GOODWILL AND INTANGIBLE ASSETS, NET

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill was recorded primarily in connection with the 2016 acquisition of Granite, the 2015 acquisitions of CastleLine and RentRange and Investability, the 2014 acquisitions of Mortgage Builder and Owners, the 2013 acquisitions of the Homeward fee-based business and Equator, LLC (“Equator”), the 2011 acquisitions of Springhouse, LLC and Tracmail and the 2010 acquisition of MPA. Note 5 discusses the 2016, 2015 and 2014 acquisitions. Changes in goodwill during the years ended December 31, 2016 and 2015 are summarized below:



(in thousands)	Mortgage Services			Financial Services		Technology Services			Total

Balance January 1, 2015	$	32,733		$	2,378	$	55,740		$	90,851
Acquisition of CastleLine	28,125			—		—			28,125
Acquisition of RentRange and Investability	19,565			—		—			19,565
Impairment of Technology Services goodwill	—			—		(55,740		)	(55,740		)
Balance, December 31, 2015	80,423			2,378		—			82,801
CastleLine purchase price allocation adjustment ⁽¹⁾	(1,395		)	—		—			(1,395		)
RentRange and Investability purchase price allocation adjustment ⁽²⁾	50			—		—			50
Acquisition of Granite	4,827			—		—			4,827

Balance, December 31, 2016	$	83,905		$	2,378	$	—		$	86,283

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⁽¹⁾	During the second quarter of 2016, goodwill was revised to reflect a purchase accounting measurement period adjustment related to the CastleLine acquisition. See Note 5.


⁽²⁾	During the third quarter of 2016, goodwill was revised to reflect a purchase accounting measurement period adjustment related to the RentRange and Investability acquisition. See Note 5.

During 2014, the fair value of the contingent consideration related to the Equator acquisition (“Equator Earn Out”) was reduced by $37.9 million with a corresponding increase in earnings based on management’s revised estimates that expected earnings of Equator will be lower than projected at the time of acquisition. In the second quarter of 2014, management determined that Equator goodwill should be tested for impairment as a result of the decline in fair value of the Equator Earn Out. Consequently, we initiated a quantitative two-step goodwill impairment test by comparing the carrying value of the net assets of Equator to its fair value based on a discounted cash flow analysis. Based on this goodwill assessment, we determined that the fair value of Equator was less than its carrying value and goodwill was impaired. As a result, we recorded an impairment loss of $37.5 million.

During our fourth quarter 2014 and 2015 annual goodwill assessments, we elected to bypass the initial analysis of qualitative factors and perform a quantitative two-step goodwill impairment test of all of our reporting units as a result of the goodwill impairment recorded in the second quarter of 2014. We calculated the fair value of each of our reporting units by using a discounted cash flow analysis and concluded that the fair values of the Mortgage Services, Financial Services and Technology Services reporting units exceeded their carrying values by a significant margin in 2014 and that the fair values of the Mortgage Services and Financial Services reporting units exceeded their carrying values by a significant margin in 2015. In 2015, the fair value of the Technology Services reporting unit was less than its carrying value. Accordingly, we performed step two of the impairment test for the Technology Services reporting unit and determined that the remaining $55.7 million of goodwill was impaired. As a result, we recorded a $55.7 million impairment loss in the fourth quarter of 2015. This goodwill impairment was primarily driven by the Company’s projected Technology Services revenue from Ocwen and investment in technologies provided to Ocwen. There were no additional goodwill impairments as of December 31, 2015 and 2014. Based on our fourth quarter 2016 goodwill assessment, we concluded that there was no impairment of goodwill for the year ended December 31, 2016.

Intangible Assets, Net

Intangible assets, net consist of the following as of December 31:



	Weighted average estimated useful life (in years)	Gross carrying amount				Accumulated amortization						Net book value
(in thousands)	Weighted average estimated useful life (in years)	2016		2015		2016			2015			2016		2015

Definite lived intangible assets:
Trademarks and trade names	13	$	15,354	$	15,244	$	(7,724	)	$	(6,491	)	$	7,630	$	8,753
Customer related intangible assets	10	277,828		274,428		(156,980		)	(113,725		)	120,848		160,703
Operating agreement	20	35,000		35,000		(12,104		)	(10,354		)	22,896		24,646
Non-compete agreements	4	1,560		1,435		(507		)	(115		)	1,053		1,320
Intellectual property	10	300		300		(85		)	(55		)	215		245
Other intangible assets	5	3,745		1,375		(955		)	(39		)	2,790		1,336

Total		$	333,787	$	327,782	$	(178,355	)	$	(130,779	)	$	155,432	$	197,003

Amortization expense for definite lived intangible assets was $47.6 million, $41.1 million and $37.7 million for the years ended December 31, 2016, 2015 and 2014, respectively. Expected annual definite lived intangible asset amortization expense for 2017 through 2021 is $35.0 million, $26.5 million, $21.1 million, $17.2 million and $12.7 million, respectively.

In the fourth quarter of 2015, we recorded an impairment loss of $11.9 million in our Technology Services segment related to customer relationship intangible assets from the 2013 Homeward and ResCap fee-based business acquisitions. These impairments of intangible assets were primarily driven by the Company’s projected Technology Services revenue from Ocwen and investment in technologies provided to Ocwen. There were no impairments of intangible assets for the years ended December 31, 2016 and 2014.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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