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Business Segment Reporting
9 Months Ended
Sep. 30, 2014
Segment Reporting [Abstract]  
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.