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Business Segment Reporting | 9 Months Ended
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Sep. 30, 2019
Segment Reporting [Abstract] |
Business Segment Reporting |
Note 18 – Business Segment Reporting
Our business segments reflect the internal reporting that we use to evaluate operating performance of services and to assess the allocation of our resources. A brief description of our current business segments is as follows: Servicing. This segment is primarily comprised of our core residential mortgage servicing business and currently accounts for most of our total revenues. We provide residential and commercial mortgage loan servicing, special servicing and asset management services. We earn fees for providing these services to owners of the mortgage loans and foreclosed real estate. In most cases, we provide these services either because we purchased the MSRs from the owner of the mortgage, retained the MSRs on the sale of residential mortgage loans or because we entered into a subservicing or special servicing agreement with the entity that owns the MSR. Our residential servicing portfolio includes conventional, government-insured and non-Agency loans. Non-Agency loans include subprime loans, which represent residential loans that generally did not qualify under GSE guidelines or have subsequently become delinquent. Lending. The Lending segment purchases and originates conventional and government-insured residential forward and reverse mortgage loans. The loans are typically sold shortly after origination into a liquid market on a servicing retained (securitization) or servicing released (sale to a third party) basis. We originate forward mortgage loans directly with customers (retail channel) as well as through correspondent lending arrangements since the second quarter of 2019. We originate reverse mortgage loans in all three channels, through our correspondent lending arrangements, broker relationships (wholesale) and retail channels. Corporate Items and Other. Corporate Items and Other includes revenues and expenses of corporate support services, CR Limited (CRL), our wholly-owned captive reinsurance subsidiary, discontinued operations and inactive entities, business activities that are individually insignificant, revenues and expenses that are not directly related to other reportable segments, interest income on short-term investments of cash and interest expense on corporate debt. Corporate Items and Other also includes severance, retention, facility-related and other expenses incurred in 2019 related to our re-engineering plan. Our cash balances are included in Corporate Items and Other. CRL provides re-insurance related to coverage on foreclosed real estate properties owned or serviced by us. We allocate a portion of interest income to each business segment, including interest earned on cash balances and short-term investments. We also allocate expenses incurred by corporate support services to each business segment. Interest expense on direct asset financings are recorded in the respective Servicing and Lending segments, while interest expense on the SSTL and Senior Notes is recorded in Corporate Items and Other and is not allocated. Financial information for our segments is as follows:
| Three Months Ended September 30, 2019
Results of Operations | Servicing |  | Lending |  | Corporate Items and Other |  | Business Segments Consolidated
Revenue | $ | 250,224 |  |  | $ | 29,502 |  |  | $ | 3,789 |  |  | $ | 283,515 |
Expenses (1) (2) | 890 |  |  | 20,665 |  |  | 23,169 |  |  | 44,724 |
Other (expense) income: |  |  |  |  |  |  |
Interest income | 2,105 |  |  | 1,688 |  |  | 336 |  |  | 4,129 |
Interest expense (3) | (268,545 | ) |  | (2,133 | ) |  | (15,244 | ) |  | (285,922 | )
Gain on repurchase of senior secured notes | — |  |  | — |  |  | 5,099 |  |  | 5,099 |
Other | 3,917 |  |  | 498 |  |  | (4,829 | ) |  | (414 | )
Other (expense) income, net | (262,523 | ) |  | 53 |  |  | (14,638 | ) |  | (277,108 | )
(Loss) income before income taxes | $ | (13,189 | ) |  | $ | 8,890 |  |  | $ | (34,018 | ) |  | $ | (38,317 | )
| Three Months Ended September 30, 2018
Results of Operations | Servicing |  | Lending |  | Corporate Items and Other |  | Business Segments Consolidated
Revenue | $ | 217,630 |  |  | $ | 16,917 |  |  | $ | 3,731 |  |  | $ | 238,278 |
Expenses (1) (2) | 185,077 |  |  | 18,954 |  |  | 13,495 |  |  | 217,526 |
Other (expense) income: |  |  |  |  |  |  |
Interest income | 2,242 |  |  | 1,255 |  |  | 466 |  |  | 3,963 |
Interest expense (3) | (47,359 | ) |  | (1,437 | ) |  | (12,492 | ) |  | (61,288 | )
Other | (1,335 | ) |  | 154 |  |  | (2,519 | ) |  | (3,700 | )
Other (expense) income, net | (46,452 | ) |  | (28 | ) |  | (14,545 | ) |  | (61,025 | )
Loss before income taxes | $ | (13,899 | ) |  | $ | (2,065 | ) |  | $ | (24,309 | ) |  | $ | (40,273 | )
| Nine months ended September 30, 2019
Results of Operations | Servicing |  | Lending |  | Corporate Items and Other |  | Business Segments Consolidated
Revenue | $ | 752,010 |  |  | $ | 99,386 |  |  | $ | 10,345 |  |  | $ | 861,741 |
Expenses (1) (2) (4) | 556,874 |  |  | 63,021 |  |  | 36,428 |  |  | 656,323 |
Other (expense) income: |  |  |  |  |  |  |
Interest income | 6,270 |  |  | 4,783 |  |  | 1,471 |  |  | 12,524 |
Interest expense (3) | (337,435 | ) |  | (5,200 | ) |  | (45,303 | ) |  | (387,938 | )
Gain on repurchase of senior secured notes | — |  |  | — |  |  | 5,099 |  |  | 5,099 |
Bargain purchase gain | — |  |  | — |  |  | (381 | ) |  | (381 | )
Other | 6,332 |  |  | 1,161 |  |  | (5,949 | ) |  | 1,544 |
Other (expense) income, net | (324,833 | ) |  | 744 |  |  | (45,063 | ) |  | (369,152 | )
(Loss) income before income taxes | $ | (129,697 | ) |  | $ | 37,109 |  |  | $ | (71,146 | ) |  | $ | (163,734 | )
| Nine months ended September 30, 2018
Results of Operations | Servicing |  | Lending |  | Corporate Items and Other |  | Business Segments Consolidated
Revenue | $ | 674,233 |  |  | $ | 65,116 |  |  | $ | 12,767 |  |  | $ | 752,116 |
Expenses (1) (2) | 523,061 |  |  | 57,036 |  |  | 49,580 |  |  | 629,677 |
Other (expense) income: |  |  |  |  |  |  |
Interest income | 4,136 |  |  | 4,107 |  |  | 1,775 |  |  | 10,018 |
Interest expense (3) | (144,551 | ) |  | (4,855 | ) |  | (40,195 | ) |  | (189,601 | )
Other | (2,089 | ) |  | 774 |  |  | (5,254 | ) |  | (6,569 | )
Other (expense) income, net | (142,504 | ) |  | 26 |  |  | (43,674 | ) |  | (186,152 | )
Income (loss) before income taxes | $ | 8,668 |  |  | $ | 8,106 |  |  | $ | (80,487 | ) |  | $ | (63,713 | )
(1) | Expenses in the Servicing segment includes MSR valuation adjustments, net.
(2) | Compensation and benefits expense in the Corporate Items and Other segment for the three and nine months ended September 30, 2019 and 2018 includes $(0.1) million and $19.1 million, and $0.3 million, and $7.5 million, respectively, of severance expense attributable to PHH integration-related headcount reductions of primarily U.S.-based employees in 2019 and severance expense attributable to headcount reductions in connection with our strategic decisions to exit the automotive capital services business and the forward lending correspondent and wholesale channels in late 2017 and early 2018, as well as our overall efforts to reduce costs.
(3) | Interest expense in the Servicing segment includes changes in the fair value of the Financing liability - MSRs pledged (Rights to MSRs).
(4) | Included in the Corporate Items and Other segment for the nine months ended September 30, 2019, we recorded in Professional services expense a recovery from a service provider of $30.7 million during the first quarter of 2019 of amounts previously recognized as expense.
Total Assets |  | Servicing |  | Lending |  | Corporate Items and Other |  | Business Segments Consolidated
September 30, 2019 |  | $ | 3,227,245 |  |  | $ | 6,225,394 |  |  | $ | 504,014 |  |  | $ | 9,956,653 |
December 31, 2018 |  | $ | 3,306,208 |  |  | $ | 5,603,481 |  |  | $ | 484,527 |  |  | $ | 9,394,216 |
September 30, 2018 |  | $ | 2,726,905 |  |  | $ | 5,385,437 |  |  | $ | 348,695 |  |  | $ | 8,461,037 |
Depreciation and Amortization Expense |  | Servicing |  | Lending |  | Corporate Items and Other |  | Business Segments Consolidated
Three months ended September 30, 2019
Depreciation expense |  | $ | 105 |  |  | $ | (32 | ) |  | $ | 6,386 |  |  | $ | 6,459 |
Amortization of debt discount |  | — |  |  | — |  |  | 330 |  |  | 330 |
Amortization of debt issuance costs |  | — |  |  | — |  |  | 816 |  |  | 816 |
Three months ended September 30, 2018
Depreciation expense |  | $ | 1,035 |  |  | $ | 23 |  |  | $ | 4,500 |  |  | $ | 5,558 |
Amortization of debt discount |  | — |  |  | — |  |  | 235 |  |  | 235 |
Amortization of debt issuance costs |  | — |  |  | — |  |  | 599 |  |  | 599 |
Nine months ended September 30, 2019
Depreciation expense |  | $ | 1,674 |  |  | $ | 49 |  |  | $ | 24,297 |  |  | $ | 26,020 |
Amortization of debt discount |  | — |  |  | — |  |  | 1,031 |  |  | 1,031 |
Amortization of debt issuance costs |  | — |  |  | — |  |  | 2,268 |  |  | 2,268 |
Nine months ended September 30, 2018
Depreciation expense |  | $ | 3,647 |  |  | $ | 77 |  |  | $ | 14,475 |  |  | $ | 18,199 |
Amortization of debt discount |  | — |  |  | — |  |  | 941 |  |  | 941 |
Amortization of debt issuance costs |  | — |  |  | — |  |  | 2,261 |  |  | 2,261 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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