FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2016

FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

The following table presents the carrying amount and estimated fair value of financial instruments held by the Company and acquisition contingent consideration liabilities at December 31, 2016 and 2015. The following fair values are estimated using market information and what the Company believes to be appropriate valuation methodologies under GAAP:



	December 31, 2016								December 31, 2015
(in thousands)	Carrying Amount		Fair Value						Carrying Amount		Fair Value
			Level 1		Level 2		Level 3				Level 1		Level 2		Level 3

Assets:
Cash and cash equivalents	$	149,294	$	149,294	$	—	$	—	$	179,327	$	179,327	$	—	$	—
Restricted cash	4,127		4,127		—		—		4,801		4,801		—		—
Available for sale securities	45,754		45,754		—		—		—		—		—		—

Liabilities:
Acquisition contingent consideration	376		—		—		376		3,932		—		—		3,932
Long-term debt	479,653		—		474,856		—		536,598		—		469,523		—

Fair Value Measurements on a Recurring Basis

Cash and cash equivalents and restricted cash are carried at amounts that approximate their fair value due to the highly liquid nature of these instruments and were measured using Level 1 inputs.

Available for sale securities are carried at fair value and consist of 4.1 million shares of Residential common stock. Available for sale securities are measured using Level 1 inputs as these securities have quoted prices in active markets.

The fair value of our long-term debt is based on quoted market prices. Based on the frequency of trading, we do not believe that there is an active market for our debt. Therefore, the quoted prices are considered Level 2 inputs.

In accordance with ASC Topic 805, Business Combinations, liabilities for contingent consideration are reflected at fair value and adjusted each reporting period with the change in fair value recognized in earnings. Liabilities for acquisition related contingent consideration were recorded in connection with the acquisitions of certain assets and assumption of certain liabilities of Mortgage Builder and Owners in 2014. We measure the liabilities for acquisition related contingent consideration using Level 3 inputs as they are determined based on the present value of future estimated payments, which include sensitivities pertaining to discount rates and financial projections.

During 2016, the Company reduced the fair value of the acquisition contingent consideration related to the Mortgage Builder and Owners acquisitions by $1.4 million and $2.2 million, respectively, as a result of changes in the fair value of expected payments.

There were no transfers between different levels during the periods presented.

Fair Value Measurements on a Nonrecurring Basis

The Company recorded a goodwill impairment loss of $55.7 million for the year ended December 31, 2015, based on fair value measurements (no comparative amount in 2016). In addition, the Company recorded an intangible asset impairment loss of $11.9 million and a premises and equipment impairment loss of $4.1 million for the year ended December 31, 2015, based on fair value measurements (no comparative amounts in 2016). These fair value measurements were based on inputs classified as Level 3 in the valuation hierarchy (see Notes 9 and 10).

Concentrations of Credit Risk

Financial instruments that subject us to concentrations of credit risk primarily consist of cash and cash equivalents and accounts receivable. Our policy is to deposit our cash and cash equivalents with major financial institutions. The Company derives the largest portion of its revenues from Ocwen (see Note 3 for additional information on Ocwen revenues and accounts receivable balance). The Company mitigates its concentrations of credit risk with respect to accounts receivable by actively monitoring past due accounts and the economic status of customers, if known.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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