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Borrowings | 9 Months Ended
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Sep. 30, 2021
Debt Disclosure [Abstract] |
Borrowings |
Note 12 – Borrowings
Financing Liabilities |  |  |  |  |  |  |  | Outstanding Balance
Borrowing Type |  | Collateral |  | Interest Rate |  | Maturity |  | September 30, 2021 |  | December 31, 2020
HMBS-related borrowings, at fair value (1) |  | Loans held for investment |  | 1ML + 242 bps (1) |  | (1) |  | $ | 6,782,564 |  |  | $ | 6,772,711 |
Other financing liabilities, at fair value |  |  |  |  |  |  |  |  |  |
Original Rights to MSRs Agreements - NRZ |  | MSRs |  | (2) |  | (2) |  | 574,020 |  |  | 566,952 |
Transferred MSR liability - MAV |  | MSRs |  | (2) |  | (2) |  | 128,887 |  |  | — |
|  |  |  |  |  |  |  | 702,907 |  |  | 566,952 |
Financing liability - Owed to securitization investors, at fair value: |  |  |  |  |  |  |  |  |  |
Residential Asset Securitization Trust 2003-A11 (RAST 2003-A11) (3) |  | Loans held for investment |  | (3) |  | Oct. 2033 |  | 8,004 |  |  | 9,770 |
Total Other financing liabilities, at fair value |  |  |  |  |  |  |  | 710,911 |  |  | 576,722 |
|  |  |  |  |  |  |  | $ | 7,493,475 |  |  | $ | 7,349,433 |
(1)Represents amounts due to the holders of beneficial interests in Ginnie Mae guaranteed HMBS that did not qualify for sale accounting treatment of HECM loans. Under this accounting treatment, the HECM loans securitized with Ginnie Mae remain on our consolidated balance sheets and the proceeds from the sale are recognized as a financing liability, which is recorded at fair value consistent with the related HECM loans. The beneficial interests in Ginnie Mae guaranteed HMBS have no maturity dates, and the borrowings mature as the related loans are repaid. Interest rate is a weighted average based on the pass-through rate of the loans. See Note 2 – Securitizations and Variable Interest Entities. (2)Pledged MSR liabilities are recognized due to the accounting treatment of MSR sale transactions with NRZ and MAV that did not qualify as sales for accounting purposes. Under this accounting treatment, the MSRs transferred remain on the consolidated balance sheet and the proceeds from the sale are recognized as a financing liability, which is recorded at fair value consistent with the related MSRs. The financing liability has no contractual maturity or repayment schedule. See Note 8 — MSR Transfers Not Qualifying for Sale Accounting for additional information. (3)Consists of securitization debt certificates due to third parties that represent beneficial interests in trusts that we include in our unaudited consolidated financial statements. Holders of the debt issued by the consolidated securitization trust entities have recourse only to the assets of the SPE for satisfaction of the debt and have no recourse against the assets of Ocwen. Similarly, the general creditors of Ocwen have no claim on the assets of the trusts. Trust pay interest based on fixed rates ranging between 4.25% and 5.75% and a variable rate based on 1ML plus 0.45%, includes certificates that are Principal Only certificates and are not entitled to receive distributions of interest.
Advance Match Funded Liabilities |  | Borrowing Capacity |  | September 30, 2021 |  | December 31, 2020
Borrowing Type |  |  |  | Maturity (1) |  | Amort. Date (1) |  | Total |  | Available (2) |  | Weighted Average Interest Rate (6) |  | Balance |  | Weighted Average Interest Rate (6) |  | Balance
Advance Receivables Backed Notes - Series 2015-VF5 (3) |  |  |  | Jun. 2052 |  | Jun. 2022 |  | $ | 80,000 |  |  | $ | 54,505 |  |  | 2.14 | % |  | $ | 25,495 |  |  | 4.26 | % |  | $ | 89,396 |
Advance Receivables Backed Notes, Series 2020-T1 (4) |  |  |  | Aug. 2052 |  | Aug. 2022 |  | 475,000 |  |  | — |  |  | 1.49 | % |  | 475,000 |  |  | 1.49 | % |  | 475,000 |
Total Ocwen Master Advance Receivables Trust (OMART) |  | 555,000 |  |  | 54,505 |  |  | 1.52 | % |  | 500,495 |  |  | 1.93 | % |  | 564,396 |
Ocwen Freddie Advance Funding (OFAF) - Advance Receivables Backed Notes, Series 2015-VF1 (5) |  |  |  | Aug. 2052 |  | Aug. 2022 |  | 40,000 |  |  | 23,923 |  |  | 2.15 | % |  | 16,077 |  |  | 3.26 | % |  | 16,892 |
|  |  |  |  |  |  |  | $ | 595,000 |  |  | $ | 78,428 |  |  | 1.54 | % |  | $ | 516,572 |  |  | 1.96 | % |  | $ | 581,288 |
(1)The amortization date of our facilities is the date on which the revolving period ends under each advance facility note and repayment of the outstanding balance must begin if the note is not renewed or extended. The maturity date is the date on which all outstanding balances must be repaid. In all of our advance facilities, there are multiple notes outstanding. After the amortization date for each note, all collections that represent the repayment of advances pledged to the facility must be applied ratably to each outstanding amortizing note to reduce the balance and, as such, the collection of advances allocated to the amortizing note may not be used to fund new advances. (2)Borrowing capacity under the OMART and OFAF facilities is available to us provided that we have sufficient eligible collateral to pledge. At September 30, 2021, none of the available borrowing capacity of the OMART and OFAF advance financing notes could be used based on the amount of eligible collateral. (3)Interest is computed based on the lender’s cost of funds plus a margin of 200 bps. On June 30, 2021, the amortization date was extended by one year to June 30, 2022, the interest rate margin was reduced from 400 bps to 200 bps, and the borrowing capacity was voluntarily reduced to from $250.0 million to $80.0 million. (4)The weighted average rate of the notes at September 30, 2021 is 1.49%, with rates on the individual classes of notes ranging from 1.28% to 5.42%. (5)Interest was computed based on the lender’s cost of funds plus a margin of 300 bps. On June 30, 2021, the amortization date was extended to August 27, 2021. On August 26, 2021, the interest rate was reduced to the lender’s cost of funds plus a margin of 200 bps, the borrowing capacity was voluntarily reduced from $70.0 million to $40.0 million and the amortization date was extended to August 26, 2022. (6)The weighted average interest rate, excluding the effect of the amortization of prepaid lender fees, is computed using the outstanding balance of each respective note and its interest rate at the financial statement date. At September 30, 2021 and December 31, 2020, the balance of unamortized prepaid lender fees was $1.8 million and $4.3 million, respectively, and are included in Other assets in our consolidated balance sheets.
Mortgage Loan Warehouse Facilities |  |  |  |  |  | Available Borrowing Capacity |  | Outstanding Balance
Borrowing Type |  | Collateral |  | Interest Rate (1) |  | Maturity |  |  |  | Uncommitted |  | Committed (2) |  | September 30, 2021 |  | December 31, 2020
Master repurchase agreement (3) |  | Loans held for sale (LHFS) |  | 1ML + 220 - 375 bps |  | June 2022 |  |  |  | $ | 115,000 |  |  | $ | 61,282 |  |  | $ | 98,718 |  |  | $ | 195,773 |
Master repurchase agreement (4) |  | LHFS (forward and reverse) |  | 1ML + 325 bps forward; 1ML + 350 bps reverse |  | Nov. 2021 |  |  |  | 50,000 |  |  | 124,385 |  |  | 75,615 |  |  | 80,081 |
Master repurchase agreement (5) |  | N/A |  | SOFR + 190 bps; SOFR floor 25 bps |  | N/A |  |  |  | 50,000 |  |  | — |  |  | — |  |  | — |
Participation agreement (6) |  | LHFS |  | (6) |  | June 2022 |  |  |  | 203,609 |  |  | — |  |  | 96,391 |  |  | — |
Master repurchase agreement (6) |  | LHFS |  | (6) |  | June 2022 |  |  |  | — |  |  | 100,000 |  |  | — |  |  | 63,281 |
Master repurchase agreement (7) |  | LHFS |  | (7) |  | June 2022 |  |  |  | — |  |  | 1,000 |  |  | — |  |  | — |
Mortgage warehouse agreement (8) |  | LHFS |  | 1ML + 350 bps; Floor 5.25% |  | Jan. 2022 |  |  |  | — |  |  | 37,681 |  |  | 12,319 |  |  | 11,715 |
Mortgage warehouse agreement (9) |  | LHFS (reverse) |  | 1ML + 250 bps; 3.25% floor |  | Oct. 2021 |  |  |  | 28,929 |  |  | — |  |  | 146,071 |  |  | 73,134 |
Mortgage warehouse agreement (10) |  | LHFS |  | (10) |  | N/A |  |  |  | 34,962 |  |  | — |  |  | 165,038 |  |  | 27,729 |
Master repurchase agreement (11) |  | LHFS |  | 1ML + 200 bps |  | N/A |  |  |  | — |  |  | — |  |  | 465,018 |  |  | — |
Loan and security agreement (12) |  | HECM (ABO) |  | Prime Rate + 50 bps; Floor 450 bps |  | Apr. 2022 |  |  |  | — |  |  | 20,000 |  |  | 10,000 |  |  | — |
Master repurchase agreement (13) |  | LHFS |  | 1ML + 250 bps |  | Oct. 2021 |  |  |  | 210,000 |  |  | — |  |  | — |  |  | — |
Total mortgage loan warehouse facilities | 2.77% (14) |  |  |  |  |  | $ | 692,500 |  |  | $ | 344,348 |  |  | $ | 1,069,170 |  |  | $ | 451,713 |
(1)1ML was 0.08% and 0.14% at September 30, 2021 and December 31, 2020, respectively. Prime Rate was 3.25% as at September 30, 2021. (2)Of the borrowing capacity on mortgage loan warehouse facilities extended on a committed basis, $3.3 million of the available borrowing capacity could be used at September 30, 2021 based on the amount of eligible collateral that could be pledged. (3)The maximum borrowing under this agreement is $275.0 million, of which $160.0 million is available on a committed basis and the remainder is available at the discretion of the lender. On March 31, 2021, we renewed the facility and the maturity date was extended to June 30, 2022. (4)The maximum borrowing under this agreement is $250.0 million, of which $200.0 million is available on a committed basis and the remainder is available on an uncommitted basis. The agreement allows the lender to acquire a 100% beneficial interest in the underlying mortgage loans. (5)The lender provides financing for up to $50.0 million at the discretion of the lender. The agreement has no stated maturity dat e. Interest on this facility is based on the Secured Overnight Financing Rate (SOFR). (6)On June 23, 2021, the facility was renewed for one year to June 23, 2022, the uncommitted borrowing capacity under the participation agreement was increased to $150.0 million and the committed borrowing capacity under the repurchase agreement increased to $100.0 million. The interest rate on repurchase agreement was revised to the stated interest rate of the mortgage loans, less 35 bps with a floor of 3.00% for new originations and less 10 bps with a floor of 3.25% for Ginnie Mae modifications, Ginnie Mae buyouts and RMBS bond clean up loans. The interest rate on the participation agreement was revised to the stated interest rate of the mortgage loans, less 35 bps with a floor of 3.00% for new originations. The agreements allow the lender to acquire a 100% beneficial interest in the underlying mortgage loans. On July 23, 2021, we temporarily increased the borrowing capacity under the participation agreement to $300.0 million until September 15, 2021. On September 14, 2021, the temporary increase in borrowing capacity was extended to November 15, 2021. (7)On June 20, 2021, the facility was renewed for one year to June 23, 2022. (8)Under this agreement, the lender provides financing for up to $50.0 million on a committed basis. On January 15, 2021, the maturity date of this facility was extended to January 15, 2022. (9)Under this agreement, t he lender provides financing for up to $150.0 million on an uncommitted basis. On February 1, 2021, the borrowing capacity was temporarily increased from $100.0 million to $150.0 million until February 28, 2021 when it was reduced to $100.0 million. On March 30, 2021, the borrowing capacity was temporarily increased to $150.0 million effective April 1, 2021 until April 29, 2021 when the increase was made permanent. On September 27, 2021, the borrowing capacity was increased to $175.0 million until maturity. On October 14, 2021, the maturity date of the facility was extended to November 23, 2021. (10)On May 17, 2021, the total borrowing capacity of this facility, all of which is uncommitted, was increased from $100.0 million to $150.0 million through the addition of a $50.0 million participation interest. The agreement has no stated maturity date, however each transaction has a maximum duration of four years. The cost of this line is set at e ach transaction date and is based on the interest rate and type of the collateral. On September 1, 2021, the total borrowing capacity of the facility was increased to $200.0 million. (11)On March 29, 2021, we entered into a repurchase agreement which provides borrowing at our discretion up to a certain maximum amount of capacity on a rolling 30-day committed basis. This facility is structured as a gestation repurchase facility whereby dry Agency mortgage loans are transferred to a trust which trust issues a trust certificate that is pledged as the collateral for the borrowings. See Note 2 – Securitizations and Variable Interest Entities for additional information. On March 31, 2021, the trust issued the first certificate of $50.0 million which was increased to $75.0 million on May 28, 2021 and further increased to $225.0 million on July 29, 2021. The second trust certificate of $50.0 million was issued on April 12, 2021 and increased to $100.0 million on July 13, 2021. Additional trust certificates of $25.0 million and $100.0 million were issued for borrowing on June 25, 2021 and July 23, 2021, respectively, under this agreement. Each certificate is renewed monthly and we reduced the interest rate to 1ML + 200 bps during the monthly certificate renewals in July 2021. (12)On April 29, 2021, we entered into a revolving facility agreement which provides up to $30.0 million of committed borrowing capacity secured by eligible HECM loans that are active buyouts (ABO), as defined in the agreement. (13)On July 23, 2021, we entered into a repurchase agreement warehouse facility with borrowing capacity of $210.0 million. This facility expired in October 2021. (14)Weighted average interest rate at September 30, 2021, excluding the effect of the amortization of prepaid lender fees. At September 30, 2021 and December 31, 2020, unamortized prepaid lender fees were $0.9 million and $2.0 million, respectively, and are included in Other assets in our consolidated balance sheets.
MSR financing facilities, net |  |  |  |  |  | Available Borrowing Capacity |  | Outstanding Balance
Borrowing Type |  | Collateral |  | Interest Rate (1) |  | Maturity |  | Uncommitted |  | Committed (2) |  | September 30, 2021 |  | December 31, 2020
Agency MSR financing facility (3) |  | MSRs, Advances |  | 1ML + 325 bps |  | June 2022 |  | $ | — |  |  | $ | 75,702 |  |  | $ | 349,298 |  |  | $ | 210,755 |
Ginnie Mae MSR financing facility (4) |  | MSRs, Advances |  | 1ML + 450 bps; 1ML floor 0.50% |  | Dec. 2021 |  | 6,937 |  |  | — |  |  | 118,063 |  |  | 112,022 |
Ocwen Excess Spread-Collateralized Notes, Series 2019-PLS1 (5) |  | MSRs |  | 5.07% |  | Nov. 2024 |  | — |  |  | — |  |  | 48,243 |  |  | 68,313 |
Secured Notes, Ocwen Asset Servicing Income Series, Series 2014-1 (6) |  | MSRs |  | (6) |  | Feb. 2028 |  | — |  |  | — |  |  | 41,362 |  |  | 47,476 |
Agency MSR financing facility - revolving loan (7) |  | MSRs |  | 1yr Swap + 2.50% |  | June 2026 |  | — |  |  | 7,929 |  |  | 277,071 |  |  | — |
Agency MSR financing facility - term loan (7) |  | MSRs |  | 1yr Swap + 2.50% |  | June 2023 |  | — |  |  | — |  |  | 112,779 |  |  | — |
Total MSR financing facilities | 3.68% (8) |  |  |  | 6,937 |  |  | 83,631 |  |  | 946,816 |  |  | 438,566 |
Unamortized debt issuance costs - PLS Notes and Agency MSR financing - term loan (9) |  |  |  |  |  |  |  | (1,072) |  |  | (894) |
Total MSR financing facilities, net |  |  |  |  |  |  |  |  | $ | 945,744 |  |  | $ | 437,672 |
(1)1ML was 0.08% and 0.14% at September 30, 2021 and December 31, 2020, respectively. 1-year swap rate was 0.19% and 0.19% at September 30, 2021 and December 31, 2020, respectively. (2)Of the borrowing capacity on MSR financing facilities extended on a committed basis, none of the available borrowing capacity could be used at September 30, 2021 based on the amount of eligible collateral that could be pledged. (3)PMC’s obligations under this facility are secured by a lien on the related MSRs. Ocwen guarantees the obligations of PMC under this facility. The maximum amount which we may borrow pursuant to the repurchase agreements is $425.0 million on a committed basis. We also pledged the membership interest of the depositor for our OMART advance financing facility as additional collateral to this facility. See Note 2 – Securitizations and Variable Interest Entities for additional information. We are subject to daily margining requirements under the terms of our MSR financing facilities. Declines in fair value of our MSRs due to declines in market interest rates, assumption updates or other factors require that we provide additional collateral to our lenders under these facilities. On March 31, 2021, the facility was upsized to $350.0 million, the interest rate reduced to 1ML plus 325bps, and the maturity was renewed to June 30, 2022. These changes became effective on April 15, 2021. On June 2, 2021, the facility was temporarily upsized to $425.0 million for a period of 90 calendar days ending no later than September 1, 2021. On August 26, 2021 and later on October 25, 2021, the temporary upsize was extended until November 1, 2021. (4)PMC’s obligations under this facility are secured by a lien on the related Ginnie Mae MSRs and advances. Ocwen guarantees the obligations of PMC under the facility. The borrowing capacity is $125.0 million on an uncommitted basis. See (3) above regarding daily margining requirements. On October 26, 2021, the borrowing capacity was increased to $150.0 million on an uncommitted basis. (5)PLS Issuer’s obligations under the facility are secured by a lien on the related PLS MSRs. Ocwen guarantees the obligations of PLS Issuer under the facility. The Class A PLS Notes issued pursuant to the credit agreement had an initial principal amount of $100.0 million and amortize in accordance with a pre-determined schedule subject to modification under certain events. See Note 2 – Securitizations and Variable Interest Entities for additional information. See (3) above regarding daily margining requirements. (6)OASIS noteholders are entitled to receive a monthly payment equal to the sum of: (a) 21 basis points of the UPB of the reference pool of Freddie Mac mortgages; (b) any termination payment amounts; (c) any excess refinance amounts; and (d) the note redemption amounts, each as defined in the indenture supplement for the notes. Monthly amortization of the liability is estimated using the proportion of monthly projected service fees on the underlying MSRs as a percentage of lifetime projected fees, adjusted for the term of the notes. (7)On June 28, 2021, we entered into a facility which includes a $135.0 million term loan and a $285.0 million revolving loan secured by a lien on PMC’s Agency MSRs. See (3) above regarding daily margining requirements. (8)Weighted average interest rate at September 30, 2021, excluding the effect of the amortization of debt issuance costs and prepaid lender fees. (9)At September 30, 2021, unamortized debt issuance costs included $0.5 million and $0.6 million on the PLS Notes and the Agency MSR financing facility - term loan, respectively. At September 30, 2021 and December 31, 2020, unamortized prepaid lender fees related to revolving type MSR financing facilities were $5.7 million and $3.3 million, respectively, and are included in Other assets in our consolidated balance sheets.
Senior Secured Term Loan, net |  |  |  |  |  | Outstanding Balance
Borrowing Type |  | Collateral |  | Interest Rate |  | Maturity |  | September 30, 2021 |  | December 31, 2020
SSTL (1) |  | (1) |  | 1-Month Euro-dollar rate + 600 bps with a Eurodollar floor of 100 bps (1) |  | May 2022 (1) |  | $ | — |  |  | $ | 185,000 |
Unamortized debt issuance costs |  |  |  |  |  |  |  | — |  |  | (4,867) |
Discount |  |  |  |  |  |  |  | — |  |  | (357) |
|  |  |  |  |  |  |  | $ | — |  |  | $ | 179,776 |
(1)On March 4, 2021, we repaid in full the $185.0 million outstanding principal balance. The prepayment resulted in our recognition of an $8.4 million loss on debt extinguishment, including a prepayment premium of 2% of the outstanding principal balance, or $3.7 million.
Senior Notes | Interest Rate (1) |  | Maturity | Outstanding Balance
| September 30, 2021 |  | December 31, 2020
PMC Senior Secured Notes | 7.875% |  | March 2026 | $ | 400,000 |  |  | $ | — |
OFC Senior Secured Notes | 12% paid in cash or 13.25% paid-in-kind (see below) |  | March 2027 | 285,000 |  |  | — |
PHH Corporation (PHH) Senior Notes | 6.375% |  | August 2021 | — |  |  | 21,543 |
PMC Senior Secured Notes | 8.375% |  | November 2022 | — |  |  | 291,509 |
Principal balance |  |  |  | 685,000 |  |  | 313,052 |
Discount (2) |  |  |  |  |  |
PMC Senior Secured Notes |  |  |  | (1,844) |  |  | — |
OFC Senior Secured Notes (3) |  |  |  | (55,638) |  |  | — |
|  |  |  | (57,482) |  |  | — |
Unamortized debt issuance costs (2) |  |  |  |  |  |
PMC Senior Secured Notes |  |  |  | (5,966) |  |  | (968) |
OFC Senior Secured Notes |  |  |  | (8,894) |  |  | — |
|  |  |  | (14,860) |  |  | (968) |
Fair value adjustments |  |  |  | — |  |  | (186) |
|  |  |  | $ | 612,658 |  |  | $ | 311,898 |
(1)Excluding the effect of the amortization of debt issuance costs and discount. (2)The discount and debt issuance costs are amortized to interest expense through the maturity of the respective notes. (3)Includes original issue discount (OID) and additional discount related to the concurrent issuance of warrants and common stock. See below for additional information. Redemption of 6.375% Senior Unsecured Notes due 2021 and 8.375% Senior Secured Notes due 2022 On March 4, 2021, we redeemed all of PHH’s outstanding 6.375% Senior Notes due August 2021 at a price of 100% of the principal amount, plus accrued and unpaid interest, and all of PMC’s 8.375% Senior Secured Notes due November 2022 at a price of 102.094% of the principal amount, plus accrued and unpaid interest. The redemption resulted in our recognition of a $7.1 million loss on debt extinguishment. Issuance of 7.875% Senior Secured Notes due 2026 On March 4, 2021, PMC completed the issuance and sale of $400.0 million aggregate principal amount of 7.875% senior secured notes due March 15, 2026 (the PMC Senior Secured Notes) at a discount of $2.1 million. The PMC Senior Secured Notes are guaranteed on a senior secured basis by Ocwen and PHH and were sold in an offering exempt from the registration requirements of the Securities Act of 1933, as amended (the Securities Act). Interest on the PMC Senior Secured Notes accrues at a rate of 7.875% per annum and is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2021. On or after March 15, 2023, PMC may redeem some or all of the PMC Senior Secured Notes at its option at the following redemption prices, plus accrued and unpaid interest, if any, on the notes redeemed to, but excluding, the redemption date if redeemed during the 12-month period beginning on March 15th of the years indicated below:
Redemption Year |  | Redemption Price
2023 |  | 103.938 | %
2024 |  | 101.969 |
2025 and thereafter |  | 100.000 |
Prior to March 15, 2023, PMC may, on any one or more occasions, redeem some or all of the PMC Senior Secured Notes at its option at a redemption price equal to 100% of the principal amount of the notes being redeemed, plus a “make-whole” premium equal to the greater of (i) 1.0% of the then outstanding principal amount of such note and (ii) the excess of (1) the present value at the redemption date of the sum of (A) the redemption price of the note at March 15, 2023 (such redemption price is set forth in the table above) plus (B) all required interest payments due on such notes through March 15, 2023 (excluding accrued but unpaid interest), such present value to be computed using a discount rate equal to the Treasury Rate (as defined in the indenture governing the PMC Senior Secured Notes (Indenture)) as of such redemption date plus 50 basis points; over (2) the then outstanding principal amount of such notes, plus accrued and unpaid interest, if any, on the notes redeemed to, but excluding, the redemption date. In addition, on or prior to March 15, 2023, PMC may also redeem up to 35.0% of the principal amount of all of the PMC Senior Secured Notes originally issued under the Indenture (including any additional PMC Senior Secured Notes issued under the Indenture) using the net proceeds of certain equity offerings at a redemption price equal to 107.875% of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of redemption (subject to the rights of holders of notes on the relevant regular record date to receive interest due on the relevant interest payment date that is on or prior to the applicable date of redemption); provided that: (i) at least 65.0% of the principal amount of all PMC Senior Secured Notes issued under the Indenture remains outstanding immediately after any such redemption; and (ii) PMC makes such redemption not more than 120 days after the consummation of any such equity offering. The Indenture contains customary covenants for debt securities of this type that limit the ability of PHH and its restricted subsidiaries (including PMC) to, among other things, (i) incur or guarantee additional indebtedness, (ii) incur liens, (iii) pay dividends on or make distributions in respect of PHH’s capital stock or make other restricted payments, (iv) make investments, (v) consolidate, merge, sell or otherwise dispose of certain assets, and (vi) enter into transactions with Ocwen’s affiliates. Issuance of OFC Senior Secured Notes On March 4, 2021, Ocwen completed the private placement of $199.5 million aggregate principal amount of senior secured notes (the OFC Senior Secured Notes) with an OID of $24.5 million to certain entities owned by funds and accounts managed by Oaktree Capital Management, L.P. (the Oaktree Investors). Concurrent with the issuance of the OFC Senior Secured Notes, Ocwen issued to the Oaktree Investors warrants to purchase shares of its common stock. The $158.5 million proceeds were allocated to the OFC Senior Secured Notes on a relative fair value basis resulting in an initial discount. On May 3, 2021, Ocwen issued to Oaktree the second tranche of the OFC Senior Secured Notes in an aggregate principal amount of $85.5 million with an OID of $10.5 million. Concurrent with the issuance of the second tranche of OFC Senior Secured Notes, Ocwen issued to the Oaktree Investors shares and warrants to purchase shares of its common stock. The $68.0 million proceeds were allocated to the OFC Senior Secured Notes on a relative fair value basis resulting in an initial discount. See Note 14 – Equity for additional information regarding the issuance of common stock and warrants. The OFC Senior Secured Notes mature on March 4, 2027 with no amortization of principal. Interest is payable quarterly in arrears on the last business day of each March, June, September and December and accrues at the rate of 12% per annum to the extent interest is paid in cash or 13.25% per annum to the extent interest is “paid-in-kind” through an increase in the principal amount or the issuance of additional notes (PIK Interest). Prior to March 4, 2022, all of the interest on the OFC Senior Secured Notes may, at our option, be paid as PIK Interest. On or after March 4, 2022, a minimum amount of interest will be required to be paid in cash equal to the lesser of (i) 7% per annum of the outstanding principal amount of the OFC Senior Secured Notes and (ii) the total amount of unrestricted cash of Ocwen and its subsidiaries less the greater of $125.0 million and the minimum liquidity amounts required by any agency. The OFC Senior Secured Notes are solely the obligation of Ocwen and are secured by a pledge of substantially all of the assets of Ocwen, including a pledge of the equity of Ocwen’s directly held subsidiaries. The lien on Ocwen’s assets securing the OFC Senior Secured Notes is junior to the lien securing Ocwen’s guarantee of the 7.875% PMC Senior Secured Notes described above. The OFC Senior Secured Notes are not guaranteed by any of Ocwen’s subsidiaries nor are they secured by a pledge or lien on any assets of Ocwen’s subsidiaries. Prior to March 4, 2026, we are permitted to redeem the OFC Senior Secured Notes in whole or in part at any time at a redemption price equal to par, plus a make-whole premium, plus accrued and unpaid interest. On and after March 4, 2026, we will be permitted to redeem the OFC Senior Secured Notes in whole or in part at any time at a redemption price equal to par plus accrued and unpaid interest. The OFC Senior Secured Notes have two financial maintenance covenants: (1) a minimum book value of stockholders’ equity of not less than $275.0 million and (2) a minimum amount of unrestricted cash of not less than $50.0 million at any time. The OFC Senior Secured Notes also have affirmative and negative covenants and events of default that are customary for debt securities of this type. Credit Ratings Credit ratings are intended to be an indicator of the creditworthiness of a company’s debt obligation. At September 30, 2021, the S&P issuer credit rating for Ocwen was “B-”. On February 24, 2021, concurrent with the launch of the PMC bond offering, S&P reaffirmed the ratings at B- and changed the outlook from Negative to Stable. Moody’s reaffirmed their ratings of Caa1 and revised their outlook to Stable from Negative on February 24, 2021. It is possible that additional actions by credit rating agencies could have a material adverse impact on our liquidity and funding position, including materially changing the terms on which we may be able to borrow money. Covenants Under the terms of our debt agreements, we are subject to various affirmative and negative covenants. Collectively, these covenants include: •Financial covenants, including, but not limited to, specified levels of net worth and liquidity; •Covenants to operate in material compliance with applicable laws; •Restrictions on our ability to engage in various activities, including but not limited to incurring or guarantying additional forms of debt, paying dividends or making distributions on or purchasing equity interests of Ocwen and its subsidiaries, repurchasing or redeeming capital stock or junior capital, repurchasing or redeeming subordinated debt prior to maturity, issuing preferred stock, selling or transferring assets or making loans or investments or other restricted payments, entering into mergers or consolidations or sales of all or substantially all of the assets of Ocwen and its subsidiaries or of PHH or PMC and their respective subsidiaries, creating liens on assets to secure debt, and entering into transactions with affiliates; •Monitoring and reporting of various specified transactions or events, including specific reporting on defined events affecting collateral underlying certain debt agreements; and •Requirements to provide audited financial statements within specified timeframes, including requirements that Ocwen’s financial statements and the related audit report be unqualified as to going concern. The most restrictive consolidated net worth requirement contained in our debt agreements with borrowings outstanding at September 30, 2021 is a minimum of $275.0 million tangible net worth at Ocwen, as defined in certain of our mortgage warehouse and MSR financing facilities agreements, or, if greater, the minimum requirement at PMC set forth by the Agencies. See Note 20 – Regulatory Requirements. The most restrictive liquidity requirement under our debt agreements with borrowings outstanding at September 30, 2021 is for a minimum of $125.0 million in consolidated liquidity, as defined, under certain of our advance match funded debt and MSR financing facilities agreements. We believe we were in compliance with all of the covenants in our debt agreements as of the date of these unaudited consolidated financial statements.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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