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Organization, Business Environment and Basis of Presentation (Policies) | 9 Months Ended
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Sep. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Basis of Presentation | Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions of the Securities and Exchange Commission (SEC) to Form 10-Q and SEC Regulation S-X, Article 10, Rule 10-01 for interim financial statements. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete financial statements. In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. The results of operations and other data for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2019. The unaudited consolidated financial statements presented herein should be read in conjunction with the audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018.
Use of Estimates and Assumptions | Use of Estimates and Assumptions The preparation of financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions include, but are not limited to, those that relate to fair value measurements, income taxes, the provision for losses that may arise from litigation proceedings, and our going concern evaluation. In developing estimates and assumptions, management uses all available information; however, actual results could materially differ from those estimates and assumptions.
Reclassifications | Reclassifications Certain amounts in the unaudited consolidated statement of cash flows for the nine months ended September 30, 2018 have been reclassified to conform to the current year presentation as follows:
• | Within the Cash flows from operating activities section, we reclassified Amortization of debt issuance costs of $2.3 million to Other, net.
• | Within the Cash flows from financing activities section, we reclassified repayments of the SSTL of $62.6 million from Repayment of mortgage loan warehouse facilities and other secured borrowings to a new separate line item (Repayment of SSTL borrowings).
These reclassifications had no impact on our consolidated cash flows from operating, investing or financing activities.
Recently Adopted And Issued Accounting Standards | Recently Adopted Accounting Standards Leases (ASU 2016-02, ASU 2018-10, ASU 2018-11 and ASU 2019-01) This ASU requires a lessee to recognize right-of-use (ROU) assets and lease liabilities on the balance sheet, regardless of whether the lease is classified as a finance or operating lease. We adopted the new leasing guidance on January 1, 2019, and we elected practical expedients permitted by the new standard which provided us transition relief when assessing leases that commenced prior to the adoption date, including determining whether existing contracts are or contain leases, the classification of such leases as operating or financing, and the accounting for initial direct costs. The adoption resulted in the recognition of a cumulative-effect adjustment to the opening balance of Retained earnings, the recognition of a gross ROU asset and lease liability, and the reclassification of existing balances for our leases as follows:
| Balances as of December 31, 2018 (1) |  | Recognition of Gross ROU Asset and Lease Liability |  | Reclassification of Existing Balances |  | Balances January 1, 2019 after Transition Adjustments (2)
Premises and Equipment: |  |  |  |  |  |  |
Right-of-use assets | $ | — |  |  | $ | 66,231 |  |  | $ | (21,438 | ) |  | $ | 44,793 |
Other Assets: |  |  |  |  |  |  |
Prepaid expenses (rent) | 977 |  |  | — |  |  | (977 | ) |  | — |
Other Liabilities: |  |  |  |  |  |  |
Liability for lease abandonments and deferred rent | (5,498 | ) |  | — |  |  | 5,498 |  |  | — |
Lease liability | — |  |  | (66,247 | ) |  | 977 |  |  | (65,270 | )
Liabilities related to discontinued operations: |  |  |  |  |  |  |
Liability for lease abandonments (3) | (15,940 | ) |  | — |  |  | 15,940 |  |  | — |
Retained Earnings: |  |  |  |  |  |  |
Cumulative effect of adopting ASU 2016-02 | — |  |  | 16 |  |  | — |  |  | 16 |
(1) | Represents amounts related to leases impacted by the adoption of this ASU that were included in our December 31, 2018 consolidated balance sheet.
(2) | ROU assets as of January 1, 2019 after transition adjustments includes $30.4 million related to premises located in the U.S., $13.6 million related to premises located in India and the Philippines, and $0.7 million related to equipment.
(3) | Represents lease impairments recognized by PHH prior to the acquisition.
Our leases include non-cancelable operating leases for premises and equipment with maturities extending to 2025, exclusive of renewal option periods. At lease commencement date, we estimate the ROU assets and lease liability at present value using our estimated incremental borrowing rate of 7.5%. We elected to recognize ROU assets and lease liabilities that arise from short-term leases. A maturity analysis of our lease liability as of September 30, 2019 is summarized as follows:
Annual obligation for the twelve months ended September 30, |
2020 | $ | 17,534 |
2021 | 15,533 |
2022 | 14,215 |
2023 | 5,182 |
2024 | 1,089 |
Thereafter | 829 |
| 54,382 |
Less: Adjustment to present value | (6,136 | )
Total lease payments, net | $ | 48,246 |
Restricted cash includes a $23.2 million deposit as collateral for an irrevocable standby letter of credit issued in connection with one of our leased facilities. This letter of credit requirement under the terms of the lease agreement is primarily the result of PHH not meeting certain credit rating criteria prior to the acquisition. The required amount of the letter of credit will be reduced each month beginning in January 2021 through the lease expiration on December 31, 2022. We amortize the balance of the ROU assets and interest on the lease liability and report in Occupancy and equipment expense on our unaudited consolidated statements of operations. Our lease liability is reduced as we make cash payments on our lease obligations. Our ROU lease assets are evaluated for impairment, in accordance with ASC 360, Premises and Equipment, at each reporting date. Subsequent to adoption, we made the decision to vacate four leased properties prior to the contractual maturity date of the lease agreements. As a result of our plan to vacate the office space, we accelerated the recognition of amortization on the ROU assets based on the shortened remaining useful life of the leases. We recorded total accelerated amortization of $5.4 million during the nine months ended September 30, 2019. Accounting Standards Issued but Not Yet Adopted Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13 and ASU 2019-04) This ASU will require more timely recording of credit losses on loans and other financial instruments. This standard aligns the accounting with the economics of lending by requiring banks and other lending institutions to immediately record the full amount of credit losses that are expected in their loan portfolios. The new guidance requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This standard requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. Additionally, the new guidance amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. This standard will be effective for us on January 1, 2020. We are currently evaluating the effect of this standard. Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13) This ASU modifies the disclosure requirements on fair value measurements in FASB ASC Topic 820, Fair Value Measurement. The main provisions in this update include removal of the following disclosure requirements from this ASC: 1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, 2) the policy for timing of transfers between levels and 3) the valuation processes for Level 3 fair value measurements. This standard adds disclosure requirements to report the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and for certain unobservable inputs an entity may disclose other quantitative information in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. This standard will be effective for us on January 1, 2020. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty will be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments will be applied retrospectively to all periods presented upon their effective date. We do not anticipate that our adoption of this standard will have a material impact on our consolidated financial statements. Intangibles - Goodwill and Other - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15) This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The amendments in this ASU require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The amendments in this ASU require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments in this ASU also require the entity to present the expense related to the capitalized implementation costs in the same line item in the statement of operations as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. This standard will be effective for us on January 1, 2020. Upon adoption, we will elect to apply the amendments in this ASU prospectively to all implementation costs incurred subsequent to that date. We do not anticipate that our adoption of this standard will have a material impact on our consolidated financial statements.

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