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Business Segment Reporting | 3 Months Ended
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Mar. 31, 2022
Segment Reporting [Abstract] |
Business Segment Reporting |
Note 18 – 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 three months ended March 31, 2022, 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, 2021, with the exception of certain reclassifications disclosed below. Effective in the first quarter of 2022, we recognize revaluation gains on Fannie Mae MSRs purchased through the Agency Cash Window Program within the Servicing segment that were historically reported in the Originations segment. MSR valuation adjustments, net for the Servicing and Originations segments has been revised for prior periods to conform to the current segment presentation. Such revaluation gains were $3.6 million and $— (nil) for the three months ended March 31, 2022 and 2021, respectively. 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. 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. 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. Effective in the first quarter of 2022, we no longer allocate interest expense on the OFC Senior Secured Notes to the Servicing and Originations segments. Interest expense allocated to the Servicing and Originations segments for prior periods has been revised to conform to the current period presentation. The interest expense allocation adjustment for the three months ended March 31, 2022 and 2021 is $10.2 million ($9.9 million Servicing and $0.3 million Originations) and $1.5 million (all Servicing), respectively. 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:
| Three Months Ended March 31, 2022
Results of Operations | Servicing |  | Originations |  | Corporate Items and Other |  | Corporate Eliminations (1) |  | Business Segments Consolidated
Servicing and subservicing fees | $ | 212,168 |  |  | $ | 455 |  |  | $ | — |  |  | $ | — |  |  | $ | 212,623 |
Reverse mortgage revenue, net | (11,853) |  |  | 24,963 |  |  | — |  |  | — |  |  | 13,110 |
Gain (loss) on loans held for sale, net (1) | (2,701) |  |  | 12,773 |  |  | — |  |  | (13,277) |  |  | (3,206) |
Other revenue, net | 405 |  |  | 6,828 |  |  | 1,803 |  |  | — |  |  | 9,036 |
Revenue | 198,019 |  |  | 45,019 |  |  | 1,803 |  |  | (13,277) |  |  | 231,563 |
MSR valuation adjustments, net (1) | 48,290 |  |  | 1,065 |  |  | — |  |  | 13,277 |  |  | 62,632 |
Operating expenses | 74,250 |  |  | 46,235 |  |  | 6,533 |  |  | — |  |  | 127,018 |
Other (expense) income: |  |  |  |  |  |  |  |  |
Interest income | 4,060 |  |  | 2,973 |  |  | 79 |  |  | — |  |  | 7,112 |
Interest expense | (23,101) |  |  | (4,234) |  |  | (10,540) |  |  | — |  |  | (37,875) |
Pledged MSR liability expense | (86,909) |  |  | — |  |  | 12 |  |  | — |  |  | (86,897) |
Earnings of equity method investee | 12,003 |  |  | — |  |  | — |  |  | — |  |  | 12,003 |
Loss on extinguishment of debt | (33) |  |  | — |  |  | — |  |  | — |  |  | (33) |
Other | 715 |  |  | (1,411) |  |  | 534 |  |  | — |  |  | (162) |
Other income (expense), net | (93,265) |  |  | (2,672) |  |  | (9,915) |  |  | — |  |  | (105,852) |
Income (loss) before income taxes | $ | 78,794 |  |  | $ | (2,823) |  |  | $ | (14,645) |  |  | $ | — |  |  | $ | 61,325 |
| Three Months Ended March 31, 2021
Results of Operations | Servicing |  | Originations |  | Corporate Items and Other |  | Corporate Eliminations (1) |  | Business Segments Consolidated
Servicing and subservicing fees | $ | 169,354 |  |  | $ | 2,384 |  |  | $ | — |  |  | $ | — |  |  | $ | 171,738 |
Reverse mortgage revenue, net | 2,035 |  |  | 19,791 |  |  | — |  |  | — |  |  | 21,826 |
Gain on loans held for sale, net (1) | 3,521 |  |  | 37,593 |  |  | — |  |  | (35,393) |  |  | 5,721 |
Other revenue, net | 502 |  |  | 6,518 |  |  | 1,289 |  |  | — |  |  | 8,309 |
Revenue | 175,412 |  |  | 66,286 |  |  | 1,289 |  |  | (35,393) |  |  | 207,594 |
MSR valuation adjustments, net (1) | (22,690) |  |  | 8,505 |  |  | — |  |  | 35,393 |  |  | 21,208 |
Operating expenses | 82,753 |  |  | 37,737 |  |  | 19,139 |  |  | — |  |  | 139,629 |
Other (expense) income: |  |  |  |  |  |  |  |  |
Interest income | 1,257 |  |  | 2,566 |  |  | 113 |  |  | — |  |  | 3,936 |
Interest expense | (18,816) |  |  | (3,552) |  |  | (6,084) |  |  | — |  |  | (28,452) |
Pledged MSR liability expense | (37,883) |  |  | — |  |  | 33 |  |  | — |  |  | (37,850) |
Loss on extinguishment of debt | — |  |  | — |  |  | (15,458) |  |  | — |  |  | (15,458) |
Other | 452 |  |  | 50 |  |  | (212) |  |  | — |  |  | 290 |
Other income (expense), net | (54,990) |  |  | (936) |  |  | (21,608) |  |  | — |  |  | (77,534) |
Income (loss) before income taxes | $ | 14,979 |  |  | $ | 36,118 |  |  | $ | (39,458) |  |  | $ | — |  |  | $ | 11,639 |
(1)Corporate Eliminations for the three months ended March 31, 2022 and 2021 includes inter-segment derivatives eliminations of $13.3 million and $35.4 million, respectively, reported as Gain on loans held for sale, net with a corresponding offset in MSR valuation adjustments, net.
Total Assets | Servicing |  | Originations |  | Corporate Items and Other |  |  |  | Business Segments Consolidated
March 31, 2022 | $ | 11,251,806 |  |  | $ | 610,925 |  |  | $ | 435,078 |  |  |  |  | $ | 12,297,809 |
December 31, 2021 | $ | 10,999,204 |  |  | $ | 823,530 |  |  | $ | 324,389 |  |  |  |  | $ | 12,147,123 |
March 31, 2021 | $ | 9,869,673 |  |  | $ | 525,630 |  |  | $ | 376,485 |  |  |  |  | $ | 10,771,788 |
Depreciation and Amortization Expense | Servicing |  | Originations |  | Corporate Items and Other |  | Business Segments Consolidated
Three months ended March 31, 2022
Depreciation expense | $ | 171 |  |  | $ | 107 |  |  | $ | 2,324 |  |  | $ | 2,602 |
Amortization of debt issuance costs and discount | 203 |  |  | — |  |  | 2,336 |  |  | 2,539 |
Three months ended March 31, 2021
Depreciation expense | $ | 209 |  |  | $ | 24 |  |  | $ | 2,626 |  |  | $ | 2,859 |
Amortization of debt issuance costs and discount | 129 |  |  | — |  |  | 1,495 |  |  | 1,624 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8924-108599 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8981-108599 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8721-108599 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e9031-108599 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 22 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8736-108599 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e9054-108599 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8657-108599 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8721-108599 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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