MSR Transfers Not Qualifying for Sale Accounting

3 Months Ended

Mar. 31, 2023

MSR Transfers Not Qualifying for Sale Accounting


Note 8 — Other Financing Liabilities, at Fair Value

The following tables presents financing liabilities carried at fair value which include pledged MSR liabilities recorded in connection with MSR transfers that do not qualify for sale accounting, liabilities of consolidated mortgage-backed securitization trusts and MSR excess servicing spread (ESS) financing liability carried at fair value (see Note 12 – Borrowings for ESS financing liability carried at amortized cost).


			Outstanding Balance
Borrowing Type	Collateral	Maturity	March 31, 2023		December 31, 2022
MSR transfers not qualifying for sale accounting (1):
Original Rights to MSRs Agreements, at fair value - Rithm	MSRs	(1)	$	560.2	$	601.2
Pledged MSR liability, at fair value - MAV	MSRs	(1)	318.7		329.8
Pledged MSR liability, at fair value - Others	MSRs	(1)	4.3		0.7
			883.2		931.7
Financing liability - Owed to securitization investors, at fair value: Residential Asset Securitization Trust 2003-A11 (RAST 2003-A11) (2)	Loans held for investment	October 2033	6.2		6.7
ESS financing liability, at fair value (3)	MSRs (3)	(3)	263.1		199.0
Total Other financing liabilities, at fair value			$	1,152.5	$	1,137.4

(1)MSRs transferred or sold in transactions which do not qualify for sale accounting treatment are accounted for as secured financings.

(2)Consists of securitization debt certificates due to third parties that represent beneficial interests in trusts that are consolidated.

(3)Consists of the obligation to remit to a third party a specified percentage of future servicing fee collections (servicing spread) on reference pools of MSRs, which we are entitled to as owner of the related MSRs.

The following tables present the activity of the pledged MSR liability recorded in connection with the MSR transfer agreements with Rithm and MAV that do not qualify for sale accounting.


	Three Months Ended March 31,
	2023						2022
Pledged MSR Liability	Rithm and Others		MAV (1)		Total		Rithm and Others		MAV (1)		Total
Beginning Balance	$	601.9	$	329.8	$	931.7	$	558.9	$	238.1	$	797.1
Additions	—		—		—		—		—		—
MSR transfers	4.3		0.1		4.4		—		39.3		39.3
Changes in fair value due to inputs and assumptions	(35.8)		(2.5)		(38.3)		6.8		50.0		56.8


Runoff and settlement	(5.9)		(8.6)		(14.5)		(19.9)		(8.4)		(28.3)
Fair value (gain) loss (2)	(41.7)		(11.1)		(52.8)		(13.1)		41.6		28.5

Calls	—		—		—		(0.6)		—		(0.6)
Ending Balance	$	564.5	$	318.7	$	883.2	$	545.2	$	319.0	$	864.3

(1)The fair value of the Pledged MSR liability differs from the fair value of the associated transferred MSR asset mostly due to the portion of ancillary income that is retained by PMC (shared between PMC and MAV) and other contractual cash flows under the terms of the subservicing agreement.

(2)The changes in fair value of the MAV Pledged MSR liability includes a $14.1 million loss associated with the amendment to the MAV Subservicing Agreement in March 2022, resulting in lower contractual ancillary income retained by PMC.

The following table presents the Pledged MSR liability expense recorded in connection with the MSR sale agreements with MAV, Rithm and others that do not qualify for sale accounting and the ESS financing liabilities.


	Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
	Rithm and Others		MAV		Total		Rithm and Others		MAV		Total
Servicing fees collected on behalf of Rithm	$	59.6	$	16.4	$	76.0	$	67.1	$	15.7	$	82.9
Less: Subservicing fee retained by Ocwen	(17.3)		(2.2)		(19.5)		(19.4)		(2.1)		(21.5)
Ancillary fee/income and other settlement (incl. expense reimbursement)	3.3		—		3.3		(2.3)		0.6		(1.7)
Transferred MSR net servicing fee remittance	$	45.6	$	14.2	59.8		$	45.4	$	14.3	59.7
ESS servicing spread remittance					10.5						—
Pledged MSR liability expense					$	70.3					$	59.7

On May 2, 2022, Ocwen entered into amendments to its servicing agreements with Rithm to extend their terms to December 31, 2023 and provide for subsequent, automatic one-year renewals, unless Ocwen provides six months’ advance notice of termination (by July 1), or Rithm provides three months’ advance notice of termination (by October 1), among other changes.

As of March 31, 2023, the UPB of MSRs subject to the servicing agreements with Rithm subsidiaries is $48.1 billion, including $1.8 billion for which Ocwen or Rithm is subservicer for another entity as servicer of record and $10.6 billion for which title has not transferred to Rithm. We describe Rithm’s rights and obligations with respect to such non-transferred MSRs as “Rights to MSRs”. As the third-party consents required for title to the MSRs to transfer were not obtained, the $10.6 billion Rights to MSRs may (i) be acquired by Ocwen at a price determined in accordance with the terms of the previously disclosed agreements entered into in January 2018 (the New RMSR Agreements), at the option of Ocwen, or (ii) be sold, together with Ocwen’s title to those MSRs, to a third party, subject to an additional Ocwen option to acquire at a price based on the winning third-party bid rather than selling to the third party. If the Rights to MSRs are not transferred pursuant to these alternatives, then the Rights to MSRs will remain subject to the subservicing agreement.

As stated above, Rithm has the right to terminate the $10.6 billion Rights to MSRs for convenience, in whole but not in part, subject to three months’ advance notice of termination. If Rithm exercises this termination right, Rithm has the option of seeking (i) the transfer of the MSRs through a sale to a third party of its Rights to MSRs (together with a transfer of Ocwen’s title to those MSRs) or (ii) a substitute RMSR arrangement that substantially replicates the Rights to MSRs structure under which we would transfer title to the MSRs to a successor servicer and Rithm would continue to own the economic rights and obligations related to the MSRs. In the case of option (i), we have a purchase option, as described above. If Rithm is not able to sell the Rights to MSRs or establish a substitute RMSR arrangement with another servicer, Rithm has the right to revoke its termination notice and re-instate the applicable servicing addendum or to establish a subservicing arrangement whereby the MSRs remaining subject to the New RMSR Agreements would be transferred to up to three subservicers who would subservice under Ocwen’s oversight. If such a subservicing arrangement were established, Ocwen would receive an oversight fee and reimbursement of expenses. We may also agree on alternative arrangements that are not contemplated under our existing agreements or that are variations of those contemplated under our existing agreements.