Ocwen and PMC have entered into agreements to sell MSRs or Rights to MSRs and the related servicing advances to NRZ, and in all cases have been retained by NRZ as subservicer. In the case of Ocwen Rights to MSRs transactions, while the majority of the risks and rewards of ownership were transferred in 2012 and 2013, legal title was retained by Ocwen, causing the Rights to MSRs transactions to be accounted for as secured financings. In the case of the PMC transactions, and for those Ocwen MSRs where consents were subsequently received and legal title was transferred to NRZ, due to the length of the non-cancellable term of the subservicing agreements, the transactions did not initially qualify for sale accounting treatment which resulted in such transactions being accounted for as secured financings. Until such time as the transaction qualifies as a sale for accounting purposes, we continue to recognize the MSRs and related financing liability on our consolidated balance sheets, as well as the full amount of servicing revenue and changes in the fair value of the MSRs and related financing liability in our unaudited consolidated statements of operations. Changes in fair value of the Rights to MSRs are recognized in MSR valuation adjustments, net in the unaudited consolidated statements of operations. Changes in fair value of the MSR related financing liability are reported in Pledged MSR liability expense.



Balance Sheets	June 30, 2020		December 31, 2019
MSRs, at fair value (1)	$	582,558	$	915,148

Due from NRZ (Receivables)
Sales and transfers of MSRs (2)	$	—	$	24,167
Subservicing fees and reimbursable expenses	1,160		9,197
	$	1,160	$	33,364

Due to NRZ (Other liabilities)	$	106,295	$	63,596

Financing liability - MSRs pledged, at fair value
Original Rights to MSRs Agreements	$	582,558	$	603,046
2017 Agreements and New RMSR Agreements (3)	—		35,445
PMC MSR Agreements (1)	—		312,102
	$	582,558	$	950,593



	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2020			2019
Statements of Operations
Servicing fees collected on behalf of NRZ (1)	$	88,405	$	141,091		$	208,073		$	296,938
Less: Subservicing fee retained by Ocwen (1)	25,523		35,905			54,855			73,312
Net servicing fees remitted to NRZ	62,882		105,186			153,218			223,626

Less: Reduction (increase) in financing liability
Changes in fair value:
Original Rights to MSRs Agreements	1,019		(1,671		)	(8,101		)	(1,550		)
2017 Agreements and New RMSR Agreements	—		4,634			(903		)	(2,346		)
PMC MSR Agreements (1)	—		47,782			40,720			80,878
	1,019		50,745			31,716			76,982
Runoff and settlement:
Original Rights to MSRs Agreements	8,128		11,412			25,921			20,447
2017 Agreements and New RMSR Agreements	9,979		26,062			35,121			49,382
PMC MSR Agreements (1)	—		15,814			7,492			33,588
	18,107		53,288			68,534			103,417

Other	2,070		(1,777		)	4,688			(3,659		)

Pledged MSR liability expense	$	41,686	$	2,930		$	48,280		$	46,886



	Three Months Ended June 30, 2020
Financing Liability - MSRs Pledged	Original Rights to MSRs Agreements			2017 Agreements and New RMSR Agreements			PMC MSR Agreements		Total
Beginning Balance	$	591,705		$	9,979		$	—	$	601,684
Changes in fair value:
Original Rights to MSRs Agreements	(1,019		)	—			—		(1,019		)
2017 Agreements and New RMSR Agreements	—			—			—		—
PMC MSR Agreements	—			—			—		—
Runoff and settlement:
Original Rights to MSRs Agreements	(8,128		)	—			—		(8,128		)
2017 Agreements and New RMSR Agreements	—			(9,979		)	—		(9,979		)
PMC MSR Agreements	—			—			—		—
Balance at June 30, 2020	$	582,558		$	—		$	—	$	582,558



	Three Months Ended June 30, 2019
Financing Liability - MSRs Pledged	Original Rights to MSRs Agreements			2017 Agreements and New RMSR Agreements			PMC MSR Agreements			Total
Beginning Balance	$	424,086		$	119,932		$	407,198		$	951,216
Additions	—			—			299			299
Changes in fair value:
Original Rights to MSRs Agreements	1,671			—			—			1,671
2017 Agreements and New RMSR Agreements	—			(4,634		)	—			(4,634		)
PMC MSR Agreements	—			—			(47,782		)	(47,782		)
Runoff and settlement:
Original Rights to MSRs Agreements	(11,412		)	—			—			(11,412		)
2017 Agreements and New RMSR Agreements	—			(26,062		)	—			(26,062		)
PMC MSR Agreements	—			—			(15,814		)	(15,814		)
Calls (1):
Original Rights to MSRs Agreements	(1,436		)	—			—			(1,436		)
2017 Agreements and New RMSR Agreements	—			(1,133		)	—			(1,133		)
Balance at June 30, 2019	$	412,909		$	88,103		$	343,901		$	844,913



	Six Months Ended June 30, 2020
Financing Liability - MSRs Pledged	Original Rights to MSRs Agreements			2017 Agreements and New RMSR Agreements			PMC MSR Agreements			Total
Beginning Balance	$	603,046		$	35,445		$	312,102		$	950,593
Sales	—			—			(226		)	(226		)
Changes in fair value:
Original Rights to MSRs Agreements	8,101			—			—			8,101
2017 Agreements and New RMSR Agreements	—			903			—			903
PMC MSR Agreements	—			—			(40,720		)	(40,720		)
Runoff and settlement:
Original Rights to MSRs Agreements	(25,921		)	—			—			(25,921		)
2017 Agreements and New RMSR Agreements	—			(35,121		)	—			(35,121		)
PMC MSR Agreements	—			—			(7,492		)	(7,492		)
Derecognition of Pledged MSR financing liability due to termination of PMC MSR Agreements	—			—			(263,664		)	(263,664		)
Calls (1):
Original Rights to MSRs Agreements	(2,668		)	—			—			(2,668		)
2017 Agreements and New RMSR Agreements	—			(1,227		)	—			(1,227		)
Balance at June 30, 2020	$	582,558		$	—		$	—		$	582,558



	Six Months Ended June 30, 2019
Financing Liability - MSRs Pledged	Original Rights to MSRs Agreements			2017 Agreements and New RMSR Agreements			PMC MSR Agreements			Total
Beginning Balance	$	436,511		$	138,854		$	457,491		$	1,032,856
Purchases	—			—			876			876
Changes in fair value:
Original Rights to MSRs Agreements	1,550			—			—			1,550
2017 Agreements and New RMSR Agreements	—			2,346			—			2,346
PHH MSR Agreements	—			—			(80,878		)	(80,878		)
Runoff and settlement:
Original Rights to MSRs Agreements	(20,447		)	—			—			(20,447		)
2017 Agreements and New RMSR Agreements	—			(49,382		)	—			(49,382		)
PHH MSR Agreements	—			—			(33,588		)	(33,588		)
Calls (1):
Original Rights to MSRs Agreements	(4,705		)	—			—			(4,705		)
2017 Agreements and New RMSR Agreements	—			(3,715		)	—			(3,715		)
Balance at June 30, 2019	$	412,909		$	88,103		$	343,901		$	844,913

Prior to the transfer of legal title under the Master Servicing Rights Purchase Agreement dated as of October 1, 2012, as amended, and certain Sale Supplements, as amended (collectively, the Original Rights to MSRs Agreements), Ocwen agreed to service the mortgage loans underlying the MSRs on the economic terms set forth in the Original Rights to MSRs Agreements.

On July 23, 2017 and January 18, 2018, we entered into a series of agreements with NRZ that collectively modify, supplement and supersede the arrangements among the parties as set forth in the Original Rights to MSRs Agreements. The July 23, 2017 agreements, as amended, include a Master Agreement, a Transfer Agreement and the Subservicing Agreement between Ocwen and New Residential Mortgage LLC (NRM), a subsidiary of NRZ, relating to non-agency loans (the NRM Subservicing Agreement) (collectively, the 2017 Agreements) pursuant to which the parties agreed, among other things, to undertake certain actions to facilitate the transfer from Ocwen to NRZ of Ocwen’s legal title to the remaining MSRs that were subject to the Original Rights to MSRs Agreements and under which Ocwen would subservice mortgage loans underlying the MSRs for an initial term ending July 2022 (the Initial Term).

On January 18, 2018, the parties entered into new agreements (including a Servicing Addendum) regarding the Rights to MSRs related to MSRs that remained subject to the Original Rights to MSRs Agreements as of January 1, 2018 and amended the Transfer Agreement (collectively, New RMSR Agreements) to accelerate the implementation of certain parts of our arrangements in order to achieve the intent of the 2017 Agreements sooner. Under the new agreements, following receipt of the required consents and transfer of the MSRs, Ocwen subservices the mortgage loans underlying the transferred MSRs pursuant to the 2017 Agreements and the August 2018 subservicing agreement with NewRez LLC dba Shellpoint Mortgage Servicing (Shellpoint) described below.

Ocwen received lump-sum cash payments of $54.6 million and $279.6 million in September 2017 and January 2018 in accordance with the terms of the 2017 Agreements and New RMSR Agreements, respectively. These upfront payments generally represented the net present value of the difference between the future revenue stream Ocwen would have received under the Original Rights to MSRs Agreements and the future revenue stream Ocwen expected to receive under the 2017 Agreements and the New RMSR Agreements. We recognized the cash received as a financing liability that we accounted for at fair value through the term of the original agreements (April 2020). Changes in fair value were recognized in Pledged MSR liability expense in the unaudited consolidated statements of operations.

On August 17, 2018, Ocwen and NRZ entered into certain amendments (i) to the New RMSR Agreements to include Shellpoint, a subsidiary of NRZ, as a party to which legal title to the MSRs could be transferred after related consents are received, (ii) to add a Subservicing Agreement between Ocwen and Shellpoint relating to non-agency loans (the Shellpoint Subservicing Agreement), (iii) to add an Agency Subservicing Agreement between Ocwen and NRM relating to agency loans (the Agency Subservicing Agreement), and (iv) to conform the New RMSR Agreements and the NRM Subservicing Agreement to certain of the terms of the Shellpoint Subservicing Agreement and the Agency Subservicing Agreement.

At any time during the Initial Term, NRZ may terminate the Subservicing Agreements and Servicing Addendum for convenience, subject to Ocwen’s right to receive a termination fee and 180 days’ notice. The termination fee is calculated as specified in the Subservicing Agreements and Servicing Addendum, and is a discounted percentage of the expected revenues that would be owed to Ocwen over the remaining contract term based on certain portfolio run-off assumptions.

Following the Initial Term, NRZ may extend the term of the Subservicing Agreements and Servicing Addendum for additional three-month periods by providing proper notice. Following the Initial Term, the Subservicing Agreements and Servicing Addendum can be cancelled by Ocwen on an annual basis. NRZ and Ocwen have the ability to terminate the Subservicing Agreements and Servicing Addendum for cause if certain specified conditions occur. The terminations must be terminations in whole (i.e., cover all the loans under the relevant Subservicing Agreement or Servicing Addendum) and not in part, except for limited circumstances specified in the agreements. In addition, if NRZ terminates any of the NRM or Shellpoint Subservicing Agreements or the Servicing Addendum for cause, the other agreements will also terminate automatically.

Under the terms of the Subservicing Agreements and Servicing Addendum, in addition to a base servicing fee, Ocwen receives certain ancillary fees, primarily late fees, loan modification fees and Speedpay^® fees. We may also receive certain incentive fees or pay penalties tied to various contractual performance metrics. NRZ receives all float earnings and deferred servicing fees related to delinquent borrower payments, as well as being entitled to receive certain REO related income including REO referral commissions.

As of June 30, 2020, the UPB of MSRs subject to the Servicing Agreements and the New RMSR Agreements is $71.4 billion, including $17.4 billion for which title has not transferred to NRZ. As the third-party consents required for title to the MSRs to transfer were not obtained by May 31, 2019, the New RMSR Agreements set forth a process under which NRZ’s $17.4 billion Rights to MSRs may (i) be acquired by Ocwen at a price determined in accordance with the terms of the New RMSR Agreements, at the option of Ocwen, or (ii) be sold, together with Ocwen’s title to those MSRs, to a third party in accordance with the terms of the New RMSR Agreements, subject to an additional Ocwen option to acquire at a price based on the winning third-party bid rather than selling to the third party. If the Rights to MSRs are not transferred pursuant to these alternatives, then the Rights to MSRs will remain subject to the New RMSR Agreements.

In addition, as noted above, during the Initial Term, NRZ has the right to terminate the $17.4 billion New RMSR Agreements for convenience, in whole but not in part, subject to payment of a termination fee and 180 days’ notice. If NRZ exercises this termination right, NRZ has the option of seeking (i) the transfer of the MSRs through a sale to a third party of its Rights to MSRs (together with a transfer of Ocwen’s title to those MSRs) or (ii) a substitute RMSR arrangement that substantially replicates the Rights to MSRs structure (a Substitute RMSR Arrangement) under which we would transfer title to the MSRs to a successor servicer and NRZ would continue to own the economic rights and obligations related to the MSRs. In the case of option (i), we have a purchase option as specified in the New RMSR Agreements. If NRZ is not able to sell the Rights to MSRs or establish a Substitute RMSR Arrangement with another servicer, NRZ has the right to revoke its termination notice and re-instate the Servicing Addendum or to establish a subservicing arrangement whereby the MSRs remaining subject to the New RMSR Agreements would be transferred to up to three subservicers who would subservice under Ocwen’s oversight. If such a subservicing arrangement were established, Ocwen would receive an oversight fee and reimbursement of expenses. We may also agree on alternative arrangements that are not contemplated under our existing agreements or that are variations of those contemplated under our existing agreements.

On December 28, 2016, PMC entered into an agreement to sell substantially all of its MSRs, and the related servicing advances, to NRM (the 2016 PMC Sale Agreement). In connection with this agreement, on December 28, 2016, PMC also entered into a subservicing agreement with NRZ which was subsequently amended and restated as of March 29, 2019 (together with the 2016 PMC Sale Agreement, the PMC MSR Agreements). The PMC subservicing agreement had an initial term of three years from the initial transaction date of June 16, 2017, subject to certain transfer and termination provisions. The MSR sale transaction did not originally achieve sale accounting treatment.

On February 20, 2020, we received a notice of termination from NRZ with respect to the PMC MSR Agreements, which accounted for $37.1 billion loan UPB, or 285,237 loans at June 30, 2020. In connection with the termination, we are entitled to loan deboarding fees from NRZ. Loan deboarding is under discussion with NRZ and is currently planned for September and October 2020, though is subject to various requirements that may delay the process. This termination is for convenience and not for cause. As the sale accounting criteria were met upon the notice of termination, the MSRs and the Rights to MSRs associated with the $37.1 billion loan UPB were derecognized from our balance sheet on February 20, 2020 without any gain or loss on derecognition. We continue to service these loans until deboarding, and account for them as a subservicing relationship. Accordingly, we recognize subservicing fees associated with the subservicing agreement subsequent to February 20, 2020 and do not report any servicing fees collected on behalf of, and remitted to NRZ, any change in fair value, runoff and settlement in financing liability thereafter.