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Business Segment Reporting
 6 Months Ended
Jun. 30, 2021
Segment Reporting [Abstract]  
Business Segment Reporting
Note 19 – 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. Our reportable business segments consist of Servicing, Originations, and Corporate Items and Other. During the six months ended June 30, 2021, there have been no changes to our business segments as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.
Effective with the fourth quarter of 2020, we have reported the results of Reverse Servicing within the Servicing segment. Previously, the Reverse Servicing business was included in the reported results of the Originations segment. This alignment of our business segments is consistent with a change in the management of the business and a change in the internal management reporting to the chief operating decision maker. Segment results for 2020 have been recast to conform to the current segment presentation. Reverse Servicing generated Revenue and Income (loss) before income taxes of $(3.4) million and $(7.4) million, respectively, for the three months ended June 30, 2020, and $12.6 million and $4.7 million for the six months ended June 30, 2020. Reverse Servicing assets consist primarily of securitized Loans held for investment - Reverse Mortgages.
Revenues and expenses directly associated with each respective business segments are included in determining its results of operations. We allocate certain expenses incurred by corporate support services that are not directly attributable to a segment to each business segment. We allocate overhead costs incurred by corporate support services to the Servicing and Originations segments which incorporates the utilization of various measurements primarily based on time studies, personnel volumes and service consumption levels. Support services costs not allocated to the Servicing and Originations segments are retained in the Corporate Items and Other segment along with certain other costs including certain litigation and settlement related expenses or recoveries, costs related to our re-engineering initiatives, and other costs related to operating as a public company. We allocate a portion of interest income to each business segment, including interest earned on cash balances.
Interest expense on direct asset-backed financings are recorded in the respective Servicing and Originations segments. Beginning in the third quarter of 2020, we began allocating interest expense on corporate debt, including the SSTL and Senior Notes, used to fund servicing advances and other servicing assets from Corporate Items and Other to the Servicing segment (excluding Reverse Servicing). Amortization of debt issuance costs and discount are excluded from the interest expense allocation. The interest expense related to the corporate debt has been allocated to the Servicing segment for periods prior to the third quarter of 2020 to conform to the current period presentation. The interest expense allocation for the six months ended June 30, 2020 is $19.9 million, and $9.5 million for the three months ended June 30, 2020.
As a result of our risk management strategy to hedge the interest rate risk of our net MSR portfolio, the fair value changes of third-party derivative instruments were reported within MSR valuation adjustments, net. For management segment reporting purposes, we established inter-segment derivative instruments to transfer the risks and allocate the associated fair value changes of derivatives between Servicing and Originations, and specifically between MSR valuation adjustments, net and Gain on loans held for sale, net (Gain/loss on economic hedge instruments). In the second quarter of 2021, we began separately hedging our MSR portfolio and pipeline. We may, from time to time, establish intersegment derivative instruments between our MSR and pipeline hedging strategies to optimize the use of third-party derivatives. The inter-segment derivative fair value changes are eliminated in the consolidated financial statements in the Corporate Elimination column in the table below.
Financial information for our segments is as follows:
Three Months Ended June 30, 2021
Results of Operations ServicingOriginationsCorporate Items and OtherCorporate Eliminations (1)Business Segments Consolidated
Servicing and subservicing fees$182,141 $2,300 $— $— $184,441 
Reverse mortgage revenue, net10,487 18,814 — — 29,301 
Gain on loans held for sale, net (1)4,130 27,273 — 11,310 42,713 
Other revenue, net497 6,986 1,507 — 8,990 
Revenue197,255 55,373 1,507 11,310 265,445 
MSR valuation adjustments, net (1)(69,948)8,808 — (11,310)(72,450)
Operating expenses 83,626 39,687 26,495 — 149,808 
Other (expense) income:
Interest income1,232 2,862 94 — 4,188 
Interest expense (23,311)(4,701)(5,504)— (33,516)
Pledged MSR liability expense(39,845)— 35 — (39,810)
Earnings of equity method investee— — 350 — 350 
Other 2,892 (168)640 — 3,364 
Other expense, net(59,032)(2,007)(4,385)— (65,424)
Income (loss) before income taxes
$(15,351)$22,487 $(29,373)$— $(22,237)
Three Months Ended June 30, 2020
Results of Operations ServicingOriginationsCorporate Items and OtherCorporate Eliminations Business Segments Consolidated
Servicing and subservicing fees$175,188 $7 $45 $— $175,240 
Reverse mortgage revenue, net(2,721)16,480 — — 13,759 
Gain on loans held for sale, net3,781 29,766 — — 33,547 
Other revenue, net817 2,663 — 998 — 4,478 
Revenue 177,065 48,916 1,043 — 227,024 
MSR valuation adjustments, net(37,074)13,640 — — (23,434)
Operating expenses 86,415 25,075 33,319 — 144,809 
Other (expense) income:
Interest income2,155 1,157 254 — 3,566 
Interest expense (22,997)(1,751)(2,012)— (26,760)
Pledged MSR liability expense(41,714)— 28 — (41,686)
Other 2,466 (8)(2,515)— (57)
Other expense, net(60,090)(602)(4,245)— (64,937)
Income (loss) before income taxes$(6,514)$36,879 $(36,521)$— $(6,156)
Six Months Ended June 30, 2021
Results of Operations ServicingOriginationsCorporate Items and OtherCorporate Eliminations (1)Business Segments Consolidated
Servicing and subservicing fees$351,496 $4,683 $— $— $356,179 
Reverse mortgage revenue, net12,521 38,606 — — 51,127 
Gain on loans held for sale, net (1)7,651 64,866 — (24,083)48,434 
Other revenue, net999 13,503 2,797 — 17,299 
Revenue 372,667 121,658 2,797 (24,083)473,039 
MSR valuation adjustments, net (1)(92,638)17,313 — 24,083 (51,242)
Operating expenses 166,379 77,016 46,042 — 289,437 
Other (expense) income:
Interest income2,489 5,428 207 — 8,124 
Interest expense (43,619)(8,252)(10,097)— (61,968)
Loss on extinguishment of debt— — (15,458)— (15,458)
Pledged MSR liability expense(77,727)— 67 — (77,660)
Earnings of equity method investee— — 350 — 350 
Other 3,345 (119)428 — 3,654 
Other expense, net
(115,512)(2,943)(24,503)— (142,958)
Income (loss) before income taxes$(1,862)$59,012 $(67,748)$— $(10,598)
Six Months Ended June 30, 2020
Results of Operations ServicingOriginationsCorporate Items and OtherCorporate Eliminations Business Segments Consolidated
Servicing and subservicing fees$386,657 $8 $58 $— $386,723 
Reverse mortgage revenue, net13,953 22,603 — — 36,556 
Gain on loans held for sale, net4,010 42,868 — — 46,878 
Other revenue, net1,975 5,109 3,625 — 10,709 
Revenue406,595 70,588 3,683 — 480,866 
MSR valuation adjustments, net(211,522)13,968 — — (197,554)
Operating expenses 170,894 48,027 63,102 — 282,023 
Other (expense) income:
Interest income4,684 2,780 1,497 — 8,961 
Interest expense (47,576)(4,185)(4,981)— (56,742)
Pledged MSR liability expense(48,337)— 57 — (48,280)
Other6,121 (30)(4,820)— 1,271 
Other expense, net(85,108)(1,435)(8,247)— (94,790)
Income (loss) before income taxes$(60,929)$35,094 $(67,666)$— $(93,501)
(1)Corporate Eliminations for the three and six months ended June 30, 2021 includes an inter-segment derivatives elimination of $11.3 million and $24.1 million, respectively, with a corresponding offset in MSR valuation adjustments, net; nil for the three and six months ended June 30, 2020.
Total AssetsServicingOriginationsCorporate Items and OtherBusiness Segments Consolidated
June 30, 2021$10,747,791 $641,931 $377,988 $11,767,710 
December 31, 2020$9,847,603 $379,233 $424,291 $10,651,127 
June 30, 2020$9,510,084 $291,085 $509,269 $10,310,438 
Depreciation and Amortization ExpenseServicingOriginationsCorporate Items and OtherBusiness Segments Consolidated
Three months ended June 30, 2021
Depreciation expense$168 $26 $2,015 $2,209 
Amortization of debt issuance costs and discount129 — 1,480 1,609 
Three months ended June 30, 2020
Depreciation expense$218 $34 $6,844 $7,096 
Amortization of debt issuance costs and discount116 — 1,403 1,519 
Six Months Ended June 30, 2021
Depreciation expense$376 $49 $4,641 $5,066 
Amortization of debt issuance costs and discount258 — 2,974 3,232 
Six months ended June 30, 2020
Depreciation expense$433 $71 $10,589 $11,093 
Amortization of debt issuance costs and discount228 — 3,953 4,181