Business Segment Reporting |
Note 19 – Business Segment Reporting Our business segments reflect the internal reporting that we use to evaluate operating performance of services and to assess the allocation of our resources. A brief description of our current business segments is as follows: Servicing. This segment is primarily comprised of our core residential servicing business. We provide residential and commercial mortgage loan servicing, special servicing and asset management services. We earn fees for providing these services to owners of the mortgage loans and foreclosed real estate. In most cases, we provide these services either because we purchased the MSRs from the owner of the mortgage, retained the MSRs on the sale of residential mortgage loans or because we entered into a subservicing or special servicing agreement with the entity that owns the MSR. Our residential servicing portfolio includes conventional, government insured and non-Agency loans. Non-Agency loans include subprime loans which represent residential loans that generally did not qualify under GSE guidelines or have subsequently become delinquent. Lending. The Lending segment is focused on originating and purchasing conventional and government insured residential forward and reverse mortgage loans mainly through our correspondent lending arrangements, broker relationships and directly with mortgage customers. The loans are typically sold shortly after origination into a liquid market on a servicing retained basis. Corporate Items and Other. Corporate Items and Other includes revenues and expenses that are not directly related to other reportable segments, business activities that are individually insignificant, interest income on short-term investments of cash, interest expense on corporate debt and certain corporate expenses. Business activities that are not considered to be of continuing significance include subprime loans held for sale (at lower of cost or fair value), investments in unconsolidated entities and affordable housing investment activities. Corporate Items and Other also included the diversified fee-based businesses that we acquired as part of the acquisitions of Homeward and ResCap and subsequently sold to Altisource on March 29, 2013 and April 12, 2013, respectively. We allocate interest income and expense to each business segment for funds raised or for funding of investments made, including interest earned on cash balances and short-term investments and interest incurred on corporate debt. We also allocate expenses generated by corporate support services to each business segment. Financial information for our segments is as follows: | | | | | | | | | | | | | | | | | | | | | | Servicing | | Lending | | Corporate Items and Other | | Corporate Eliminations | | Business Segments Consolidated | Results of Operations | | | | | | | | | | Three months ended September 30, 2014 | | | | | | | | | | Revenue | $ | 485,303 |
| | $ | 26,877 |
| | $ | 1,557 |
| | $ | (39 | ) | | $ | 513,698 |
| Operating expenses (1) | 313,964 |
| | 22,632 |
| | 118,482 |
| | (39 | ) | | 455,039 |
| Income (loss) from operations | 171,339 |
| | 4,245 |
| | (116,925 | ) | | — |
| | 58,659 |
| Other income (expense): | | | | | | | | | | Interest income | 903 |
| | 4,825 |
| | 865 |
| | — |
| | 6,593 |
| Interest expense | (124,106 | ) | | (2,601 | ) | | (6,342 | ) | | — |
| | (133,049 | ) | Other | (3,618 | ) | | 139 |
| | (990 | ) | | — |
| | (4,469 | ) | Other income (expense), net | (126,821 | ) | | 2,363 |
| | (6,467 | ) | | — |
| | (130,925 | ) | Income (loss) before income taxes | $ | 44,518 |
| | $ | 6,608 |
| | $ | (123,392 | ) | | $ | — |
| | $ | (72,266 | ) | | | | | | | | | | | Three months ended September 30, 2013 | | | | | | | | | | Revenue | $ | 496,302 |
| | $ | 33,539 |
| | $ | 1,801 |
| | $ | (402 | ) | | $ | 531,240 |
| Operating expenses (1) | 305,654 |
| | 29,504 |
| | 11,143 |
| | (41 | ) | | 346,260 |
| Income (loss) from operations | 190,648 |
| | 4,035 |
| | (9,342 | ) | | (361 | ) | | 184,980 |
| Other income (expense): | | | | | | | | | | Interest income | 859 |
| | 3,066 |
| | 1,454 |
| | — |
| | 5,379 |
| Interest expense (2) | (113,678 | ) | | (3,279 | ) | | 72 |
| | — |
| | (116,885 | ) | Other | (6,631 | ) | | 1,843 |
| | 398 |
| | 361 |
| | (4,029 | ) | Other income (expense), net | (119,450 | ) | | 1,630 |
| | 1,924 |
| | 361 |
| | (115,535 | ) | Income (loss) before income taxes | $ | 71,198 |
| | $ | 5,665 |
| | $ | (7,418 | ) | | $ | — |
| | $ | 69,445 |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Servicing | | Lending | | Corporate Items and Other | | Corporate Eliminations | | Business Segments Consolidated | Nine months ended September 30, 2014 | | | | | | | | | | Revenue | $ | 1,526,606 |
| | $ | 86,811 |
| | $ | 4,734 |
| | $ | (118 | ) | | $ | 1,618,033 |
| Operating expenses (1) | 919,998 |
| | 81,261 |
| | 148,555 |
| | (118 | ) | | 1,149,696 |
| Income (loss) from operations | 606,608 |
| | 5,550 |
| | (143,821 | ) | | — |
| | 468,337 |
| Other income (expense): | | | | | | | | | | Interest income | 1,805 |
| | 13,117 |
| | 2,550 |
| | — |
| | 17,472 |
| Interest expense | (391,122 | ) | | (8,271 | ) | | (9,736 | ) | | — |
| | (409,129 | ) | Other | (4,622 | ) | | 3,846 |
| | 710 |
| | — |
| | (66 | ) | Other income (expense), net | (393,939 | ) | | 8,692 |
| | (6,476 | ) | | — |
| | (391,723 | ) | Income (loss) before income taxes | $ | 212,669 |
| | $ | 14,242 |
| | $ | (150,297 | ) | | $ | — |
| | $ | 76,614 |
| | | | | | | | | | | Nine months ended September 30, 2013 | | | | | | | | | | Revenue | $ | 1,381,872 |
| | $ | 81,180 |
| | $ | 19,758 |
| | $ | (492 | ) | | $ | 1,482,318 |
| Operating expenses (1) | 795,645 |
| | 69,543 |
| | 95,361 |
| | (131 | ) | | 960,418 |
| Income (loss) from operations | 586,227 |
| | 11,637 |
| | (75,603 | ) | | (361 | ) | | 521,900 |
| Other income (expense): | | | | | | | | | | Interest income | 1,382 |
| | 12,432 |
| | 3,516 |
| | — |
| | 17,330 |
| Interest expense (2) | (309,606 | ) | | (10,108 | ) | | 150 |
| | — |
| | (319,564 | ) | Other | (30,961 | ) | | 6,852 |
| | 2,977 |
| | 361 |
| | (20,771 | ) | Other income (expense), net | (339,185 | ) | | 9,176 |
| | 6,643 |
| | 361 |
| | (323,005 | ) | Income (loss) before income taxes | $ | 247,042 |
| | $ | 20,813 |
| | $ | (68,960 | ) | | $ | — |
| | $ | 198,895 |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Servicing | | Lending | | Corporate Items and Other | | Corporate Eliminations | | Business Segments Consolidated | Total Assets | |
| | |
| | |
| | |
| | |
| September 30, 2014 | $ | 6,059,359 |
| | $ | 1,706,964 |
| | $ | 589,317 |
| | $ | — |
| | $ | 8,355,640 |
| | | | | | | | | | | December 31, 2013 | $ | 6,295,976 |
| | $ | 1,195,812 |
| | $ | 435,215 |
| | $ | — |
| | $ | 7,927,003 |
| | | | | | | | | | | September 30, 2013 | $ | 4,086,378 |
| | $ | 704,641 |
| | $ | 609,236 |
| | $ | — |
| | $ | 5,400,255 |
|
| | (1) | Depreciation and amortization expense are as follows: |
| | | | | | | | | | | | | | | | | | Servicing | | Lending | | Corporate Items and Other | | Business Segments Consolidated | For the three months ended September 30, 2014 | |
| | |
| | |
| | |
| Depreciation expense | $ | 2,636 |
| | $ | 98 |
| | $ | 3,022 |
| | $ | 5,756 |
| Amortization of mortgage servicing rights | 60,689 |
| | 94 |
| | — |
| | 60,783 |
| Amortization of debt discount | 331 |
| | — |
| | 344 |
| | 675 |
| Amortization of debt issuance costs | 1,114 |
| | — |
| | — |
| | 1,114 |
| | | | | | | | | For the three months ended September 30, 2013 | |
| | |
| | |
| | |
| Depreciation expense | $ | 3,589 |
| | $ | 135 |
| | $ | 2,973 |
| | $ | 6,697 |
| Amortization of mortgage servicing rights | 79,035 |
| | 148 |
| | — |
| | 79,183 |
| Amortization of debt discount | 330 |
| | — |
| | — |
| | 330 |
| Amortization of debt issuance costs | 1,178 |
| | — |
| | — |
| | 1,178 |
| | | | | | | | | For the nine months ended September 30, 2014 | | | | | | | | Depreciation expense | $ | 8,099 |
| | $ | 235 |
| | $ | 8,267 |
| | $ | 16,601 |
| Amortization of mortgage servicing rights | 185,263 |
| | 613 |
| | 199 |
| | 186,075 |
| Amortization of debt discount | 991 |
| | — |
| | 513 |
| | 1,504 |
| Amortization of debt issuance costs | 3,241 |
| | — |
| | — |
| | 3,241 |
| | | | | | | | | For the nine months ended September 30, 2013 | | | | | | | | Depreciation expense | $ | 9,968 |
| | $ | 209 |
| | $ | 6,976 |
| | $ | 17,153 |
| Amortization of mortgage servicing rights | 197,287 |
| | 148 |
| | — |
| | 197,435 |
| Amortization of debt discount | 1,082 |
| | — |
| | — |
| | 1,082 |
| Amortization of debt issuance costs | 3,264 |
| | — |
| | — |
| | 3,264 |
|
| | (2) | Includes interest expense related to financing liabilities recorded in connection with the HLSS Transactions. As discussed in Note 1A — Restatement of Previously Issued Consolidated Financial Statements, we are restating our previously reported consolidated operating results for the three and nine months ended September 30, 2013 to correct an error in the accounting applicable to the financing liabilities in connection with Rights to MSRs sold to HLSS. |
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