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Business Segment Reporting
 9 Months Ended
Sep. 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 nine months ended September 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 $(0.5) million and $(5.6) million, respectively, for the three months ended September 30, 2020, and $12.1 million and $(0.9) million for the nine months ended September 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. 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.
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 September 30, 2021
Results of Operations ServicingOriginationsCorporate Items and OtherCorporate Eliminations (1)Business Segments Consolidated
Servicing and subservicing fees$205,431 $1,155 $— $— $206,585 
Reverse mortgage revenue, net(13,032)18,067 — — 5,035 
Gain on loans held for sale, net (1)31,555 29,604 — (1,457)59,702 
Other revenue, net303 9,947 1,529 — 11,779 
Revenue224,257 58,773 1,529 (1,457)283,101 
MSR valuation adjustments, net (1)(10,577)2,800 — 1,457 (6,320)
Operating expenses 80,849 43,498 21,088 — 145,436 
Other (expense) income:
Interest income2,416 5,348 105 — 7,869 
Interest expense (28,979)(6,711)(4,933)— (40,623)
Pledged MSR liability expense(91,120)— (41)— (91,160)
Other 1,443 122 1,267 — 2,832 
Other expense, net(116,239)(1,241)(3,602)— (121,082)
Income (loss) before income taxes
$16,592 $16,833 $(23,162)$— $10,263 
Three Months Ended September 30, 2020
Results of Operations ServicingOriginationsCorporate Items and OtherCorporate Eliminations (1)Business Segments Consolidated
Servicing and subservicing fees$178,544 $3,178 $— $— $181,722 
Reverse mortgage revenue, net(1,116)15,615 — — 14,499 
Gain on loans held for sale, net (1)6,758 31,295 — 7,833 45,886 
Other revenue, net1,248 4,125 1,555 — 6,928 
Revenue 185,434 54,213 1,555 7,833 249,035 
MSR valuation adjustments, net (1)(38,351)12,370 — (7,833)(33,814)
Operating expenses 84,639 30,304 34,579 — 149,522 
Other (expense) income:
Interest income1,637 1,952 212 — 3,801 
Interest expense (22,179)(2,405)(2,231)— (26,815)
Pledged MSR liability expense(57,434)— 30 — (57,404)
Other 2,178 230 937 — 3,345 
Other expense, net(75,798)(223)(1,052)— (77,073)
Income (loss) before income taxes$(13,354)$36,056 $(34,076)$— $(11,374)
Nine Months Ended September 30, 2021
Results of Operations ServicingOriginationsCorporate Items and OtherCorporate Eliminations (1)Business Segments Consolidated
Servicing and subservicing fees$556,927 $5,837 $— $— $562,764 
Reverse mortgage revenue, net(511)56,673 — — 56,162 
Gain on loans held for sale, net (1)39,206 94,470 — (25,541)108,136 
Other revenue, net1,302 23,450 4,326 — 29,078 
Revenue 596,924 180,431 4,326 (25,541)756,140 
MSR valuation adjustments, net (1)(103,215)20,112 — 25,541 (57,562)
Operating expenses 247,228 120,514 67,131 — 434,873 
Other (expense) income:
Interest income4,905 10,776 312 — 15,993 
Interest expense (72,598)(14,963)(15,030)— (102,591)
Loss on extinguishment of debt— — (15,458)— (15,458)
Pledged MSR liability expense(168,847)— 27 — (168,820)
Other 4,787 4 2,045 — 6,836 
Other expense, net
(231,753)(4,183)(28,104)— (264,040)
Income (loss) before income taxes$14,728 $75,846 $(90,909)$— $(335)
Nine Months Ended September 30, 2020
Results of Operations ServicingOriginationsCorporate Items and OtherCorporate Eliminations (1)Business Segments Consolidated
Servicing and subservicing fees$565,201 $3,186 $58 $— $568,445 
Reverse mortgage revenue, net12,837 38,218 — — 51,055 
Gain on loans held for sale, net (1)10,768 74,163 — 7,833 92,764 
Other revenue, net3,223 9,234 5,180 — 17,637 
Revenue592,029 124,801 5,238 7,833 729,901 
MSR valuation adjustments, net (1)(249,873)26,338 — (7,833)(231,368)
Operating expenses 255,534 78,330 97,681 — 431,545 
Other (expense) income:
Interest income6,321 4,733 1,708 — 12,762 
Interest expense (69,755)(6,591)(7,211)— (83,557)
Pledged MSR liability expense(105,771)— 87 — (105,684)
Other8,300 198 (3,882)— 4,616 
Other expense, net(160,905)(1,660)(9,298)— (171,863)
Income (loss) before income taxes$(74,283)$71,149 $(101,741)$— $(104,875)
(1)Corporate Eliminations for the three and nine months ended September 30, 2021 includes an inter-segment derivatives elimination of $1.5 million and $25.5 million, respectively, with a corresponding offset in MSR valuation adjustments, net; and $7.8 million for the three and nine months ended September 30, 2020.
Total AssetsServicingOriginationsCorporate Items and OtherBusiness Segments Consolidated
September 30, 2021$10,790,503 $865,011 $384,724 $12,040,238 
December 31, 2020$9,847,603 $379,233 $424,291 $10,651,127 
September 30, 2020$9,516,514 $437,304 $470,033 $10,423,851 
Depreciation and Amortization ExpenseServicingOriginationsCorporate Items and OtherBusiness Segments Consolidated
Three months ended September 30, 2021
Depreciation expense$137 $77 $2,247 $2,461 
Amortization of debt issuance costs and discount129 — 2,076 2,205 
Three months ended September 30, 2020
Depreciation expense$219 $31 $4,055 $4,305 
Amortization of debt issuance costs and discount115 — 1,039 1,154 
Nine Months Ended September 30, 2021
Depreciation expense$514 $125 $6,888 $7,527 
Amortization of debt issuance costs and discount388 — 5,050 5,438 
Nine months ended September 30, 2020
Depreciation expense$652 $102 $14,644 $15,398 
Amortization of debt issuance costs and discount343 — 4,992 5,335