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Fair Value
 9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value
Note 3 – Fair Value
Fair value is estimated based on a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in
pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs to valuation techniques into three broad levels whereby the highest priority is given to Level 1 inputs and the lowest to Level 3 inputs.
The carrying amounts and the estimated fair values of our financial instruments and certain of our nonfinancial assets measured at fair value on a recurring or non-recurring basis or disclosed, but not measured, at fair value are as follows:
  September 30, 2021December 31, 2020
 LevelCarrying ValueFair ValueCarrying ValueFair Value
Financial assets     
Loans held for sale
Loans held for sale, at fair value (a) (e)3, 2$921,621 $921,621 $366,364 $366,364 
Loans held for sale, at lower of cost or fair value (b)
312,079 12,079 21,472 21,472 
Total Loans held for sale$933,700 $933,700 $387,836 $387,836 
Loans held for investment
Loans held for investment - Reverse mortgages (a) 3$7,100,726 $7,100,726 $6,997,127 $6,997,127 
Loans held for investment - Restricted for securitization investors (a)
38,004 8,004 9,770 9,770 
Total loans held for investment
$7,108,730 $7,108,730 $7,006,897 $7,006,897 
Advances, net (c)
3$739,596 $739,596 $828,239 $828,239 
Receivables, net (c)3183,090 183,090 187,665 187,665 
Mortgage-backed securities (a)31,618 1,618 2,019 2,019 
Corporate bonds (a)2211 211 211 211 
Investment in equity method investee (c)319,794 19,794 — — 
Financial liabilities:     
Advance match funded liabilities (c)3$516,572 $515,405 $581,288 $581,997 
Financing liabilities:
HMBS-related borrowings (a)3$6,782,564 $6,782,564 $6,772,711 $6,772,711 
Other financing liabilities
Financing liability -Transferred MSR liability (a) 3702,907 702,907 566,952 566,952 
Financing liability - Owed to securitization investors (a)38,004 8,004 9,770 9,770 
Total Other financing liabilities710,911 710,911 576,722 576,722 
 
Senior secured term loan (c) (d)2$— $— $179,776 $184,639 
Mortgage loan warehouse facilities (c)31,069,170 1,069,170 451,713 451,713 
MSR financing facilities (c) (d)3945,744 918,217 437,672 406,860 
Senior notes:
Senior notes (c) (d) (f)2392,190 403,490 311,898 320,879 
OFC Senior notes due 2027 (c) (d) (f)3220,468 258,805 — — 
Total Senior notes$612,658 $662,295 $311,898 $320,879 
  September 30, 2021December 31, 2020
 LevelCarrying ValueFair ValueCarrying ValueFair Value
Derivative financial instrument assets (liabilities)
     
Interest rate lock commitments (a) 3$14,030 $14,030 $22,706 $22,706 
Forward trades - Loans held for sale (a)
2421 421 (50)(50)
TBA / Forward mortgage-backed securities (MBS) trades (a)1(11,227)(11,227)(4,554)(4,554)
Interest rate swap futures (a)1(8,236)(8,236)504 504 
TBA forward Pipeline trades (a)15,262 5,262 — — 
Other3(438)(438)— — 
MSRs (a) 3$2,176,260 $2,176,260 $1,294,817 $1,294,817 
(a)Measured at fair value on a recurring basis.
(b)Measured at fair value on a non-recurring basis.
(c)Disclosed, but not measured, at fair value. 
(d)The carrying values are net of unamortized debt issuance costs and discount. See Note 12 – Borrowings for additional information.
(e)Loans repurchased from Ginnie Mae securitizations with a fair value of $210.8 million and $51.1 million at September 30, 2021 and December 31, 2020, respectively, are classified as Level 3. The remaining balance of loans held for sale at fair value is classified as Level 2.
(f)On March 4, 2021, PMC completed the issuance and sale of $400.0 million aggregate principal amount of senior secured notes. Fair value is based on valuation data obtained from a pricing service. Therefore, these notes are classified as Level 2. Additionally on March 4, 2021 and May 3, 2021, Ocwen completed the private placement of $199.5 million and $85.5 million, respectively, aggregate principal amount of senior secured second lien notes. These notes are classified as Level 3. See Note 12 – Borrowings for additional information.
The following tables present a reconciliation of the changes in fair value of Level 3 assets and liabilities that we measure at fair value on a recurring basis:
Loans Held for Investment - Restricted for Securitization InvestorsFinancing Liability - Owed to Securitization InvestorsLoans Held for Sale - Fair ValueMortgage-Backed SecuritiesIRLCs
Three months ended September 30, 2021
Beginning balance$8,680 $(8,680)$138,842 $1,607 $17,437 
Cumulative effect of fair value election
— — — — 
Purchases, issuances, sales and settlements 
Purchases— — 136,996 — — 
Issuances— — — — 184,995 
Sales— — (64,032)— — 
Settlements (676)676 — — — 
Transfers (to) from:
Loans held for sale, at fair value— — — — (182,783)
Receivables, net— — (558)— — 
 (676)676 72,406 — 2,212 
Change in fair value included in earnings— — (496)11 (5,619)
Transfers in and / or out of Level 3
— — — — — 
Ending balance$8,004 $(8,004)$210,752 $1,618 $14,030 
Loans Held for Investment - Restricted for Securitization InvestorsFinancing Liability - Owed to Securitization InvestorsLoans Held for Sale - Fair ValueMortgage-Backed SecuritiesIRLCs
Three months ended September 30, 2020
Beginning balance$11,664 $(11,664)$25,950 $1,726 $17,818 
Purchases, issuances, sales and settlements
Purchases— — 45,445 — — 
Issuances— — — — 87,311 
Sales— — (45,723)— — 
Settlements (652)652 356 — (77,785)
Transfers (to) from:
Receivables, net— — 157 — — 
 (652)652 235 — 9,526 
Change in fair value included in earnings— — 224 424 (4,665)
Ending balance$11,012 $(11,012)$26,409 $2,150 $22,679 
Loans Held for Investment - Restricted for Securitization InvestorsFinancing Liability - Owed to Securitization InvestorsLoans Held for Sale - Fair ValueMortgage-backed SecuritiesIRLCs
Nine Months Ended September 30, 2021
Beginning balance$9,770 $(9,770)$51,072 $2,019 $22,706 
Purchases, issuances, sales and settlements
 
Purchases— — 303,117 — — 
Issuances— — — — 446,751 
Sales— — (135,088)— — 
Settlements (1,766)1,766 — — — 
Transfers (to) from:
Loans held for sale, at fair value— — — — (425,169)
Other assets— — (377)— — 
Receivables, net— — (1,113)— — 
 (1,766)1,766 166,539 — 21,582 
Change in fair value included in earnings— — (6,859)(401)(30,258)
Ending balance$8,004 $(8,004)$210,752 $1,618 $14,030 
Loans Held for Investment - Restricted for Securitization InvestorsFinancing Liability - Owed to Securitization InvestorsLoans Held for Sale - Fair ValueMortgage-backed SecuritiesIRLCs
Nine Months Ended September 30, 2020
Beginning balance$23,342 $(22,002)$— $2,075 $— 
Purchases, issuances, sales and settlements
  
Purchases— — 103,955 — — 
Issuances— — — — 144,931 
Deconsolidation of mortgage-backed securitization trusts(10,715)9,519 — — — 
Sales— — (104,273)— — 
Settlements (1,615)1,615 (70)— — 
Transfers (to) from:
Loans held for sale, at fair value
— — — — (128,224)
Receivables, net— — (113)— — 
 (12,330)11,134 (501)— 16,707 
Change in fair value included in earnings— (144)1,328 75 (4,506)
Transfers in and / or out of Level 3— — 25,582 — 10,478 
Ending balance$11,012 $(11,012)$26,409 $2,150 $22,679 
A rollforward of the beginning and ending balances of Loans Held for Investment and HMBS-related borrowings, MSRs and Financing liability - MSRs pledged that we measure at fair value on a recurring and non-recurring basis is provided in Note 5 – Reverse Mortgages, Note 7 – Mortgage Servicing and Note 8 — MSR Transfers Not Qualifying for Sale Accounting, respectively.
During the nine months ended September 30, 2021, there have been no changes to the methodologies that we use in estimating fair values or classifications under the valuation hierarchy as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020. The significant unobservable assumptions that we make to estimate the fair value of significant assets and liabilities classified as Level 3 and measured at fair value on a recurring or non-recurring basis are provided below.
Loans Held for Sale
The fair value of loans we purchased from Ginnie Mae guaranteed securitizations is estimated using both observable and unobservable inputs, including published forward Ginnie Mae prices or existing sale contracts, as well as estimated default, prepayment, and discount rates. The significant unobservable input in estimating fair value is the estimated default rate. Accordingly, these repurchased Ginnie Mae loans are classified as Level 3 within the valuation hierarchy.
Loans Held for Investment - Reverse Mortgages
Reverse mortgage loans held for investment are carried at fair value and classified as Level 3 within the valuation hierarchy. Significant unobservable assumptions include voluntary prepayment speeds, defaults and discount rate. The conditional prepayment speed assumption displayed in the table below is inclusive of voluntary (repayment or payoff) and involuntary (inactive/delinquent status and default) prepayments. The discount rate assumption is primarily based on an assessment of current market yields on reverse mortgage loan and tail securitizations, expected duration of the asset and current market interest rates.
Significant unobservable assumptionsSeptember 30,
2021		December 31,
2020
Life in years
Range
1.1 to 8.0
0.9 to 8.0
Weighted average 5.65.9 
Conditional prepayment rate, including voluntary and involuntary prepayments
Range
11.0% to 35.5%
10.6% to 28.8%
Weighted average 16.2 %15.4 %
Discount rate2.5 %1.9 %
Significant increases or decreases in any of these assumptions in isolation could result in a significantly lower or higher fair value, respectively. The effects of changes in the assumptions used to value the securitized loans held for investment, excluding future draw commitments, are partially offset by the effects of changes in the assumptions used to value the HMBS-related borrowings that are associated with these loans.
MSRs
MSRs are carried at fair value and classified within Level 3 of the valuation hierarchy. The fair value is determined using the mid-point of the range of prices provided by third-party valuation experts, without adjustment, except in the event we have a potential or completed sale, including transactions where we have executed letters of intent, in which case the fair value of the MSRs is recorded at the estimated sale price.
A change in the valuation inputs or assumptions may result in a significantly higher or lower fair value measurement. Changes in market interest rates predominantly impact the fair value of Agency MSRs via prepayment speeds by altering the borrower refinance incentive and the non-Agency MSRs due to the impact on advance funding costs. The significant unobservable assumptions used in the valuation of these MSRs include prepayment speeds, delinquency rates, cost to service and discount rates.
Significant unobservable assumptionsSeptember 30, 2021December 31, 2020
AgencyNon-AgencyAgencyNon-Agency
Weighted average prepayment speed9.0 %12.0 %11.8 %11.5 %
Weighted average lifetime delinquency rate1.4 %12.8 %3.0 %28.0 %
Weighted average discount rate8.6 %11.2 %9.2 %11.4 %
Weighted average cost to service (in dollars)$72 $209 $79 $270 
Because the mortgages underlying these MSRs permit the borrowers to prepay the loans, the value of the MSRs generally tends to diminish in periods of declining interest rates, an improving housing market or expanded product availability (as prepayments increase) and increase in periods of rising interest rates, a deteriorating housing market or reduced product availability (as prepayments decrease). The following table summarizes the estimated change in the value of the MSRs as of September 30, 2021 given hypothetical increases in lifetime prepayments and yield assumptions:
Adverse change in fair value10%20%
Weighted average prepayment speeds$(65,965)$(128,151)
Weighted average discount rate (53,571)(103,573)
Investment in Equity Method Investee
Our investment in equity method investee is accounted for using the equity method and classified as Level 3 within the valuation hierarchy. The assets, including MSRs and MSR related assets, and liabilities of the investee are carried at fair value or a value that approximates fair value. Accordingly, the investee’s net asset value approximates its fair value, and its earnings or losses reflect the change in its net asset value, resulting in our recorded investment approximating fair value. See Note 10 - Investment in Equity Method Investee for further details.
Financing Liabilities
HMBS-Related Borrowings
HMBS-related borrowings are carried at fair value and classified as Level 3 within the valuation hierarchy. These borrowings are not actively traded, and therefore, quoted market prices are not available.
Significant unobservable assumptions include yield spread and discount rate. The yield spread and discount rate assumption for these liabilities are primarily based on an assessment of current market yields for newly issued HMBS, expected duration and current market interest rates.
Significant unobservable assumptionsSeptember 30,
2021		December 31,
2020
Life in years
Range
1.1 to 8.0
0.9 to 8.0
Weighted average 5.65.9 
Conditional prepayment rate
Range
11.0% to 35.5%
10.6% to 28.8%
Weighted average16.2 %15.4 %
Discount rate2.3 %1.7 %
Significant increases or decreases in any of these assumptions in isolation could result in a significantly higher or lower fair value, respectively. The effects of changes in the assumptions used to value the HMBS-related borrowings are partially offset by the effects of changes in the assumptions used to value the associated pledged loans held for investment, excluding future draw commitments.
MSRs Pledged Liabilities
These MSR pledged liabilities carried at fair value and classified as Level 3 within the valuation hierarchy. We determine the fair value of the pledged MSR liability consistent with the mid-point of the range of prices provided by third-party valuation experts for the related MSR, considering retained cash flows.
Significant unobservable assumptionsSeptember 30,
2021		December 31,
2020
Weighted average prepayment speed11.2 %11.5 %
Weighted average delinquency rate11.2 %29.8 %
Weighted average discount rate10.7 %11.4 %
Weighted average cost to service (in dollars)$199 $287 
Significant increases or decreases in these assumptions in isolation would result in a significantly higher or lower fair value.
Derivative Financial Instruments
Interest rate lock commitments (IRLCs) are classified as Level 3 assets as fallout rates were determined to be significant unobservable assumptions.