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Securitizations and Variable Interest Entities | 9 Months Ended
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Sep. 30, 2023
Transfers and Servicing [Abstract] |
Securitizations and Variable Interest Entities |
Note 2 – Securitizations and Variable Interest Entities
We securitize, sell and service forward and reverse residential mortgage loans and regularly transfer financial assets in connection with asset-backed financing arrangements. We have aggregated these transfers of financial assets and asset-backed financing arrangements using special purpose entities (SPEs) or variable interest entities (VIEs) into the following groups: (1) securitizations of residential mortgage loans, (2) financings of advances and (3) MSR financings. Financing transactions that do not use SPEs or VIEs are disclosed in Note 12 – Borrowings. Securitizations of Residential Mortgage Loans Transfers of Forward Loans We sell or securitize forward loans that we originate or purchase from third parties, generally in the form of mortgage-backed securities guaranteed by the GSEs or Ginnie Mae. Securitization typically occurs within 30 days of loan closing or purchase. We act only as a fiduciary and do not have a variable interest in the securitization trusts. As a result, we account for these transactions as sales upon transfer. The following table presents a summary of cash flows received from and paid to securitization trusts related to transfers of loans accounted for as sales that were outstanding:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
2023 |  | 2022 |  | 2023 |  | 2022
Proceeds received from securitizations | $ | 4,619.0 |  |  | $ | 5,227.5 |  |  | $ | 9,233.9 |  |  | $ | 12,925.3 |
Servicing fees collected (1) | 31.0 |  |  | 21.6 |  |  | 86.2 |  |  | 67.2 |
Purchases of previously transferred assets, net of claims reimbursed | (4.0) |  |  | (3.5) |  |  | (11.1) |  |  | (10.3) |
| $ | 4,646.0 |  |  | $ | 5,245.5 |  |  | $ | 9,309.0 |  |  | $ | 12,982.1 |
(1)We receive servicing fees based upon the securitized loan balances and certain ancillary fees, all of which are reported in Servicing and subservicing fees in the unaudited consolidated statements of operations. In connection with these transfers, we retained MSRs of $71.4 million and $134.0 million during the three and nine months ended September 30, 2023, respectively, and $70.2 million and $176.2 million during the three and nine months ended September 30, 2022, respectively. Certain obligations arise from the agreements associated with our transfers of loans. Under these agreements, we may be obligated to repurchase the loans, or otherwise indemnify or reimburse the investor or insurer for losses incurred due to material breach of contractual representations and warranties. We receive customary origination representations and warranties from our network of approved correspondent lenders. To the extent that we have recourse against a third-party originator, we may recover part or all of any loss we incur. Also refer to the Loan Put-Back and Related Contingencies section of Note 20 – Contingencies. The following table presents the carrying amounts of our assets that relate to our continuing involvement with forward loans that we have transferred with servicing rights retained as well as an estimate of our maximum exposure to loss including the UPB of the transferred loans:
| September 30, 2023 |  | December 31, 2022
Carrying value of assets |  |  |
MSRs, at fair value | $ | 698.4 |  |  | $ | 524.3 |
Advances | 62.3 |  |  | 75.9 |
UPB of loans transferred (1) | 45,093.6 |  |  | 37,571.1 |
Maximum exposure to loss (2) | $ | 45,854.2 |  |  | $ | 38,171.2 |
(1)Includes $9.7 billion and $6.8 billion of loans delivered to Ginnie Mae as of September 30, 2023 and December 31, 2022, respectively, and includes loan modifications repurchased and delivered through the Ginnie Mae Early Buyout Program (EBO). (2)The maximum exposure to loss in the table above is primarily based on the remaining UPB of loans serviced and assumes all loans were deemed worthless as of the reporting date. It does not take into consideration the proceeds from the underlying collateral liquidation, recoveries or any other recourse available to us, including from mortgage insurance, guarantees or correspondent sellers. We do not believe the maximum exposure to loss from our involvement with these previously transferred loans is representative of the actual loss we are likely to incur based on our contractual rights and historical loss experience and projections. Also, refer to the Loan Put-Back and Related Contingencies section in Note 20 – Contingencies. At September 30, 2023 and December 31, 2022, 2.4% and 2.5%, respectively, of the transferred residential loans that we service were 60 days or more past due, including 60 days or more past due loans under forbearance. This includes 7.2% and 8.3%, respectively, of loans delivered to Ginnie Mae that are 60 days or more past due. Transfers of Reverse Mortgages We pool HECM loans into HMBS that we sell into the secondary market with servicing rights retained. As the transfers of the HECM loans do not qualify for sale accounting, we account for these transfers as financings, with the HECM loans classified as Loans held for investment, at fair value, on our unaudited consolidated balance sheets. Financing of Loans Held for Sale, Receivables and Other Assets using SPEs In 2021, we consolidated an SPE (trust) in connection with a warehouse mortgage loan financing facility structured as a gestation repurchase facility whereby Agency mortgage loans are transferred by PMC to the trust for collateralization purposes. As of December 31, 2022, the certificates issued by the trust and pledged as collateral had been reduced to zero. As of September 30, 2023, $150.0 million loans held for sale were pledged as collateral for $150.0 million debt certificates issued by the trust. In June 2023, we completed a private placement securitization of HECM loans that are insured by the FHA and REO properties, also referred to as reverse mortgage buyouts. The securitized assets include assets originated by PHH and assets acquired in April 2023. The securitization trust, Ocwen Loan Investment Trust 2023-HB1 (OLIT) issued senior and mezzanine class Notes to third party investors. We retain certain mezzanine class Notes and ownership interests and service the underlying assets. We determined we were the primary beneficiary, thus consolidate the securitization trust, OLIT and related depositor. Recourse for the Notes is limited to the assets of OLIT. Also refer to Note 12 – Borrowings. The table below presents the carrying value and classification of the assets and liabilities reported on our consolidated balance sheet that are associated with the securitized reverse mortgage loans buyouts and financing liabilities:
| September 30, 2023 |  |
Mortgage loans (Loans held for sale, at fair value) | $ | 127.4 |  |  |
Receivables, net | 29.4 |  |  |
REO (Other Assets) | 13.4 |  |  |
Debt service accounts (Restricted cash) | 8.4 |  |  |
Outstanding borrowings (Mortgage loan financing facilities, net) | 190.2 |  |  |
Unamortized discount and debt issuance costs (Mortgage loan financing facilities, net) | 23.9 |  |  |
Interest Reserve Account (Restricted cash) | 0.5 |  |  |
Financings of Advances using SPEs Match funded advances, i.e., advances that are pledged as collateral to our advance facilities, result from our transfers of residential loan servicing advances to SPEs - that we include in our consolidate financial statements - in exchange for cash. The table below presents the carrying value and classification of the assets and liabilities of the advance financing facilities:
| September 30, 2023 |  | December 31, 2022
Match funded advances (Advances, net) | $ | 471.4 |  |  | $ | 608.4 |
Debt service accounts (Restricted cash) | 11.0 |  |  | 15.8 |
Advance match funded liabilities | 402.2 |  |  | 512.5 |
MSR Financings using SPEs We consolidate two SPEs (PMC ESR Trusts) in connection with a third-party financing facility secured by certain of PMC’s Fannie Mae and Freddie Mac MSRs (Agency MSRs) and one SPE (PMC PLS ESR Issuer LLC) in connection with our PLS MSR financing facility (Ocwen Excess Spread-Collateralized Notes, Series 2022-PLS1 Class A). The table below presents the carrying value and classification of the assets and liabilities of the Agency MSR financing facility and the PLS Notes facility:
| September 30, 2023 |  | December 31, 2022
MSRs pledged (MSRs, at fair value) | $ | 501.9 |  |  | $ | 696.9 |
Debt service account (Restricted cash) | 1.7 |  |  | 1.8 |
Outstanding borrowings (MSR financing facilities, net) | 283.8 |  |  | 366.5 |

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