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Business Segment Reporting
 12 Months Ended
Dec. 31, 2021
Segment Reporting [Abstract]  
Business Segment Reporting
Note 23 — 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. A brief description of our current business segments is as follows:
Servicing. This segment is primarily comprised of our residential mortgage servicing business and accounted for 78% of our total revenues in 2021. We provide residential and commercial forward mortgage loan servicing, reverse mortgage servicing, special servicing and asset management services. We earn fees for providing these services to owners of the mortgage loans and foreclosed real estate. In most cases, we provide these services either because we purchased the MSRs from the owner of the mortgage, retained the MSRs on the sale or securitization of residential mortgage loans or because we entered into a subservicing or special servicing agreement with the entity that owns the MSR. Our residential servicing portfolio includes both forward and reverse conventional, government-insured and non-Agency mortgage loans, including the reverse
mortgage loans classified as loans held for investment on our balance sheet. Non-Agency loans include subprime loans, which represent residential loans that generally did not qualify under GSE guidelines or have subsequently become delinquent.
Originations. The Originations segment (previously Lending) purchases and originates conventional and government-insured residential forward and reverse mortgage loans through multiple channels. The loans are typically sold shortly after origination on a servicing retained basis. We originate forward mortgage loans directly with customers (recapture channel) as well as through correspondent lending arrangements since the second quarter of 2019. We originate reverse mortgage loans in all three channels through our correspondent lending arrangements, broker relationships (wholesale) and retail channels. In addition to our originated MSRs, we acquire MSRs through multiple channels, including flow purchase agreements, the Agency Cash Window programs and bulk MSR purchases.
Corporate Items and Other. Corporate Items and Other includes revenues and expenses of corporate support services, CR Limited (CRL), our wholly-owned captive reinsurance subsidiary, inactive entities, business activities that are individually insignificant, revenues and expenses that are not directly related to other reportable segments, interest income on short-term investments of cash, gain or loss on extinguishment of debt, interest expense on unallocated corporate debt and foreign currency exchange gains or losses. Corporate Items and Other also includes severance, retention, facility-related and other expenses incurred in 2019 and 2020 related to our cost re-engineering initiatives. Our cash balances are included in Corporate Items and Other. CRL provides re-insurance related to coverage on foreclosed real estate properties owned or serviced by us.
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 to each business segment using various methodologies intended to approximate the utilization of such services. Beginning in 2020, we updated our methodology to allocate overhead costs incurred by corporate support services to the Servicing and Originations segments, which now incorporates the utilization of various measurements primarily based on time studies, personnel volumes and service consumption levels. In prior periods, corporate support services costs were primarily allocated based on relative segment size. 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. We allocate interest expense on corporate debt from Corporate Items and Other to the Servicing segment and the Originations segment (starting in the fourth quarter of 2021) based on relative financing requirements.
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 Eliminations column in the table below.
Financial information for our segments is as follows:
Results of OperationsServicingOriginationsCorporate Items and OtherCorporate Eliminations (1)Business Segments Consolidated
Year Ended December 31, 2021
Servicing and subservicing fees$773,459 $8,482 $— $— $781,941 
Reverse mortgage revenue, net(2,335)82,011 — — 79,676 
Gain on loans held for sale, net (1)46,596 124,489 — (25,330)145,755 
Other revenue, net1,660 34,909 6,158 — 42,727 
Revenue819,380 249,891 6,158 (25,330)1,050,099 
MSR valuation adjustments, net (1)(160,396)25,166 — 25,330 (109,900)
Operating expenses 342,424 172,797 94,106 — 609,327 
Other income (expense):
Interest income8,245 17,678 451 — 26,374 
Interest expense (104,578)(22,972)(16,418)— (143,968)
Pledged MSR liability expense(209,121)(834)54 — (209,901)
Loss on extinguishment of debt— — (15,458)— (15,458)
Equity in earnings of unconsolidated entity3,620 — — — 3,620 
Other, net 5,190 (2,282)1,182 — 4,090 
Other expense, net(296,644)(8,410)(30,189)— (335,243)
Income (loss) before income taxes
$19,916 $93,850 $(118,137)$— $(4,371)
Year Ended December 31, 2020
Servicing and subservicing fees$731,221 $6,041 $58 $— $737,320 
Reverse mortgage revenue, net7,579 53,147 — — 60,726 
Gain on loans held for sale, net (1)14,704 105,164 — 17,368 137,236 
Other revenue, net4,160 14,946 6,524 — 25,630 
Revenue 757,664 179,298 6,582 17,368 960,912 
MSR valuation adjustments, net (1)(276,252)41,699 — (17,368)(251,921)
Operating expenses (2) 331,885 114,357 129,462 — 575,704 
Other income (expense):
Interest income7,061 7,008 1,930 — 15,999 
Interest expense (90,671)(9,837)(8,859)— (109,367)
Pledged MSR liability expense(152,454)— 120 — (152,334)
Other, net 10,752 351 (4,372)— 6,731 
Other expense, net(225,312)(2,478)(11,181)— (238,971)
Income (loss) before income taxes$(75,785)$104,162 $(134,061)$— $(105,684)
Results of OperationsServicingOriginationsCorporate Items and OtherCorporate Eliminations (1)Business Segments Consolidated
Year Ended December 31, 2019
Servicing and subservicing fees$974,160 $1,254 $93 $— $975,507 
Reverse mortgage revenue, net63,459 22,850 — — 86,309 
Gain on loans held for sale, net5,426 32,865 9 — 38,300 
Other revenue, net5,445 4,729 13,085 — 23,259 
Revenue 1,048,490 61,698 13,187 — 1,123,375 
MSR valuation adjustments, net(120,864)(12)— — (120,876)
Operating expenses (2) (3)547,976 72,457 53,506 — 673,939 
Other income (expense):
Interest income10,085 5,243 1,776 — 17,104 
Interest expense (102,525)(7,590)(4,014)— (114,129)
Pledged MSR liability expense(372,172)— — — (372,172)
 Gain on extinguishment of debt— — 5,099 — 5,099 
Other, net 12,294 892 (4,139)— 9,047 
Other income (expense), net(452,318)(1,455)(1,278)— (455,051)
Loss before income taxes$(72,668)$(12,226)$(41,597)$— $(126,491)
(1)Corporate Eliminations for 2021 and 2020 includes inter-segment derivative eliminations of $25.3 million and $17.4 million reported as gain on loans held for sale, net, respectively, with a corresponding offset in MSR valuation adjustments, net.
(2)In 2020, we executed certain cost re-engineering initiatives to generate further cost savings, some of which qualify as restructuring charges under GAAP, including the partial abandonment of certain leased properties and additional severance costs. As a result of these initiatives, we accelerated the depreciation of facility lease ROU assets and leasehold improvements by $3.3 million, recorded $6.3 million of facility and other related exit costs, and accrued $3.4 million of employee severance costs. In 2019, we executed cost re-engineering opportunities that extended beyond eliminating redundant costs through the PHH integration process. Costs for this plan totaled $65.0 million, including $35.7 million of employee-related costs, $10.1 million facilities-related and $19.1 million of other costs. Employee-related costs and facility-related costs are reported in Compensation and benefits expense and Occupancy and equipment expense, respectively, in the consolidated statements of operations. Other costs are primarily reported in Professional services expense and Other expenses. The expenses were all incurred within the Corporate Items and Other segment. The remaining liability of $2.0 million at December 31, 2020 is included in Other accrued expenses, a component of Other liabilities in the consolidated balance sheet and was settled in 2021.
(3)Included in the Corporate Items and Other segment for 2019, we recorded in Professional services expense a recovery from a service provider of $30.7 million during the first quarter of amounts previously recognized as expense.
Total AssetsServicingOriginationsCorporate Items and OtherBusiness Segments Consolidated
December 31, 2021$10,999,204 $823,530 $324,389 $12,147,123 
December 31, 20209,847,603 379,233 424,291 10,651,127 
December 31, 20199,580,466 257,416 568,317 10,406,199 
Depreciation and Amortization ExpenseServicingOriginationsCorporate Items and OtherBusiness Segments Consolidated
Year Ended December 31, 2021:    
Depreciation expense$674 $244 $9,347 $10,265 
Amortization of debt discount and issuance costs687 — 7,105 7,792 
Year Ended December 31, 2020:    
Depreciation expense$857 $128 $18,136 $19,121 
Amortization of debt discount and issuance costs470 — 6,522 6,992 
Year Ended December 31, 2019:    
Depreciation expense$1,925 $93 $29,893 $31,911 
Amortization of debt discount and issuance costs71 — 4,441 4,512