Discontinued Operations

3 Months Ended

Mar. 31, 2014

Discontinued Operations

NOTE 13 — DISCONTINUED OPERATIONS

The following tables present the assets and liabilities, as of March 31, 2014 and December 31, 2013, and financial results for the three months ended March 31, 2014 and 2013, of the components of the Company designated as discontinued operations as of March 31, 2014 (see Note 15 — Subsequent Events for additional information about changes to discontinued operations):

Assets and Liabilities of Discontinued Operations

	March 31,		December 31,
(Dollars in thousands)	2014		2013
Current assets:
Cash and cash equivalents	$	121	$	139
Inventory		—		432
Real estate owned, net		—		75
Settlement receivable		1,500		—
Other current assets		142		45
Total current assets of discontinued operations		1,763		691
Intangible assets, net		196		196
Goodwill		400		400
Assets of discontinued operations	$	2,359	$	1,287
Current liabilities:
Judgment and accrued interest	$	1,877	$	1,877
Trade payables		230		254
Unclaimed property		6		19
Other current liabilities		172		135
Total current liabilities of discontinued operations		2,285		2,285
Repurchase reserve		6,250		6,500
Liabilities of discontinued operations	$	8,535	$	8,785

Statements of Operations of Discontinued Operations

	Three Months Ended March 31,
(Dollars in thousands)	2014		2013
Operating revenues and other income (expense)	$	1,824	$	60
Operating costs		982		666
Earnings (loss) from discontinued operations before income taxes		842		(606	)
Income tax expense (benefit)		1		(1	)
Earnings (loss) from discontinued operations, net of income taxes	$	841	$	(605	)

Material assets and liabilities of discontinued operations include:

Inventory

Inventory consisted of a line of skin care products, including finished goods, packaging and other raw materials. In the first quarter of 2014, the remaining inventory was scrapped, due largely to expiration dates of finished goods and raw materials and a determination of no value for the packaging and shipping materials on hand.

Real estate owned, net

REO, net consisted of single-family residential properties acquired through, or in lieu of, foreclosure of loans secured by the properties and was reported at the lower of cost or estimated net realizable value. As of December 31, 2013, REO, net was comprised of one property, which was sold in February 2014.

Settlement receivable

Settlement receivable represents proceeds due from a former executive of Fremont. Under the terms of the Confidential Settlement Agreement and Releases (the “Faigin Settlement Agreement”), Mr. Faigin will pay the Company $1.5 million, which has been recorded as of March 31, 2014. See the “Faigin Matter” in Note 15 — Subsequent Events for more information about the settlement.

Judgment and accrued interest

Judgment and accrued interest relates to litigation brought and won by Mr. Faigin, cash for which has been deposited with the Superior Court of the State of California, County of Los Angeles (the “California Superior Court”) and is classified as restricted cash in the unaudited condensed consolidated balance sheets. The judgment will be satisfied in conjunction with the settlement of the Faigin Settlement Agreement, which was finalized on April 25, 2014. See the “Faigin Matter” in Note 14 — Commitments and Contingencies for additional information about the judgment.

Repurchase reserve

The Company maintains a repurchase reserve that represents estimated losses the Company may experience from repurchase claims, both known and unknown, based on claimed breaches of certain representations and warranties provided by FIL to counterparties that purchased the residential real estate loans FIL originated, predominantly from 2002 through the first quarter of 2007. Management estimates the likely range of the loan repurchase liability based on a number of factors, including, but not limited to, the timing of such claims relative to the loan origination date, the quality of the documentation supporting such claims, the number and involvement of cross-defendants, if any, related to such claims, and a time and expense estimate if a claim were to result in litigation. The estimate is based on currently available information and is subject to known and unknown uncertainties using multiple assumptions requiring significant judgment. Accordingly, actual results may vary significantly from the current estimate. Total outstanding repurchase claims as of March 31, 2014 were $101.7 million. Of the outstanding repurchase claims, there has been no communication or other action from the claimants:

— for more than six years in the case of $59.2 million in claims, or 58.2% of total claims outstanding;

— for more than four years, but less than six years, in the case of $12.6 million in claims, or 12.4% of total claims outstanding; and

— for more than two years, but less than four years, in the case of $29.9 million in claims, or 29.4% of total claims outstanding.

There were no repurchase claims received or settled during the three months ended March 31, 2014 or the year ended December 31, 2013. The repurchase reserve liability was $6.3 million and $6.5 million as of March 31, 2014 and December 31, 2013, respectively. Recoveries of allowance for repurchase reserves were $0.2 million for each of the three months ended March 31, 2014 and 2013.