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Fair Value
 12 Months Ended
Dec. 31, 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.
Level 1:     Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
Level 2:     Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3:    Unobservable inputs for the asset or liability.
We classify assets in their entirety based on the lowest level of input that is significant to the fair value measurement.
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:
December 31,
  20212020
 LevelCarrying ValueFair ValueCarrying ValueFair Value
Financial assets:     
Loans held for sale
Loans held for sale, at fair value (a) (e)3, 2$917,534 $917,534 $366,364 $366,364 
 Loans held for sale, at lower of cost or fair value (b)310,993 10,993 21,472 21,472 
Total Loans held for sale$928,527 $928,527 $387,836 $387,836 
December 31,
  20212020
 LevelCarrying ValueFair ValueCarrying ValueFair Value
Loans held for investment
Loans held for investment - Reverse mortgages (a)3$7,199,762 $7,199,762 $6,997,127 $6,997,127 
Loans held for investment - Restricted for securitization investors (a)
37,879 7,879 9,770 9,770 
Total loans held for investment7,207,641 7,207,641 7,006,897 7,006,897 
Advances, net (c)3772,433 772,433 828,239 828,239 
Receivables, net (c)3180,707 180,707 187,665 187,665 
Mortgage-backed securities (a)31 1 2,019 2,019 
Corporate bonds (a)2211 211 211 211 
Investment in equity method investee (c)323,297 23,297 — — 
Financial liabilities:     
Advance match funded liabilities (c)3$512,297 $511,994 $581,288 $581,997 
Financing liabilities:
HMBS-related borrowings (a)3$6,885,022 $6,885,022 $6,772,711 $6,772,711 
Other financing liabilities:
Financing liability - Pledged MSR liability (a)3797,084 797,084 566,952 566,952 
Financing liability - Owed to securitization investors (a)37,879 7,879 9,770 9,770 
Total Other financing liabilities$804,963 $804,963 $576,722 $576,722 
Mortgage loan warehouse facilities (c)3$1,085,076 $1,085,076 $451,713 $451,713 
MSR financing facilities (c) (d)3900,760 873,820 437,672 406,860 
Senior secured term loan (c) (d)2$— $— $179,776 $184,639 
Senior notes:
PMC & PHH Senior notes (c) (d) (f)2392,555 413,472 311,898 320,879 
 OFC Senior notes due 2027 (c) (d) (f)3222,242 261,455 — — 
Total Senior notes$614,797 $674,927 $311,898 $320,879 
Derivative financial instrument assets (liabilities)
     
Interest rate lock commitments (a) 3$18,084 $18,084 $22,706 $22,706 
Forward trades - Loans held for sale (a)1364 364 (50)(50)
  TBA / Forward mortgage-backed securities (MBS) trades (a)1(287)(287)(4,554)(4,554)
Interest rate swap futures (a)11,734 1,734 504 504 
TBA forward Pipeline trades (a)148 48 — — 
Option contracts (a)2(277)(277)— — 
Other (a)3(1,070)(1,070)— — 
MSRs (a)3$2,250,147 $2,250,147 $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 14 — Borrowings for additional information. 
(e)Loans repurchased from Ginnie Mae securitizations with a fair value of $220.9 million and $51.1 million at December 31, 2021 and 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 14 — 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 Securitiza -
tion Investors		Loans Held for Sale - Fair ValueMortgage-Backed SecuritiesIRLCs
Year Ended December 31, 2021
Beginning balance$9,770 $(9,770)51,072 $2,019 $22,706 
Purchases, issuances, sales and settlements 
Purchases— — 436,154 — — 
Issuances (1)— — — — 627,677 
Sales— — (259,995)(1,617)— 
Settlements (1,891)1,891 — — — 
Transfers to:
Loans held for sale, at fair value (1)— — — — (591,701)
Receivables, net— — (1,644)— — 
Other assets— — (377)— — 
 (1,891)1,891 174,138 (1,617)35,976 
Change in fair value included in earnings (1)— — (4,270)(401)(40,597)
Transfers in and / or out of Level 3— — — — — 
Ending balance$7,879 $(7,879)$220,940 $1 $18,085 
(1)IRLC activity (issuances and transfers) represent changes in fair value included in earnings. This activity is presented on a gross basis in the table for disclosure purposes. Total net change in fair value included in earnings attributed to IRLCs for 2021 is a $4.6 million loss. See Note 17 — Derivative Financial Instruments and Hedging Activities.
 Loans Held for Investment - Restricted for Securitization InvestorsFinancing Liability - Owed to Securitiza -
tion Investors		Loans Held for Sale - Fair ValueMortgage-Backed SecuritiesIRLCs
Year Ended December 31, 2020
Beginning balance$23,342 $(22,002)$— $2,075 $— 
Purchases, issuances, sales and settlements 
Purchases— — 162,589 — — 
Issuances— — — — 286,992 
Deconsolidation of mortgage-backed securitization trusts(10,715)9,519 — — — 
Sales— — (137,780)— — 
Settlements (2,857)2,857 — — — 
Transfers (to) from:
Loans held for sale, at fair value— — — — (285,198)
Receivables, net— — (969)— — 
 (13,572)12,376 23,840 — 1,794 
Change in fair value included in earnings — (144)1,650 (56)10,434 
Transfers in and / or out of Level 3— — 25,582 — 10,478 
Ending balance$9,770 $(9,770)$51,072 $2,019 $22,706 


 Loans Held for Investment - Restricted for Securitization InvestorsFinancing Liability - Owed to Securitiza -
tion Investors		Mortgage-Backed SecuritiesDerivatives - Interest Rate Caps
Year Ended December 31, 2019
Beginning balance$26,520 $(24,815)$1,502 $678 
Purchases, issuances, sales and settlements 
Purchases— — — — 
Issuances — — — — 
Sales— — — — 
Settlements (3,178)2,813 — — 
 (3,178)2,813 — — 
Change in fair value included in earnings— — 573 (678)
Ending balance$23,342 $(22,002)$2,075 $— 
 
A reconciliation from the beginning balances to the ending balances of Loans Held for Investment and HMBS-related borrowings, MSRs and Pledged MSR liability that we measure at fair value on a recurring and non-recurring basis is disclosed in Note 5 – Reverse Mortgages, Note 7 — Mortgage Servicing and Note 8 — MSR Transfers Not Qualifying for Sale Accounting, respectively.
The methodologies that we use and key assumptions that we make to estimate the fair value of financial instruments and other assets and liabilities measured at fair value on a recurring or non-recurring basis and those disclosed, but not carried, at fair value are described below.
Loans Held for Sale
Residential forward and reverse mortgage loans that we intend to sell are carried at fair value as a result of a fair value election. Such loans are subject to changes in fair value due to fluctuations in interest rates from the closing date through the date of the sale of the loan into the secondary market. These loans are generally classified within Level 2 of the valuation
hierarchy because the primary component of the price is obtained from observable values of mortgage forwards for loans of similar terms and characteristics. We have the ability to access this market, and it is the market into which conventional and government-insured mortgage loans are typically sold.
We purchase certain loans from Ginnie Mae guaranteed securitizations in connection with loan modifications, strategic EBO and loan resolution activity as part of our contractual obligations as the servicer of the loans. Effective January 1, 2020, we elected to classify any repurchased loans as loans held for sale at fair value as we expect to redeliver (sell) the loans into new Ginnie Mae guaranteed securitizations (in the case of modified loans) or sell the loans to a private investor (in the case of EBO loans). Modified and EBO loans purchased before January 1, 2020 are classified as loans held for sale at the lower of cost or fair value. The fair value of these loans 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 repurchased in connection with loan resolution activities are classified as receivables. Because these loans are insured or guaranteed by the FHA or VA, the fair value of these loans represents the net recovery value taking into consideration the insured or guaranteed claim.
When we enter into an agreement to sell a loan or pool of loans to an investor at a set price, we value the loan or loans at the commitment price, unless facts and circumstances exist that could impact deal economics, at which point we use judgment to determine appropriate adjustments to recorded fair value, if any. We determine the fair value of loans for which we have no agreement to sell on the expected future cash flows discounted at a rate commensurate with the risk of the estimated cash flows.
Loans Held for Investment
Loans Held for Investment - Reverse Mortgages
We measure these loans at fair value based on the expected future cash flows discounted over the expected life of the loans at a rate commensurate with the risk of the estimated cash flows, including future draw commitments for HECM loans. Inputs of the discounted cash flows of these assets include future draws and tail securitization spreads, conditional prepayment rate (including voluntary and involuntary prepayments) and discount rate.
We engage third-party valuation experts in the determination of fair value. While the models and related assumptions used by the valuation experts are proprietary to them, we understand the methodologies, the significant inputs and the assumptions used to develop the prices based on our ongoing due diligence, which includes regular discussions with the valuation experts. We evaluate the reasonableness of our third party experts’ assumptions using historical experience, or cash flow backtesting, adjusted for prevailing market conditions. The fair value is equal to the third-party valuation expert fair value mark.
Significant unobservable assumptions include conditional prepayment rate and discount rate. The conditional prepayment rate 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.
December 31,
Significant unobservable assumptions20212020
Life in years
Range
1.0 to 8.2
0.9 to 8.0
Weighted average 5.7 5.9 
Conditional prepayment rate, including voluntary and involuntary prepayments
Range
11.2% to 36.6%
10.6% to 28.8%
Weighted average 16.0 %15.4 %
Discount rate2.6 %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.
Loans Held for Investment – Restricted for securitization investors
We have elected to measure loans held by consolidated mortgage-backed securitization trusts at fair value. The loans are secured by first liens on single family residential properties. Fair value is based on proprietary cash flow modeling processes
from a third-party broker/dealer and a third-party valuation expert. Significant assumptions used in the valuation include projected monthly payments, projected prepayments and defaults, property liquidation values and discount rates.
MSRs
We determine the fair value of MSRs primarily using discounted cash flow methodologies. The significant components of the estimated future cash inflows for MSRs include servicing fees, late fees, float earnings and other ancillary fees. Significant cash outflows include the cost of servicing, the cost of financing servicing advances and compensating interest payments.
We engage third-party valuation experts who generally utilize: (a) transactions involving instruments with similar collateral and risk profiles, adjusted as necessary based on specific characteristics of the asset or liability being valued; and/or (b) industry-standard modeling, such as a discounted cash flow model and prepayment model, in arriving at their estimate of fair value. The prices provided by the valuation experts reflect their observations and assumptions related to market activity, incorporating available industry survey results and client feedback, and including risk premiums and liquidity adjustments. While the models and related assumptions used by the valuation experts are proprietary to them, we understand the methodologies and assumptions used to develop the prices based on our ongoing due diligence, which includes regular discussions with the valuation experts. We believe that the procedures executed by the valuation experts, supported by our verification and analytical procedures, provide reasonable assurance that the prices used in our consolidated financial statements comply with the accounting guidance for fair value measurements and disclosures and reflect the assumptions that a market participant would use.
We evaluate the reasonableness of our third-party experts’ assumptions using historical experience adjusted for prevailing market conditions. Assumptions used in the valuation of MSRs include:
•Mortgage prepayment speeds•
Delinquency rates
•Cost of servicing•Interest rate used for computing float earnings
•Discount rate•Compensating interest expense
•
Interest rate used for computing the cost of financing servicing advances
•Collection rate of other ancillary fees
•
Curtailment on advances
MSRs are carried at fair value and classified within Level 3 of the valuation hierarchy. The fair value is equal to the fair value mark provided by the 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. Fair value reflects actual Ocwen sale prices for orderly transactions where available in lieu of independent third-party valuations. Our valuation process includes discussions of bid pricing with the third-party valuation experts and are contemplated along with other market-based transactions in their model validation.
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.
December 31,
Significant unobservable assumptions20212020
AgencyNon-AgencyAgencyNon-Agency
Weighted average prepayment speed8.5 %12.1 %11.8 %11.5 %
Weighted average lifetime delinquency rate1.2 %11.9 %3.0 %28.0 %
Weighted average discount rate8.5 %11.2 %9.2 %11.4 %
Weighted average cost to service (in dollars)
$71 $205 $79 $270 
Because the mortgages underlying these MSRs permit the borrowers to prepay the loans, the value of the MSRs generally tends to diminish in periods of declining interest rates, an improving housing market or expanded product availability (as prepayments increase) and increase in periods of rising interest rates, a deteriorating housing market or reduced product
availability (as prepayments decrease). The following table summarizes the estimated change in the value of the MSRs as of December 31, 2021 given hypothetical increases in lifetime prepayments and yield assumptions:
Adverse change in fair value10%20%
Weighted average prepayment speeds$(62,497)$(121,391)
Weighted average discount rate(63,711)(114,336)
The sensitivity analysis measures the potential impact on fair values based on hypothetical changes, which in the case of our portfolio at December 31, 2021 are increased prepayment speeds and an increase in the yield assumption.
Advances
We value advances at their net realizable value, which generally approximates fair value. Servicing advances have no stated maturity and do not bear interest. Principal and interest advances are generally realized within a relatively short period of time. The timing of recovery of taxes, insurance and other corporate advances depends on the underlying loan attributes, performance, and in many cases, foreclosure or liquidation timeline. The fair value adjustment to servicing advances associated with the estimated time to recover such advances is separately measured and reported as a component of the fair value of the associated MSR, consistent with actual market transactions. Refer to MSRs above for a description of the valuation methodology and assumptions related to the cost of financing servicing advances and discount rate, among other factors.
Receivables
The carrying value of receivables generally approximates fair value because of the relatively short period of time between their origination and realization.
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 11 — Investment in Equity Method Investee for further details.
Advance Match Funded Liabilities
For advance match funded liabilities that bear interest at a rate that is adjusted regularly based on a market index, the carrying value approximates fair value. For advance match funded liabilities that bear interest at a fixed rate, we determine fair value by discounting the future principal and interest repayments at a market rate commensurate with the risk of the estimated cash flows. We assume the notes are refinanced at the end of their revolving periods, consistent with how we manage our advance facilities.
Financing Liabilities
HMBS-Related Borrowings
HMBS-related borrowings are carried at fair value. These borrowings are not actively traded, and therefore, quoted market prices are not available. We determine fair value using a discounted cash flow approach, by discounting the projected recovery of principal and interest over the estimated life of the borrowing at a market rate commensurate with the risk of the estimated cash flows.
We engage third-party valuation experts to support our valuation and provide observations and assumptions related to market activities. The fair value is equal to the fair value mark provided by a third-party valuation expert. We evaluate the reasonableness of our fair value estimate and assumptions using historical experience, or cash flow backtesting, adjusted for prevailing market conditions and benchmarks with third-party expert valuations.
Significant unobservable assumptions include conditional prepayment rate 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.
December 31,
Significant unobservable assumptions20212020
Life in years
Range
1.0 to 8.2
0.9 to 8.0
Weighted average 5.7 5.9
Conditional prepayment rate
Range
11.2% to 36.6%
10.6% to 28.8%
Weighted average 16.0 %15.4 %
Discount rate2.5 %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.
Pledged MSR Liabilities
Pledged MSR liabilities are carried at fair value and classified as Level 3 within the valuation hierarchy. We recognize the proceeds received in connection with MSRs transferred or sold in transactions which did not initially qualify for sale accounting treatment as a secured financing that we account for at fair value. We determine the fair value of the pledged MSR liability following a similar approach as for the associated transferred MSRs. Fair value of the pledged MSR liability in connection with the MAV MSR transactions is determined using the fair value mark provided by third-party valuation expert, consistent with the associated MSR, using the same methodology and assumptions, while considering cash flows contractually retained by PMC. Fair value for the portion of the borrowing attributable to the MSRs underlying the Rights to MSRs in connection with NRZ transactions is determined using the fair value mark provided by the third-party valuation experts. Fair value for the portion of the borrowing attributable to any lump sum payments received in connection with the transfer of MSRs underlying such Rights to MSRs to the extent such transfer is accounted for as a financing is determined by discounting the relevant future cash flows that were altered through such transfer using assumptions consistent with the fair value mark provided by the third-party valuation experts for the related MSR.
December 31,
Significant unobservable assumptions20212020
Weighted average prepayment speed10.9 %11.5 %
Weighted average delinquency rate8.8 %29.8 %
Weighted average discount rate10.5 %11.4 %
Weighted average cost to service (in dollars)$182 $287 
Significant increases or decreases in these assumptions in isolation would result in a significantly higher or lower fair value.
Financing Liability – Owed to Securitization Investors
Consists of securitization debt certificates due to third parties that represent beneficial ownership interests in mortgage-backed securitization trusts that we include in our consolidated financial statements. We determine fair value using the measurement alternative to ASC Topic 820: Fair Value Measurement. In accordance with the measurement alternative, the fair value of the consolidated securitization debt certificates is measured as the fair value of the loans held by the trust less the fair value of the beneficial interests held by us in the form of residual securities.
Mortgage Loan Warehouse Facilities
Our mortgage loan warehouse facilities bear interest at a rate that is adjusted regularly based on a market index. The carrying value of the outstanding borrowings under these revolving facilities approximates fair value.
MSR Financing Facilities
Our MSR financing facilities bear interest at a rate that is adjusted regularly based on a market index. The carrying value of the outstanding borrowings under these facilities approximates fair value.
In 2014, we issued Ocwen Asset Servicing Income Series (OASIS), Series 2014-1 Notes secured by Ocwen-owned MSRs relating to Freddie Mac mortgages. In 2019, we issued Ocwen Excess Spread-Collateralized Notes, Series 2019-PLS1 notes
secured by certain of PMC’s private label MSRs. We determine the fair value of these notes based on bid prices provided by third parties involved in the issuance and placement of the notes.
Senior Notes
We base the fair value on quoted prices in a market with available limited trading activity, or on valuation data obtained from a pricing service in the absence of trading data.
Derivative Financial Instruments
Interest rate lock commitments (IRLCs) represent an agreement to purchase loans from a third-party originator or an agreement to extend credit to a mortgage applicant (locked pipeline), whereby the interest rate is set prior to funding. Fair value amounts of IRLCs are adjusted for expected “fallout” (locked pipeline loans not expected to close) using models that consider cumulative historical fallout rates and other factors. IRLCs are classified as Level 3 assets as fallout rates were determined to be significant unobservable assumptions.
We entered into forward MBS trades to provide an economic hedge against changes in the fair value of residential forward and reverse mortgage loans held for sale that we carry at fair value until August 2019 and, beginning in September 2019, to hedge our net MSR portfolio. We use derivative instruments, including forward trades of MBS or Agency “to be announced” securities (TBAs) and exchange-traded interest rate swap futures, as economic hedging instruments. Forward contracts, TBAs and interest rate swap futures are actively traded in the market and we obtain unadjusted market quotes for these derivatives; thus, they are classified within Level 1 of the valuation hierarchy.
In addition, we may use interest rate caps to minimize future interest rate exposure on variable rate debt issued on servicing advance financing facilities from increases in one-month or three-month Eurodollar rate (1ML or 3ML, respectively) interest rates. The fair value for interest rate caps is based on counterparty market prices and adjusted for counterparty credit risk.