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margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 8%; text-align: left;"><font style="text-transform: uppercase;">Note 1</font></td> <td style="width: 92%;"><font style="text-transform: uppercase;">Summary of Significant Accounting Policies</font></td> </tr> </table> <p style="font: bold 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px 0.5in; text-indent: -0.5in; font-size-adjust: none; font-stretch: normal;">Organization</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">Ocwen Financial Corporation (NYSE: OCN) (Ocwen, OCN, &#8220;we&#8221;, or &#8220;us&#8221;) is a financial services holding company which, through its subsidiaries, is engaged in the servicing and origination of mortgage loans. Ocwen is headquartered in Atlanta, Georgia with offices in Florida, New Jersey, Pennsylvania, Texas, United States Virgin Islands (USVI) and Washington, DC and support operations in India and Uruguay. Ocwen is a Florida corporation organized in February 1988. Ocwen Loan Servicing, LLC (OLS), a wholly-owned subsidiary, is licensed to service mortgage loans in all fifty states, the District of Columbia and two U.S. territories. Homeward Residential, Inc. (Homeward), a wholly-owned subsidiary, is licensed to originate mortgage loans in 47 U.S. jurisdictions, including the District of Columbia and Puerto Rico.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">At March 31, 2013, Ocwen directly or indirectly owned all of the outstanding stock of its primary operating subsidiaries: Homeward, OLS, Ocwen Financial Solutions Private Limited and Ocwen Mortgage Servicing, Inc. (OMS).</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">On February 15, 2013, OLS completed the acquisition of certain assets and operations of Residential Capital, LLC (ResCap), an indirect subsidiary of Ally Financial, Inc. (Ally), in connection with the asset sale by ResCap and certain of its subsidiaries pursuant to a plan under Chapter 11 of the Bankruptcy Code (the ResCap Acquisition). We purchased mortgage servicing rights (MSRs) related to &#8220;private label&#8221;, Federal Home Loan Mortgage Corporation (Freddie Mac) and Government National Mortgage Association (Ginnie Mae) residential mortgage loans and master and sub-servicing agreements. The ResCap Acquisition included the related advances and related elements of the servicing platform for the MSRs and advances. This transaction did not involve the transfer of ownership of any legal entities.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">On December 27, 2012, Ocwen completed the merger by and among Ocwen, O&amp;H Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Ocwen, Homeward Residential Holdings, Inc. (Homeward Holding) and WL Ross &amp; Co. LLC, a Delaware limited liability company as shareholder representative, pursuant to which O&amp;H Acquisition Corp. merged with and into Homeward Holding with Homeward Holding continuing as the surviving corporation and becoming a wholly-owned subsidiary of Ocwen (the Homeward Acquisition). Homeward engages in the servicing of residential mortgage loans, the majority of which are nonprime, and also originates prime loans.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0in; font-size-adjust: none; font-stretch: normal;"><b>Basis of Presentation</b></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">The accompanying unaudited interim consolidated financial statements have been prepared in conformity with the instructions of the Securities and Exchange Commission (SEC) to Form 10-Q and SEC Regulation S-X, Article 10, Rule 10-01 for interim financial statements. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete financial statements. In our opinion, the accompanying unaudited interim consolidated financial statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation. The results of operations and other data for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2013. The unaudited interim consolidated financial statements presented herein should be read in conjunction with the audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">The preparation of financial statements in conformity with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Material estimates that are particularly significant in the near or medium term relate to fair value measurements, the provision for potential losses that may arise from litigation proceedings, the amortization of MSRs and the valuation of goodwill and deferred tax assets.</p> <p style="font: bold 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px 0.5in; text-indent: -0.5in; font-size-adjust: none; font-stretch: normal;">Principles of Consolidation</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">Our financial statements include the accounts of Ocwen, its majority-owned subsidiaries and any variable interest entity (VIE) where we have determined that we are the primary beneficiary. We apply the equity method of accounting to investments when the entity is not a VIE, and we are able to exercise significant influence, but not control, over the policies and procedures of the entity but own 50% or less of the voting securities. We have eliminated intercompany accounts and transactions in consolidation.</p> <div style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"> <p style="font: 10pt/normal times new roman, times, serif; margin: 0px; text-indent: 0in; font-size-adjust: none; font-stretch: normal;"><i>Variable Interest Entities</i></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">We evaluate each special purpose entity (SPE) for classification as a VIE. When a SPE meets the definition of a VIE and we determine that Ocwen is the primary beneficiary, we include the SPE in our consolidated financial statements.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">We have determined that the SPEs created in connection with our match funded financing facilities are VIEs of which we are the primary beneficiary. We also determined that we were the primary beneficiary for four residential mortgage loan securitization trusts.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0in; font-size-adjust: none; font-stretch: normal;"><i>Securitizations and Asset Backed Financing Arrangements </i></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">We securitize, sell and service residential mortgage loans and regularly transfer financial assets in connection with asset-backed financing arrangements. We have aggregated these securitizations and asset-backed financing arrangements into two groups: (1) securitizations of residential mortgage loans and (2) financings of advances on loans serviced for others.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"><i>Securitizations of Residential Mortgage Loans.</i> Currently, we securitize and sell residential mortgage loans involving Ginnie Mae, Freddie Mac and Federal National Mortgage Association (Fannie Mae). We retain the right to service these loans and receive servicing fees based upon the securitized loan balances and certain ancillary fees, all of which are reported in servicing and subservicing fees on the Consolidated Statements of Operations. In prior years, we securitized residential mortgage loans through &#8220;private label&#8221; securitization trusts. We continued to be involved with the securitization trusts, typically by acting as the servicer or sub-servicer for the loans held by the trust and by retaining a beneficial ownership interest in the securitization trust. The beneficial interests that we held consisted of both subordinate and residual securities that were either retained at the time of the securitization or subsequently acquired. We held beneficial interests in five of these trusts. We also acquired residual and subordinated interests in six additional trusts where we were not the transferor but were the servicer.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">In December 2012, we sold the beneficial interests that we held in the four consolidated securitization trusts and deconsolidated these securitization trusts. We also sold our retained interests in two of the seven unconsolidated securitization trusts. The beneficial interests that we hold in the five remaining unconsolidated securitization trusts have no value and no potential for significant cash flows in the future. In addition, at March 31, 2013, we had no other significant assets in our unaudited interim consolidated financial statements related to these securitization trusts. We have no obligation to provide financial support to unconsolidated securitization trusts and have provided no such support. The beneficial owners of the trusts can look only to the assets of the securitization trusts for satisfaction of the debt issued by the securitization trusts and have no recourse against the assets of Ocwen. The general creditors of Ocwen have no claim on the assets of the trusts.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"><i>Financings of Advances on Loans Serviced for Others.</i> Match funded advances on loans serviced for others result from our transfers of residential loan servicing advances to SPEs in exchange for cash. We consolidate these SPEs because the transfers do not qualify for sales accounting treatment or because Ocwen is the primary beneficiary of the SPE.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">These SPEs issue debt supported by collections on the transferred advances. We made these transfers under the terms of our advance facility agreements. We classify the transferred advances on our Consolidated Balance Sheet as Match funded advances and the related liabilities as Match funded liabilities. The SPEs use collections of the pledged advances to repay principal and interest and to pay the expenses of the SPE. Holders of the debt issued by these entities can look only to the assets of the SPE for satisfaction of the debt and have no recourse against Ocwen. The assets and liabilities of the advance financing SPEs are comprised solely of Match funded advances, Debt service accounts, Match funded liabilities and amounts due to affiliates. Amounts due to affiliates are eliminated in consolidation.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">See Note 8 &#8211; Match Funded Advances, Note 12 &#8211; Debt Service Accounts and Note 14 &#8211; Match Funded Liabilities for additional information.</p> <p style="font: bold 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px 0.5in; text-indent: -0.5in; font-size-adjust: none; font-stretch: normal;">Reclassification</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">Within in the revenue section of the Consolidated Statement of Operations for the three months ended March 31, 2012, reclassified Process management fees of $8.8 million to Other revenues.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">Within in the Other income (expense) section of the Consolidated Statement of Operations for the three months ended March 31 2012, we reclassified Loss on loans held for resale, net, of $(0.4) million and Equity in earnings of unconsolidated entities of $0.3 million to Other, net.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">Within the operating activities section of the Consolidated Statement of Cash Flows for the three months ended March 31, 2012, we reclassified Provision for valuation allowance on mortgage servicing assets of $0.2 million, Loss on loans held for resale, net, of $0.4 million and Equity in earnings of unconsolidated entities of $(0.3) million to Other, net. Within the investing activities section we reclassified Proceeds from sales of real estate of $0.5 million, Decrease in restricted cash &#8211; for securitization investors of $42 thousand and Principal payments received on loans &#8211; restricted for securitization investors of $1.0 million to Other. Within the financing activities section we reclassified Repayment of secured borrowings &#8211; owed to securitization investors of $(1.7) million to Other.</p> </div> <!-- Field: Page; Sequence: 10; Value: 1 --></div> <table style="font: bold 10pt/normal 'times new roman', times, serif; width: 100%; text-transform: none; text-indent: 0px; letter-spacing: normal; margin-top: 10pt; margin-bottom: 0px; word-spacing: 0px; font-size-adjust: none; font-stretch: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 126px; text-align: left;"><font style="text-transform: uppercase;">NOTE 3</font></td> <td style="width: 1441px;"><font style="text-transform: uppercase;">BUSINESS ACQUISITIONS</font></td> </tr> </table> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;"><font style="font-weight: normal;">We completed the acquisitions of ResCap and Homeward as part of our ongoing strategy to expand our residential servicing business.<font style="text-transform: uppercase;">&#160;</font>We accounted for these transactions using the acquisition method which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. 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The following factors led to certain balances having preliminary fair value estimates:</p> <table style="font: 10pt/normal 'times new roman', times, serif; width: 100%; text-transform: none; text-indent: 0px; letter-spacing: normal; margin-top: 10pt; margin-bottom: 0px; word-spacing: 0px; font-size-adjust: none; font-stretch: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;"><font style="font: 10pt/normal symbol;">&#183;</font></td> <td>The complex nature of certain acquired assets and liabilities prevented us from completing our valuations and reconciliations;</td> </tr> </table> <table style="font: 10pt/normal 'times new roman', times, serif; width: 100%; text-transform: none; text-indent: 0px; letter-spacing: normal; margin-top: 10pt; margin-bottom: 0px; word-spacing: 0px; font-size-adjust: none; font-stretch: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;"><font style="font: 10pt/normal symbol;">&#183;</font></td> <td>We engaged a third party specialist to assist in valuing certain assets and liabilities and this work is not yet complete; and</td> </tr> </table> <table style="font: 10pt/normal 'times new roman', times, serif; width: 100%; text-transform: none; text-indent: 0px; letter-spacing: normal; margin-top: 10pt; margin-bottom: 0px; word-spacing: 0px; font-size-adjust: none; font-stretch: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;"><font style="font: 10pt/normal symbol;">&#183;</font></td> <td>Underlying information such as UPB and other loan level details have not yet been boarded and reconciled onto our servicing platform, and therefore, we have not been able to fully validate and reconcile certain asset and liability balances correlated with UPB data.</td> </tr> </table> <p style="font: bold 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px 0.5in; color: #000000; text-transform: none; text-indent: -0.5in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">ResCap Acquisition</p> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">We completed the ResCap Acquisition on February 15, 2013. We acquired MSRs to &#8220;private label&#8221;, Freddie Mac and Ginnie Mae loans with an unpaid principal balance (UPB) of $107.3 billion and master servicing agreements with a UPB of $42.1 billion. We also assumed subservicing contracts with a UPB of $25.9 billion. In addition, until certain consents and court approvals are obtained, we will subservice MSRs with a UPB of $9.0 billion on behalf of ResCap. When such consents and approvals are obtained, we will purchase these MSRs and assume the subservicing contracts from ResCap. We also acquired certain diversified fee-based business operations that include recovery, title and closing services.</p> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">To finance the ResCap Acquisition, we deployed $840.0 million of net additional capital from the proceeds of a new $1.3 billion senior secured term loan (SSTL) facility and borrowed $1.2 billion pursuant to two new servicing advance facilities and one existing facility.</p> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">Our purchase agreement with ResCap allows us to fully assess the valuation of the assets acquired and liabilities assumed during the 120 days following the closing. Any measurement period adjustments that we determine to be material will be applied retrospectively to the period of acquisition, and depending on the nature of the adjustments, other periods subsequent to the period of acquisition could also be affected.</p> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">Ocwen assumed certain limited liabilities as part of the transaction, including certain employee liabilities and certain business payables outstanding at the closing date. Under the agreement with ResCap, Ocwen generally did not assume any contingent obligations, including pending or threatened litigation, financial obligations in connection with any settlements, orders, or similar agreements entered into by ResCap or obligations in connection with any representations or warranties associated with loans previously sold by ResCap except litigation that may arise in the ordinary course of servicing mortgage loans relating to servicing agreements assumed by Ocwen. 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margin: 10pt 0px 0px; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">Through March 31, 2013, we incurred $1.8 million of fees for professional services related to the ResCap Acquisition that are included in Operating expenses.</p> <p style="font: bold 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px 0.5in; color: #000000; text-transform: none; text-indent: -0.5in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">Homeward Acquisition</p> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">We completed the Homeward Acquisition on December 27, 2012. We acquired the MSRs and subservicing for approximately 421,000 residential mortgage loans with a UPB of approximately $77.0 billion. We also acquired Homeward&#8217;s loan origination platform and its diversified fee-based business that includes property valuation, REO management, title, closing and advisory services.</p> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">Our purchase agreement with Homeward allows us to fully assess the valuation of the assets and liabilities acquired during an evaluation period that extends beyond the date of these unaudited interim consolidated financial statements. Because the measurement period is still open, we expect that certain fair value estimates will change once we receive all information necessary to make a final fair value assessment. We expect that the measurement period will extend until at least June 30, 2013. 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As part of this transaction, Ocwen also agreed to sell certain designated assets used or usable in the business conducted by another Homeward subsidiary, Power Valuation Services, Inc., as well as certain designated intellectual property and information technology assets that are used or usable in the business conducted by the acquired subsidiaries or by Powerline Valuation Services, Inc. Altisource also assumed certain liabilities of the diversified fee-based business. The carrying value of the net assets sold approximated the sales price. The assets sold consisted of receivables and other assets of $18.7 million. The liabilities assumed by Altisource of $4.0 million consisted principally of deferred revenue. At the time of the sale, we derecognized goodwill of $72.3 million associated with the sold business. The purchase price is subject to a working capital and net income adjustment to be determined within 90 days of the closing date. 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text-indent: 0px; letter-spacing: normal; word-spacing: 0px; border-collapse: collapse; font-size-adjust: none; font-stretch: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="width: 1364px; text-indent: 0in;">Revenues</td> <td style="width: 48px;">&#160;</td> <td style="width: 15px; text-align: left;">$</td> <td style="width: 125px; text-align: right;">277,635</td> <td style="width: 15px; text-align: left;">&#160;</td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; text-indent: 0in;">Net income</td> <td>&#160;</td> <td style="text-align: left;">$</td> <td style="text-align: right;">22,928</td> <td style="text-align: left;">&#160;</td> </tr> </table> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;"><b>Other</b></p> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">On March 31, 2013, we increased our ownership in Correspondent One S.A. (Correspondent One), an entity formed with Altisource in March 2011, from 49% to 100%. We acquired the shares of Correspondent One held by Altisource (49% interest) for $12.6 million and acquired the remaining shares held by an unrelated entity for $0.9 million. We accounted for this transaction as a step acquisition<b>&#160;</b>and recognized the assets acquired and liabilities assumed at their fair values as of the acquisition date. The acquired net assets were $26.3 million and consisted primarily of cash ($23.0 million) and residential mortgage loans ($1.1 million). We remeasured our previously held investment, which we accounted for using the equity method, at fair value and recognized a loss of $0.4 million. We also recognized goodwill of $0.1 million. We began including the accounts of Correspondent One in our consolidated financial statements effective on the date of acquisition and have eliminated our investment in consolidation. Correspondent One facilitates the purchase of conforming and government-guaranteed residential mortgages from approved mortgage originators and resells the mortgages to secondary market investors. Correspondent One is not material to our financial condition, results of operations or cash flows.</p> <div> <table style="font: bold 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 8%; text-align: left;"><font style="text-transform: uppercase;">Note 4</font></td> <td style="width: 92%;"><font style="text-transform: uppercase;">Asset Sales and Financing</font></td> </tr> </table> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">In order to efficiently finance our assets and operations, we periodically sell the right to receive servicing fees, excluding ancillary income, relating to certain of our mortgage servicing rights (Rights to MSRs) and related advances (collectively HLSS Transactions) to Home Loan Servicing Solutions, Ltd. and its wholly owned subsidiary, HLSS Holdings, LLC (collectively HLSS). To the extent applicable, HLSS may also acquire certain advance SPEs and the related match funded liabilities. During the three months ended March 31, 2013 and 2012, we completed HLSS Transactions relating to the Rights to MSRs for $15.9 billion and $15.2 billion of UPB, respectively.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">As part of the HLSS Transactions, we retain legal ownership of the MSRs and continue to service the related mortgage loans. However, we service the loans for a reduced fee because HLSS has assumed the match funded liabilities as well as the obligation for future servicing advances related to the MSRs. We are obligated to transfer legal ownership of the MSRs to HLSS upon obtaining all required third party consents. At that time, we would subservice the MSRs pursuant to our subservicing agreement with HLSS which was executed on February 10, 2012. 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We also own residential mortgage loans that are not eligible to be sold to the GSEs due to delinquency or other issues. Residential mortgage loans that we intend to sell to the GSEs are carried at fair value as a result of a fair value election. Such loans are subject to changes in fair value due to fluctuations in interest rates from the closing date through the date of the sale of the loan into the secondary market. These loans are classified within Level 2 of the valuation hierarchy as the primary component of the price is obtained from observable values of mortgage forwards for loans of similar terms and characteristics. We have the ability to access this market, and it is the market into which conforming mortgage loans are typically sold.</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">We report all other loans held for sale at the lower of cost or fair value. Current market illiquidity has reduced the availability of observable pricing data for certain of these loans. When we enter into an agreement to sell a loan or pool of loans to an investor at a set price, we value the loan or loans at the commitment price. We base the fair value of uncommitted loans on the expected future cash flows discounted at a rate commensurate with the risk of the estimated cash flows. Assumptions used in the valuation of performing loans include historical default rates, re-performance rates on defaulted loans, loss severity on defaulted loans, average resolution timeline, average coupon rate; and a discount rate. Significant assumptions used in the valuation of nonperforming loans include the current market value of the underlying collateral based on third party sources such as appraisals or broker price opinions, resolution timeline, estimated foreclosure and disposition costs that are based on historical experience and a discount rate. The assumptions we used in the valuation of these performing and non-performing loans at March 31, 2013 have not changed significantly from those we used in the December 31, 2012 valuations.</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">We repurchase certain loans from Ginnie Mae guaranteed securitizations in connection with loan modifications and loan resolution activity as part of our servicing obligations. These are classified as loans held for sale (and carried at the lower of cost or fair value), as we expect to redeliver (sell) the loans to new Ginnie Mae guaranteed securitizations in the case of modified loans.&#160; The fair value of these loans is estimated using published forward Ginnie Mae prices.&#160; Loans repurchased in connection with loan resolution activities are modified or otherwise remediated through loss mitigation activities or are reclassified to receivables.&#160; Because these loans are insured or guaranteed by the Federal Housing Administration (FHA) or U.S Department of Veterans Affairs (VA), the fair value of these loans represents the net recovery value taking into consideration the insured or guaranteed claim.</p> <p style="text-indent: 0in; margin: 0px; font: bold 10pt times new roman, times, serif;">Mortgage Servicing Rights</p> <p style="text-indent: 0in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;"><i>Amortized Cost MSRs</i></p> <p style="text-indent: 0.25in; margin: 10pt 0px; font: 10pt times new roman, times, serif;">We estimate the fair value of MSRs carried at amortized cost using a combination of internal models and data provided by third-party valuation experts. 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Significant cash outflows include the cost of servicing, the cost of financing servicing advances and compensating interest payments.</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">We perform an impairment analysis based on the difference between the carrying amount and fair value after grouping our loans into the applicable strata. As a result of the Homeward and ResCap Acquisitions, management has re-evaluated the portfolio and determined the appropriate strata are Agency and Non-Agency. The Agency stratum includes all GSE MSRs. The Non-Agency stratum includes all &#8220;private label&#8221; primary and master MSRs.</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">We estimate fair value using internal models and with the assistance of third-party valuation experts. Our internal models calculate the present value of expected future cash flows utilizing assumptions that we believe are used by market participants. We derive prepayment speeds and delinquency assumptions from historical experience adjusted for prevailing market conditions. We utilize discount rates provided by third-party valuation experts and we consider external market-based assumptions in determining the interest rate for the cost of financing advances, the interest rate for float earnings and the cost of servicing.</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">Third-party valuation experts generally utilize: (a) transactions involving instruments with similar collateral and risk profiles, adjusted as necessary based on specific characteristics of the asset or liability being valued; and/or (b) industry-standard modeling, such as a discounted cash flow model in arriving at their estimate of fair value. The prices provided by the valuation experts reflect their observations and assumptions related to market activity, including risk premiums and liquidity adjustments. The models and related assumptions used by the valuation experts are owned and managed by them and, in many cases, the significant inputs used in the valuation techniques are not reasonably available to us. However, we have an understanding of the processes and assumptions used to develop the prices based on our ongoing due diligence, which includes regular discussions with the valuation experts. 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As a result of the Homeward and ResCap Acquisitions, management has re-evaluated the portfolio and determined the appropriate strata are Agency and Non-Agency. The Agency stratum includes all GSE MSRs. The Non-Agency stratum includes all &#8220;private label&#8221; primary and master MSRs.</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">&#160;</p> <p style="text-indent: -0.5in; margin: 0px 0px 0px 0.5in; font: 10pt times new roman, times, serif;"><font style="font-weight: normal;"><i>Fair Value MSRs</i></font></p> <p style="text-align: left; text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">MSRs carried at fair value are classified within Level 3 of the valuation hierarchy due to the use of third party valuation expert pricing without adjustment. 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Although we have not adjusted the information obtained from the third-party pricing sources, we review this information to ensure that it provides a reasonable basis for estimating fair value. Our review is designed to identify information that appears stale, information that has changed significantly from the prior period and other indicators that the information may not be accurate. For interest rate contracts, significant increases or decreases in the unobservable portion of the yield curves in isolation will result in substantial changes in the fair value measurement.</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">In addition, we use interest rate caps to minimize future interest rate exposures on variable rate debt issued on servicing advance facilities from increases in one-month LIBOR interest rates. 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The maturity date is the date on which all outstanding balances must be repaid. In two advance facilities, there are multiple notes outstanding. For each note, after the amortization date, all collections that represent the repayment of advances pledged to the facility must be applied to reduce the balance of the note outstanding, and any new advances are ineligible to be financed.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0px;"></td> <td style="text-align: left; width: 0.25in;">(2)</td> <td>Borrowing capacity is available to us provided that we have additional eligible collateral to pledge. Collateral may only be pledged to one facility. 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width: 0.25in;">(4)</td> <td>The maximum borrowing capacity under this facility was reduced from $650 million to $300 million on December 26, 2012.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0px;"></td> <td style="text-align: left; width: 0.25in;">(5)</td> <td>The maximum borrowing capacity under this facility was increased from $250 million to $450 million on December 26, 2012.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0px;"></td> <td style="text-align: left; width: 0.25in;">(6)</td> <td>We entered into these facilities in connection with the ResCap Acquisition (See Note 3 &#8211; Business Acquisitions).</td> </tr> </table> <div> <table style="font: bold 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 8%; text-align: left;"><font style="text-transform: uppercase;">Note 15</font></td> <td style="width: 92%;"><font style="text-transform: uppercase;">Other Borrowings</font></td> </tr> </table> </div> <div>&#160;</div> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0in; font-size-adjust: none; font-stretch: normal;">Lines of credit and other secured and unsecured borrowings are comprised of the following at the dates indicated:</p> <div>&#160;</div> <div> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="text-align: left; vertical-align: top;"></td> <td></td> <td style="text-align: left; vertical-align: top;"></td> <td></td> <td style="text-align: center;"></td> <td></td> <td style="text-align: center;"></td> <td></td> <td style="text-align: center;" colspan="2"></td> <td></td> <td></td> <td style="text-align: center;" colspan="2"></td> <td></td> <td></td> <td style="text-align: center;" colspan="2"></td> <td></td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: left; vertical-align: top;"><b> </b></td> <td style="padding-bottom: 1pt;"><b> </b></td> <td style="text-align: left; vertical-align: top;"><b> </b></td> <td style="padding-bottom: 1pt;"><b> </b></td> <td style="text-align: center;"><b> </b></td> <td style="padding-bottom: 1pt;"><b> </b></td> <td style="text-align: center;"><b> </b></td> <td style="padding-bottom: 1pt; font-weight: bold;"><b> </b></td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" colspan="2"><b>Available</b></td> <td style="padding-bottom: 1pt; font-weight: bold;"><b> </b></td> <td style="padding-bottom: 1pt;"><b> </b></td> <td style="text-align: center; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="6"><b>Balance Outstanding</b></td> <td style="padding-bottom: 1pt;"><b> </b></td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center; vertical-align: bottom; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" nowrap="nowrap"><b>Borrowings</b></td> <td style="padding-bottom: 1pt;" nowrap="nowrap"><b> </b></td> <td style="text-align: center; vertical-align: bottom; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" nowrap="nowrap"><b>Collateral</b></td> <td style="padding-bottom: 1pt;" nowrap="nowrap"><b> </b></td> <td style="text-align: center; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" nowrap="nowrap"><b>Interest Rate</b></td> <td style="padding-bottom: 1pt;" nowrap="nowrap"><b> </b></td> <td style="text-align: center; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" nowrap="nowrap"><b>Maturity</b></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"><b> </b></td> <td style="text-align: center; font-weight: bold; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2" nowrap="nowrap"><b>Borrowing<br />Capacity</b></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"><b> </b></td> <td style="padding-bottom: 1pt;" nowrap="nowrap"><b> </b></td> <td style="text-align: center; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2" nowrap="nowrap"><b>March 31,<br />2013</b></td> <td style="padding-bottom: 1pt;" nowrap="nowrap"><b> </b></td> <td style="padding-bottom: 1pt;" nowrap="nowrap"><b> </b></td> <td style="text-align: center; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2" nowrap="nowrap"><b>December 31, <br />2012</b></td> <td style="padding-bottom: 1pt;" nowrap="nowrap"><b> </b></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 8.65pt; text-decoration: underline; vertical-align: top;">Servicing:</td> <td></td> <td style="text-align: left; vertical-align: top;"></td> <td></td> <td style="text-align: right;"></td> <td></td> <td style="text-align: right;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;"></td> <td></td> <td style="text-align: left; vertical-align: top;"></td> <td></td> <td style="text-align: left;">1ML + 550 bps with a LIBOR floor of 150 bps</td> <td></td> <td style="text-align: center;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="width: 27%; text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;">SSTL (1)</td> <td style="width: 3%;"></td> <td style="width: 10%; text-align: left; vertical-align: top;">(1)</td> <td style="width: 2%;"></td> <td style="width: 10%; text-align: left;">(1)</td> <td style="width: 2%;"></td> <td style="width: 10%; text-align: center;">Sept. 2016</td> <td style="width: 2%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">&#8212;</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 2%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">&#8212;</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 2%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">314,229</td> <td style="width: 1%; text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;">SSTL (2)</td> <td></td> <td style="text-align: left; vertical-align: top;">(2)</td> <td></td> <td style="text-align: left;">(2)</td> <td></td> <td style="text-align: center;">Feb. 2018</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">1,300,000</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;"></td> <td></td> <td style="text-align: left; vertical-align: top;"></td> <td></td> <td></td> <td></td> <td style="text-align: center;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;">Senior unsecured term loan (3)</td> <td></td> <td style="text-align: left; vertical-align: top;"></td> <td></td> <td style="text-align: left;">1-Month Euro-dollar rate + 675 bps with a Eurodollar floor of 150 bps</td> <td></td> <td style="text-align: center;">Mar. 2017</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">75,000</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;">Financing liability &#8211; MSRs pledged (4)</td> <td></td> <td style="text-align: left; vertical-align: top;">MSRs (4)</td> <td></td> <td style="text-align: left;">(4)</td> <td></td> <td style="text-align: center;">(4)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">393,776</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">303,705</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;">Financing liability &#8211; MSRs pledged (5)</td> <td></td> <td style="text-align: left; vertical-align: top;">MSRs (5)</td> <td></td> <td style="text-align: left;">(5)</td> <td></td> <td style="text-align: center;">(5)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">1,890</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">2,603</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; text-indent: -8.65pt; padding-bottom: 1pt; padding-left: 17.3pt; vertical-align: top;">Promissory note (6)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; padding-bottom: 1pt; vertical-align: top;">MSRs</td> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;">1ML + 350 bps</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: center; padding-bottom: 1pt;">May 2017</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">18,467</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">18,466</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; text-indent: -8.65pt; padding-bottom: 1pt; padding-left: 17.3pt; vertical-align: top;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; padding-bottom: 1pt; vertical-align: top;"></td> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: center; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">1,714,133</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">714,003</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;"></td> <td></td> <td style="text-align: left; vertical-align: top;"></td> <td></td> <td></td> <td></td> <td style="text-align: center;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; text-decoration: underline; vertical-align: top;">Lending:</td> <td></td> <td style="text-align: left; vertical-align: top;"></td> <td></td> <td></td> <td></td> <td style="text-align: center;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;">Master repurchase agreement (7)</td> <td></td> <td style="text-align: left; vertical-align: top;">Loans held for sale (LHFS)</td> <td></td> <td>1ML + 175 bps</td> <td></td> <td style="text-align: center;">Mar. 2014</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">194,788</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">105,212</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">88,122</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;">Participation agreement (8)</td> <td></td> <td style="text-align: left; vertical-align: top;">LHFS</td> <td></td> <td>N/A</td> <td></td> <td style="text-align: center;">Apr. 2013</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">50,682</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">58,938</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;">Master repurchase agreement (9)</td> <td></td> <td style="text-align: left; vertical-align: top;">LHFS</td> <td></td> <td>1ML + 200 bps</td> <td></td> <td style="text-align: center;">May 2013</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">195,996</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">54,004</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">133,995</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; text-indent: -8.65pt; padding-bottom: 1pt; padding-left: 17.3pt; vertical-align: top;">Master repurchase agreement</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; padding-bottom: 1pt; vertical-align: top;">LHFS</td> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;">1ML + 200 bps</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: center; padding-bottom: 1pt;">Jul. 2013</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">232,392</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">67,608</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">107,020</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; text-indent: -8.65pt; padding-bottom: 1pt; padding-left: 17.3pt; vertical-align: top;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; padding-bottom: 1pt; vertical-align: top;"></td> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: center; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">623,176</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">277,506</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">388,075</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;"></td> <td></td> <td style="text-align: left; vertical-align: top;"></td> <td></td> <td></td> <td></td> <td style="text-align: center;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; text-decoration: underline; vertical-align: top;">Corporate Items and Other</td> <td></td> <td style="text-align: left; vertical-align: top;"></td> <td></td> <td></td> <td></td> <td style="text-align: center;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; text-indent: -8.65pt; padding-bottom: 1pt; padding-left: 17.3pt; vertical-align: top;">Securities sold under an agreement to repurchase (10)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; padding-bottom: 1pt; vertical-align: top;">Ocwen Real Estate Asset Liquidating Trust 2007-1 Notes</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; padding-bottom: 1pt;">Class A-2 notes: 1ML + 200 bps; Class A-3 notes: 1ML + 300 bps</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: center; padding-bottom: 1pt;">Monthly</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">2,592</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">2,833</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;"></td> <td></td> <td style="text-align: left; vertical-align: top;"></td> <td></td> <td></td> <td></td> <td style="text-align: center;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">623,176</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">1,994,231</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">1,104,911</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 17.3pt; vertical-align: top;"></td> <td></td> <td style="text-align: left; vertical-align: top;"></td> <td></td> <td></td> <td></td> <td style="text-align: center;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; text-indent: -8.65pt; padding-bottom: 1pt; padding-left: 17.3pt; vertical-align: top;">Discount (1)(2)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; padding-bottom: 1pt; vertical-align: top;"></td> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: center; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(6,337</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(8,232</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; text-indent: -8.65pt; padding-bottom: 2.5pt; padding-left: 17.3pt; vertical-align: top;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; padding-bottom: 2.5pt; vertical-align: top;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: center; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">623,176</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">1,987,894</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">1,096,679</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> </tr> </table> </div> <div> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; margin-top: 0pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0%;"></td> <td style="width: 3%; text-align: left;">(1)</td> <td style="width: 97%;">In February 2013, we repaid this loan in full and wrote off the remaining discount as part of the loss on extinguishment.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0%;"></td> <td style="width: 3%; text-align: left;">(2)</td> <td style="width: 97%;">On February 15, 2013, we entered into a new SSTL facility agreement and borrowed $1.3 billion that was used principally to fund the ResCap Acquisition and repay the balance of the previous SSTL. The loan was issued with an original issue discount of $6.5 million that we are amortizing over the term of the loan. We are required to repay the principal amount of the borrowings in consecutive quarterly installments of $3.3 million. In addition, we are required to use the net cash proceeds (as defined) from any asset sale (as defined) to repay loan principal. Generally, this provision applies to non-operating sales of assets, such as the HLSS Transactions, and generally, net cash proceeds represent the proceeds from the sale of the assets, net of the repayment of any debt secured by a lien on the assets sold. The borrowings are secured by a first priority security interest in substantially all of the assets of Ocwen. Borrowings bear interest, at the election of Ocwen, at a rate per annum equal to either (a) the base rate [the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 0.50% and (iii) the one-month Eurodollar rate (1-Month LIBOR)], plus a margin of 2.75% and a base rate floor of 2.25% or (b) the one month Eurodollar rate, plus a margin of 3.75% with a 1-Month LIBOR floor of 1.25%.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0%;"></td> <td style="width: 3%; text-align: left;">(3)</td> <td style="width: 97%;">We repaid this loan in full in February 2013.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0%;"></td> <td style="width: 3%; text-align: left;">(4)</td> <td style="width: 97%;">As part of the HLSS Transactions, we transfer certain Rights to MSRs to HLSS. Because we have not yet transferred legal title to the MSRs, we account for these transfers as financings with the proceeds from the sale of the Rights to MSRs recorded as a financing liability. The financing liability is amortized using the interest method with the servicing income that is remitted to HLSS representing payments of principal and interest. The liability has no contractual maturity but is amortized over the estimated life of transferred Rights to MSRs. The balance of the liability is reduced each month based on the change in the estimated fair value of the transferred rights to MSRs. See Note 4 &#8211; Asset Sales and Financing for additional information.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0%;"></td> <td style="width: 3%; text-align: left;">(5)</td> <td style="width: 97%;">We sold MSRs for certain loans to an unrelated third party in December 2012; however, we are required to repurchase the MSRs for any loans that cannot be refinanced by the purchaser under the federal government&#8217;s Home Affordable Refinance Program (HARP). As a result, the sale is being accounted for as a financing. The financing liability is being amortized using the interest method with the servicing income that is remitted to the purchaser representing payments of principal and interest.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0%;"></td> <td style="width: 3%; text-align: left;">(6)</td> <td style="width: 97%;">Prepayments of the balance on this note may be required if the borrowing base, as defined, falls below the amount of the note outstanding.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0%;"></td> <td style="width: 3%; text-align: left;">(7)</td> <td style="width: 97%;">On March 19, 2013, we extended the Master Repurchase Agreement to March 18, 2014.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0%;"></td> <td style="width: 3%; text-align: left;">(8)</td> <td style="width: 97%;">Under this participation agreement, the lender provides financing on an uncommitted basis for up to $100.0 million at the discretion of the lender. The participation agreement allows the lender to acquire a 100% beneficial interest in the underlying mortgage loans. However, the transaction does not qualify for sales accounting treatment as is, therefore, accounted for as a financing. The lender earns the stated interest rate of the underlying mortgage loans while the loans are financed under the participation agreement. In April 2013, we extended the participation agreement maturity date to May 31, 2014.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0%;"></td> <td style="width: 3%; text-align: left;">(9)</td> <td style="width: 97%;">On January 25, 2013, we extended the Master Repurchase Agreement maturity date to May 3, 2013.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0%;"></td> <td style="width: 3%; text-align: left;">(10)</td> <td style="width: 97%;">This agreement has no stated credit limit and lending is determined for each transaction based on the acceptability of the securities presented as collateral.</td> </tr> </table> </div> <div> <table style="font: bold 10pt/normal times new roman, times, serif; width: 100%; margin-top: 0pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 8%; text-align: left;"><font style="text-transform: uppercase;">Note 16</font></td> <td style="width: 92%;"><font style="text-transform: uppercase;">Other Liabilities</font></td> </tr> </table> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">Other liabilities were comprised of the following:</p> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="text-align: center; padding-bottom: 1pt;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="text-align: center; font-weight: bold; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2" nowrap="nowrap">March 31,<br />2013</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="text-align: center; font-weight: bold; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2" nowrap="nowrap">December 31,<br />2012</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="width: 74%; text-align: left;">Accrued expenses (1)</td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">174,645</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">106,376</td> <td style="width: 1%; text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left;">Amount due seller for purchase price adjustments &#8211; ResCap Acquisition</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">74,208</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left;">Due to related parties (2)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">47,884</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">45,034</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left;">Checks held for escheat</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">31,645</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">33,225</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left;">Payable to servicing and subservicing investors (3)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">24,023</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">9,973</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left;">Liability for selected tax items</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">22,338</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">22,702</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left;">Derivatives, at fair value (4)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">21,863</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">18,658</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left;">Servicing liabilities (5)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">9,726</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">9,830</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left;">Accrued interest payable</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">6,978</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">5,410</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="padding-bottom: 1pt;">Other</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">57,697</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">26,456</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">471,007</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">277,664</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0px;"></td> <td style="width: 0.25in; text-align: left;">(1)</td> <td>Includes $59.3 million of accrued expenses attributable to the ResCap Acquisition including $49.0 million of accruals for compensatory fees for foreclosures that may ultimately exceed investor timelines.</td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0px;"></td> <td style="width: 0.25in; 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A brief description of our current business segments is as follows:</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"><i>Servicing.</i> 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 both agency and non-agency loans. Non-agency loans include prime and subprime loans which represent residential loans that generally did not qualify under GSE guidelines or have subsequently become delinquent.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"><i>Lending.</i> The Lending segment is focused on originating and purchasing agency-conforming residential mortgage loans mainly through our correspondent lending business. We also commenced a direct lending business to pursue refinancing opportunities from our existing portfolio, where permitted. The loans are typically sold shortly after origination into a liquid market on a servicing retained basis.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"><i>Corporate Items and Other.</i> Corporate Items and Other includes items of revenue and expense that are not directly related to a business, business activities that are individually insignificant, interest income on short-term investments of cash, 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 Homeward Acquisition and the ResCap Acquisition and subsequently sold.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">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. 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font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="width: 35%;">Revenue</td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">376,084</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">13,908</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">16,712</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">(45</td> <td style="width: 1%; text-align: left;">)</td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">406,659</td> <td style="width: 1%; text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; padding-bottom: 1pt;">Operating expenses (1)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">211,505</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">11,098</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">20,968</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(45</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">243,526</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; padding-bottom: 1pt;">Income (loss) from operations</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">164,579</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">2,810</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(4,256</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">163,133</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left;">Other income (expense), net:</td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left;">Interest income</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">(614</td> <td style="text-align: left;">)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">4,780</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">1,019</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">5,185</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left;">Interest expense (1)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">(90,460</td> <td style="text-align: left;">)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">(2,829</td> <td style="text-align: left;">)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">(127</td> <td style="text-align: left;">)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">(93,416</td> <td style="text-align: left;">)</td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="padding-bottom: 1pt;">Other</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(26,085</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">267</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">2,251</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(23,567</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; padding-bottom: 1pt;">Other income (expense), net</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(117,159</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">2,218</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">3,143</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(111,798</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; padding-bottom: 2.5pt;">Income (loss) before income taxes</td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">47,420</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">5,028</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">(1,113</td> <td style="text-align: left; padding-bottom: 2.5pt;">)</td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">&#8212;</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">51,335</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> </tr> <tr style="vertical-align: bottom;"> <td style="font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-decoration: underline;">Three Months Ended March 31, 2012:</td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> </tr> <tr style="vertical-align: bottom;"> <td style="font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td>Revenue</td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">164,192</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">658</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">(304</td> <td style="text-align: left;">)</td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">164,546</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; padding-bottom: 1pt;">Operating expenses (1)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">82,879</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">3,395</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(147</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">86,127</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; padding-bottom: 1pt;">Income (loss) from operations</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">81,313</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(2,737</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(157</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">78,419</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left;">Other income (expense), net:</td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left;">Interest income</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">2,312</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">2,312</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left;">Interest expense (1)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">(46,526</td> <td style="text-align: left;">)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">(398</td> <td style="text-align: left;">)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">(46,924</td> <td style="text-align: left;">)</td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="padding-bottom: 1pt;">Other</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(310</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(3,535</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">157</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(3,688</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; padding-bottom: 1pt;">Other income (expense), net</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(46,836</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(1,621</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">157</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">(48,300</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; padding-bottom: 2.5pt;">Income (loss) before income taxes</td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">34,477</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">&#8212;</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">(4,358</td> <td style="text-align: left; padding-bottom: 2.5pt;">)</td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">&#8212;</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">30,119</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> </tr> <tr style="vertical-align: bottom;"> <td style="font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; font-weight: bold;">Total Assets</td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td>March 31, 2013</td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">5,713,500</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">430,915</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">1,103,600</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">7,248,015</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom;"> <td style="font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td>December 31, 2012</td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">4,461,755</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">551,733</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">658,394</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">5,671,882</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom;"> <td style="font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> <td style="text-align: right; font-size: 8pt;"></td> <td style="text-align: left; font-size: 8pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td>March 31, 2012</td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">3,530,184</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">964,327</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">4,494,511</td> <td style="text-align: left;"></td> </tr> </table> <table style="font: 10pt/normal times new roman, times, serif; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0px;"></td> <td style="width: 0.25in; text-align: left;">(1)</td> <td>Depreciation and amortization expense are as follows:</td> </tr> </table> <div> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="text-align: center; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt; font-weight: bold;"></td> <td style="text-align: center; font-weight: bold; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2">Servicing</td> <td style="padding-bottom: 1pt; font-weight: bold;"></td> <td style="padding-bottom: 1pt; font-weight: bold;"></td> <td style="text-align: center; font-weight: bold; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2">Lending</td> <td style="padding-bottom: 1pt; font-weight: bold;"></td> <td style="padding-bottom: 1pt; font-weight: bold;"></td> <td style="text-align: center; font-weight: bold; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2">Corporate Items and Other</td> <td style="padding-bottom: 1pt; font-weight: bold;"></td> <td style="padding-bottom: 1pt; font-weight: bold;"></td> <td style="text-align: center; font-weight: bold; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2">Business Segments Consolidated</td> <td style="padding-bottom: 1pt; font-weight: bold;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-decoration: underline;">Three Months Ended March 31, 2013:</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="width: 48%; text-align: left;">Depreciation expense</td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">2,699</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">234</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">1,580</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">4,513</td> <td style="width: 1%; text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td>Amortization of MSRs</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">47,883</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">47,883</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left;">Amortization of debt discount</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">424</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">424</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left;">Amortization of debt issuance costs &#8211; SSTL</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">894</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">894</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-decoration: underline;">Three Months Ended March 31, 2012:</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left;">Depreciation expense</td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">255</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">578</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">833</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; 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In addition, Ocwen agreed not to establish similar fee-based businesses (or establish relationships with other companies engaged in the line of similar fee-based businesses) that would directly or indirectly compete with diversified fee-based businesses as they relate to the Homeward servicing platform acquired by Altisource.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">Certain services provided by Altisource under these contracts are charged to the borrower and/or loan investor. Accordingly, such services, while derived from our loan servicing portfolio, are not reported as expenses by Ocwen. 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margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">Our business is subject to extensive regulation by federal, state and local governmental authorities, including the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), the SEC and various state agencies that license, audit and conduct examinations of our mortgage originations, servicing and collection activities in a number of states. The CFPB asserts supervisory authority (including the authority to conduct examinations) over Ocwen and its affiliates, including Homeward. From time to time, we also receive requests from federal, state and local agencies for records, documents and information relating to our policies, procedures and practices regarding our loan origination, loan servicing and debt collection business activities. We incur significant ongoing costs to comply with new and existing laws and governmental regulation of our business.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">We must comply with a number of federal, state and local consumer protection laws including, among others, the Gramm-Leach-Bliley Act, the Fair Debt Collection Practices Act, the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), the Fair Credit Reporting Act, the Servicemembers Civil Relief Act, Homeowners Protection Act, the Federal Trade Commission Act and, more recently, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and state mortgage origination, mortgage servicing and foreclosure laws. These laws apply to loan origination, loan servicing, debt collection, use of credit reports, safeguarding of non&#8722;public personally identifiable information about our customers, foreclosure and claims handling, investment of and interest payments on escrow balances and escrow payment features, and mandate certain disclosures and notices to borrowers. These requirements can and do change as statutes and regulations are enacted, promulgated or amended.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">There are a number of foreign laws and regulations that are applicable to our operations in India and Uruguay, including acts that govern licensing, employment, safety, taxes, insurance, and the laws and regulations that govern the creation, continuation and the winding up of companies as well as the relationships between the shareholders, the company, the public and the government in both countries.</p> </div> <table style="font: bold 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0pt; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 8%; text-align: left;"><font style="text-transform: uppercase;">Note 24</font></td> <td style="width: 92%;"><font style="text-transform: uppercase;">Commitments and Contingencies</font></td> </tr> </table> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">We are subject to various pending legal proceedings, including those subject to loss sharing <font style="color: black;">and indemnification </font>provisions of our various acquisitions. In our opinion, the resolution of those proceedings will not have a material effect on our financial condition, results of operations or cash flows.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">&#160;</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 0pt; text-align: left; font-size-adjust: none; font-stretch: normal;"><b>Litigation Contingencies</b></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"><font style="font-weight: normal;">In September 2006, the Bankruptcy Trustee in Chapter 7 proceedings involving American Business Financial Services, Inc. (ABFS) brought an action against multiple defendants, including Ocwen, in Bankruptcy Court. The action arises out of Debtor-in-Possession financing to ABFS by defendant Greenwich Capital Financial Products, Inc. and the subsequent purchases by Ocwen of MSRs and certain residual interests in mortgage-backed securities previously held by ABFS. The Trustee filed an amended complaint in March 2007 alleging various claims against Ocwen including turnover, fraudulent transfers, accounting, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract, fraud, civil conspiracy and conversion. The Trustee seeks compensatory damages in excess of $100.0 million and punitive damages jointly and severally against all defendants. In April 2008, Ocwen filed an answer denying all charges and a counterclaim for breach of contract, fraud, negligent misrepresentation and indemnification in connection with the MSR purchase transaction. On August 30, 2012, the Bankruptcy Court entered an order granting Ocwen&#8217;s motion for partial summary judgment and denying the Trustee&#8217;s motion for partial summary judgment. This order effectively rejects the bulk of the Trustee&#8217;s damage claims against Ocwen. In light of this order, the parties entered into a definitive written settlement agreement that provides for a final resolution and termination of this matter. This settlement has been approved by the Bankruptcy Court, and Ocwen&#8217;s involvement in the matter has ended. This settlement did not have a material effect on our financial condition, results of operations or cash flows.</font></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0in; font-size-adjust: none; font-stretch: normal;"><b>Regulatory Contingencies</b></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">We are subject to a number of pending federal and state regulatory investigations, examinations, inquiries, requests for information and/or other actions. In July 2010, OLS received two subpoenas from the Federal Housing Finance Agency as conservator for Freddie Mac and Fannie Mae in connection with ten private label mortgage securitization transactions where Freddie Mac and Fannie Mae have invested. The transactions include mortgage loans serviced but not originated by OLS or its affiliates. On November 24, 2010, OLS received a Civil Investigative Demand (CID) from the FTC requesting documents and information regarding various servicing activities. On June 6, 2012, the FTC notified OLS that it had referred this CID to the CFPB. On November 7, 2011, OLS received a CID from the Attorney General&#8217;s Office of the Commonwealth of Massachusetts requesting documents and information regarding certain foreclosures executed in Massachusetts. On January 18, 2012, OLS received a subpoena from the New York Department of Financial Services (NY DFS) requesting documents regarding OLS&#8217; policies, procedures and practices regarding lender-placed or &#8220;force-placed&#8221; insurance which is required to be provided for borrowers who allow their hazard insurance policies to lapse. Separately, on December 5, 2012, we entered into a Consent Order with the NY DFS in which we agreed to the appointment of an independent Monitor to oversee our compliance with the Agreement on Servicing Practices. Ocwen&#8217;s understanding is that NY DFS has selected the firm which will act as the Monitor, and we intend to continue to cooperate with the NY DFS and the Monitor once the NY DFS and the Monitor finalize the terms of the engagement. On August 13, 2012, OLS received a request from the Multi-State Mortgage Committee of the Conference of State Bank Supervisors (MMC) to provide information and data relating to our loan servicing portfolio, including loan count and volume data, loan modifications, fees assessed, delinquencies, short sales, loan-to-value data and rating agency reports. The MMC, along with the CFPB, certain state Attorneys General<font style="color: black;"> and other agencies who were involved in the National Mortgage Settlement executed on February 9, 2012 by the five large banks</font>, also requested that we indicate our position on behalf of OLS and Litton on the servicing standards and consumer relief provisions contained in that settlement.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">We are cooperating with <font style="color: black;">and providing requested information to </font>each of the agencies involved in the foregoing actions. Specifically in response to the request from the MMC, CFPB, state Attorneys General<font style="color: black;"> and other agencies</font>, we indicated our willingness to adopt the servicing standards set out in the National Mortgage Settlement with certain caveats. We further indicated our willingness to <font style="color: black;">undertake various </font>consumer assistance commitments <font style="color: black;">in the form of</font> loan modifications and other <font style="color: black;">foreclosure avoidance </font>alternatives. On February 26, 2013, the MMC, CFPB and state Attorneys General requested that we consider a proposal to contribute to a consumer relief fund that would provide cash payments to borrowers foreclosed upon by OLS and various entities we have acquired.&#160; We believe the maximum liability<i> </i>under this proposal would be approximately $135.0 million.&#160; We do not believe such a contribution from us is warranted under the circumstances and have so notified the requesting parties. Nevertheless, in an attempt to bring finality to this matter, we have entered into discussions with the requesting parties while reserving all our rights and defenses.&#160; It is reasonably possible, however, that a resolution may not be concluded in which case legal proceedings could ensue which we would defend vigorously.&#160; At this time, the amounts, if any, that ultimately could be incurred with regard to this matter are not reasonably estimable.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">On November 30, 2012, prior to our completion of the Homeward Acquisition, two CIDs were issued to Homeward by the U.S. Department of Justice, Eastern District of Texas, as part of an investigation of whether Homeward violated the False Claims Act in connection with its participation in HAMP. We were advised by Homeward that documents and information have been provided pursuant to these CIDs. The investigation remains open, and we intend to cooperate in the event there are further informational requests.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">As part of the ResCap Acquisition, OLS is required to service the ResCap loans in accordance with the requirements of the National Mortgage Settlement, although OLS is not responsible for <font style="color: black;">any payment, penalty or financial obligation, including but not limited to </font>providing Ally&#8217;s share of financial relief to borrowers under that settlement. The Office of Mortgage Settlement Oversight, which is responsible for monitoring compliance with obligations under the National Mortgage Settlement, issued a report on February 14, 2013 confirming that Ally/ResCap have completed its minimum consumer relief obligations.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">One or more of the foregoing regulatory actions or similar actions in the future against Ocwen, OLS, Litton or Homeward could cause us to incur fines, penalties, settlement costs, damages, legal fees or other charges in material amounts, or undertake remedial actions pursuant to administrative orders or court-issued injunctions, any of which could adversely affect our financial results or incur additional significant costs related to our loan servicing operations.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">In addition to these matters, Ocwen receives periodic inquires, both formal and informal in nature, from various state and federal agencies as part of those agencies&#8217; oversight of the mortgage servicing sector. Such ongoing inquiries, including those into servicer foreclosure processes, could result in additional actions by state or federal governmental bodies, regulators or the courts that could result in an extension of foreclosure timelines, which may be applicable generally to the servicing industry or to us in particular. In addition, a number of our match funded advance facilities contain provisions that limit the eligibility of advances to be financed based on the length of time that advances are outstanding, and two of our match funded advance facilities have provisions that limit new borrowings if average foreclosure timelines extend beyond a certain time period, either of which, if such provisions applied, could adversely affect liquidity by reducing our average effective advance rate. Increases in the amount of advances and the length of time to recover advances, fines or increases in operating expenses, and decreases in the advance rate and availability of financing for advances could result in increased borrowings, reduced cash and higher interest expense which could negatively impact our liquidity and profitability.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0in; font-size-adjust: none; font-stretch: normal;"><b>Loan Put-Back and Related Contingencies</b></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0pt 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">In several recent court actions, mortgage loan sellers against whom repurchase claims have been asserted based on alleged breaches of representations and warranties are defending on various grounds including the expiration of statutes of limitation, lack of notice and opportunity to cure and vitiation of the obligation to repurchase as a result of foreclosure or charge off of the loan. Ocwen is not a party to any of the actions, but we are the servicer for certain securitizations involved in such actions. In connection with these actions, Ocwen is in the process of negotiating tolling agreements with respect to its role as servicer for a very small number of securitizations and may enter into additional tolling agreements in the future. Should Ocwen be made a party to these or similar actions, we may need to defend allegations that we failed to service loans in accordance with applicable agreements and that such failures prejudiced the rights of repurchase claimants against loan sellers. We believe that any such allegations would be without merit and, if necessary, would vigorously defend against them. If, however, we were required to compensate claimants for losses related to seller breaches of representations and warranties in respect of loans we service, then our business, financial condition and results of operations could be adversely affected.</p> <table style="font: bold 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0%;"></td> <td style="text-align: left; width: 8%;"><font style="text-transform: uppercase;">Note 25</font></td> <td style="width: 92%;"><font style="text-transform: uppercase;">Subsequent Events</font></td> </tr> </table> <p style="text-indent: -0.5in; margin: 10pt 0px 0px 0.5in; font: bold 10pt times new roman, times, serif;">Genworth Acquisition</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">On October 26, 2012, Ocwen and Genworth Financial, Inc. (GNW) entered into an agreement whereby Ocwen will acquire Genworth Financial Home Equity Access, Inc. for approximately $22.0 million in cash. The company, which will be renamed Liberty Home Equity Solutions, Inc. is the leading reverse mortgage originator based on January 2013 industry data with strong positions in both retail and wholesale originations. The acquisition closed on April 1, 2013.</p> <p style="text-indent: -0.5in; margin: 10pt 0px 0px 0.5in; font: bold 10pt times new roman, times, serif;">Ally Bank MSR Acquisition</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">On March 8, 2013, OLS and Ally Bank, a wholly owned subsidiary of Ally, entered into a Mortgage Servicing Rights Purchase and Sale Agreement whereby OLS agreed to acquire Freddie Mac and Fannie Mae MSRs and the servicing advances related to loans with a UPB of approximately $85.0 billion as of January 31, 2013. We also agreed to acquire MSRs related to loans with an estimated UPB of $5.0 billion from commitments made by Ally prior to February 28, 2013. The estimated purchase price was approximately $600.0 million, net of assumed liabilities. We assumed the origination representation and warranty obligations in connection with a majority of the acquired MSRs. The transaction will close in stages, with the initial closing on April 1, 2013 and the final closing expected in July 2013. We had been subservicing these MSRs via a prior agreement with ResCap on behalf of Ally under a subservicing contract assumed by us in connection with the ResCap Acquisition.<br /><br /></p> <p style="text-indent: -0.5in; margin: 0px 0px 0px 0.5in; font: bold 10pt times new roman, times, serif;">Sale of ResCap Fee-Based Businesses to Altisource</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">On April&#160;12, 2013, Ocwen and OMS entered into an Agreement (the &#8220;Agreement&#8221;) with Altisource to extend terms related to the existing servicing arrangements between Altisource and Ocwen for mortgage servicing assets acquired from ResCap.&#160;</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">The Agreement provides that during the term of the existing servicing arrangements (which currently have terms expiring on August&#160;31, 2025, subject to certain renewal rights) between Altisource and Ocwen, (i)&#160;Altisource will be the exclusive provider, except as prohibited by applicable law, to Ocwen and all of its subsidiaries and affiliates, of certain services related to the ResCap business; (ii)&#160;Ocwen will not establish similar fee-based businesses that would directly or indirectly compete with Altisource services as they relate to the ResCap business; and (iii)&#160;Ocwen and all of its subsidiaries and affiliates will market and promote the utilization of Altisource&#8217;s services to their various third party relationships. Additionally, the parties agreed to use commercially reasonable best efforts to ensure that the loans associated with the ResCap business are boarded onto Altisource&#8217;s mortgage servicing platform. The cash consideration paid or payable by Altisource to Ocwen under the Agreement totals $128.8 million, $80.0 million of which was paid on April&#160;12, 2013, with the remaining $48.8 million to be paid in monthly installments for up to five months following the closing.</p> 19349000 42576000 99000 19448000 42576000 4057736000 3337571000 1368000 3902390000 18200000 151250000 558750000 1535000000 <div> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0in; font-size-adjust: none; font-stretch: normal;"><b>Basis of Presentation</b></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">The accompanying unaudited interim consolidated financial statements have been prepared in conformity with the instructions of the Securities and Exchange Commission (SEC) to Form 10-Q and SEC Regulation S-X, Article 10, Rule 10-01 for interim financial statements. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete financial statements. In our opinion, the accompanying unaudited interim consolidated financial statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation. The results of operations and other data for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2013. The unaudited interim consolidated financial statements presented herein should be read in conjunction with the audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">The preparation of financial statements in conformity with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Material estimates that are particularly significant in the near or medium term relate to fair value measurements, the provision for potential losses that may arise from litigation proceedings, the amortization of MSRs and the valuation of goodwill and deferred tax assets.</p> </div> <p style="font: bold 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px 0.5in; text-indent: -0.5in; font-size-adjust: none; font-stretch: normal;">Principles of Consolidation</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0pt; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">Our financial statements include the accounts of Ocwen, its majority-owned subsidiaries and any variable interest entity (VIE) where we have determined that we are the primary beneficiary. We apply the equity method of accounting to investments when the entity is not a VIE, and we are able to exercise significant influence, but not control, over the policies and procedures of the entity but own 50% or less of the voting securities. We have eliminated intercompany accounts and transactions in consolidation.</p> <div><br /> <p style="font: 10pt/normal times new roman, times, serif; margin: 0px; text-indent: 0in; font-size-adjust: none; font-stretch: normal;"><i>Variable Interest Entities</i></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">We evaluate each special purpose entity (SPE) for classification as a VIE. When a SPE meets the definition of a VIE and we determine that Ocwen is the primary beneficiary, we include the SPE in our consolidated financial statements.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">We have determined that the SPEs created in connection with our match funded financing facilities are VIEs of which we are the primary beneficiary. We also determined that we were the primary beneficiary for four residential mortgage loan securitization trusts.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0in; font-size-adjust: none; font-stretch: normal;"><i>Securitizations and Asset Backed Financing Arrangements </i></p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">We securitize, sell and service residential mortgage loans and regularly transfer financial assets in connection with asset-backed financing arrangements. We have aggregated these securitizations and asset-backed financing arrangements into two groups: (1) securitizations of residential mortgage loans and (2) financings of advances on loans serviced for others.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"><i>Securitizations of Residential Mortgage Loans.</i> Currently, we securitize and sell residential mortgage loans involving Ginnie Mae, Freddie Mac and Federal National Mortgage Association (Fannie Mae). We retain the right to service these loans and receive servicing fees based upon the securitized loan balances and certain ancillary fees, all of which are reported in servicing and subservicing fees on the Consolidated Statements of Operations. In prior years, we securitized residential mortgage loans through &#8220;private label&#8221; securitization trusts. We continued to be involved with the securitization trusts, typically by acting as the servicer or sub-servicer for the loans held by the trust and by retaining a beneficial ownership interest in the securitization trust. The beneficial interests that we held consisted of both subordinate and residual securities that were either retained at the time of the securitization or subsequently acquired. We held beneficial interests in five of these trusts. We also acquired residual and subordinated interests in six additional trusts where we were not the transferor but were the servicer.</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">In December 2012, we sold the beneficial interests that we held in the four consolidated securitization trusts and deconsolidated these securitization trusts. We also sold our retained interests in two of the seven unconsolidated securitization trusts. The beneficial interests that we hold in the five remaining unconsolidated securitization trusts have no value and no potential for significant cash flows in the future. In addition, at March 31, 2013, we had no other significant assets in our unaudited interim consolidated financial statements related to these securitization trusts. We have no obligation to provide financial support to unconsolidated securitization trusts and have provided no such support. The beneficial owners of the trusts can look only to the assets of the securitization trusts for satisfaction of the debt issued by the securitization trusts and have no recourse against the assets of Ocwen. 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Class A-3 notes: 1ML + 300 bps Monthly 2833000 2592000 (1) MSRs (4) MSRs (5) MSRs Loans held for sale (LHFS) LHFS (2) LHFS LHFS 1ML + 550 bps with a LIBOR floor of 150 bps (1) 1-Month Euro-dollar rate + 675 bps with a Eurodollar floor of 150 bps (4) (5) 1ML + 350 bps 1ML + 175 bps 1ML + 200 bps 1ML + 200 bps 2016-09-30 2017-03-31 2017-05-31 2014-03-18 2013-07-31 2018-02-28 2013-05-03 2013-04-30 194788000 623176000 232392000 623176000 195996000 -8232000 -6337000 6500000 623176000 -74208000 45034000 47884000 33225000 31645000 9973000 24023000 22702000 22338000 18658000 21863000 9830000 9726000 5410000 6978000 26456000 57697000 -8688000 60000 1086000 1468218000 -227171000 -84778000 85000000 -194000000 4479506000 -2471538000 -12000000 1280000000 -105000000 -232174000 -1651514000 -2940387000 Feb. 2015 - May 2016 Mar. 2013 - May 2027 Apr. 2013 - Jun. 2013 Mar. 2013 - May 2013 2013 2013 2013 2015-2016 2014-2027 2013 617274000 250000000 297180000 547180000 1013000000 1979281000 222500000 706560000 4652000 -1569000 -1917000 -3486000 123000 -13079000 1597000 -1108000 -1237000 1143000 1028000 2171000 46000 2447000 -2480000 -1149000 -2667000 10189000 Loss on loans held for sale, net Other, net Other, net Other, net Other net; Servicing and origination Other, net Other, net Loss on loans held for sale, net 2015 2015 2013 4775615000 966281000 201892000 217209000 419101000 1979281000 1250000000 222500000 -7801000 -1915000 -9716000 -7153000 -55000 285000 230000 -7153000 AOCL AOCL AOCL -15091000 -13202000 -13079000 1597000 -2050000 2401000 2447000 -6296000 1000000 8952000 3405000 -5079000 63000 -657000 772000 5958000 -3262000 4216000 46924000 31115000 14222000 153000 710000 724000 93416000 30351000 60523000 2542000 164546000 164192000 658000 -304000 406659000 376084000 16712000 -45000 13908000 78419000 81313000 -2737000 -157000 163133000 164579000 -4256000 2810000 2312000 2312000 5185000 -614000 1019000 4780000 -3688000 -310000 -3535000 157000 -23567000 -26085000 2251000 267000 -48300000 -46836000 -1621000 157000 -111798000 -117159000 3143000 2218000 833000 255000 578000 4513000 2699000 1580000 234000 3612000 10000 4233000 112000 6530000 251000 11692000 491000 75000000 -31495000 -5971000 -25524000 -19836000 -40376000 20540000 22000000 604000 840000000 87000000 79400000000 85000000000 5000000000 107300000000 92500000000 600000000 128800000 80000000 48800000 421000 77000000000 59300000 4000000 42100000000 25900000000 9000000000 1300000000 15200000000 15900000000 -4300000 -4800000 We value advances that we make on loans that we service for others at their net realizable value which generally approximates fair value because advances have no stated maturity, generally are realized within a relatively short period of time and do not bear interest. We use interest rate swaps to hedge against the effects of changes in interest rates on our borrowings under advance funding facilities. These derivatives are not exchange-traded and therefore quoted market prices or other observable inputs are not available. Fair value is based on information provided by third-party pricing sources. Third-party valuations are derived from proprietary models based on inputs that include yield curves and contractual terms such as fixed interest rates and payment dates. Although we have not adjusted the information obtained from the third-party pricing sources, we review this information to ensure that it provides a reasonable basis for estimating fair value. Our review is designed to identify information that appears stale, information that has changed significantly from the prior period and other indicators that the information may not be accurate. For interest rate contracts, significant increases or decreases in the unobservable portion of the yield curves in isolation will result in substantial changes in the fair value measurement. In addition, we use interest rate caps to minimize future interest rate exposures on variable rate debt issued on servicing advance facilities from increases in one-month LIBOR interest rates. The fair value for interest rate caps is based on counterparty market prices and adjusted for counterparty credit risk. We enter into forward trades to provide an economic hedge against changes in the fair value of loans held for sale carried at fair value. Forward trades are primarily used to fix the forward sales price that will be realized upon the sale of mortgage loans into the secondary market. Forward contracts are actively traded in the market, thus they are classified within Level 1 of the valuation hierarchy. IRLCs represent an agreement to purchase loans from a third-party originator, or an agreement to extend credit to a mortgage applicant (locked pipeline), or an agreement to sell a loan to investors, whereby the interest rate is set prior to funding. IRLCs are classified within Level 2 of the valuation hierarchy as the primary component of the price is obtained from observable values of mortgage forwards for loans of similar terms and characteristics. Fair value amounts of IRLCs are adjusted for expected "fallout" (locked pipeline loans not expected to close), using models that consider cumulative historical fallout rates and other factors. We enter into derivative contracts including interest rate swaps, U.S. Treasury futures and forward contracts to hedge against the effects of changes in the value of the MSRs which we carry at fair value. The fair value of interest rate swaps is based upon projected short-term interest rates and volatility based on published market based sources. Because futures and forward contracts are actively traded in the market, they are classified within Level 1 of the valuation hierarchy. Effective April 1, 2013, we modified our strategy for managing the risks of the underlying loan portfolios and no longer use derivative contracts to hedge against the effects of changes in the value of MSRs which we carry at fair value. See Note 18 - Derivative Financial Instruments for additional information regarding derivative financial instruments. <p style="font: bold 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px 0.5in; color: #000000; text-transform: none; text-indent: -0.5in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">Loans Held for Sale</p> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px; text-align: left; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">We originate and purchase residential mortgage loans that we intend to sell to Freddie Mac and Fannie Mae (together with Ginnie Mae the GSEs). We also own residential mortgage loans that are not eligible to be sold to the GSEs due to delinquency or other issues. Residential mortgage loans that we intend to sell to the GSEs are carried at fair value as a result of a fair value election. Such loans are subject to changes in fair value due to fluctuations in interest rates from the closing date through the date of the sale of the loan into the secondary market. These loans are classified within Level 2 of the valuation hierarchy as the primary component of the price is obtained from observable values of mortgage forwards for loans of similar terms and characteristics. We have the ability to access this market, and it is the market into which conforming mortgage loans are typically sold.</p> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">We report all other loans held for sale at the lower of cost or fair value. Current market illiquidity has reduced the availability of observable pricing data for certain of these loans. When we enter into an agreement to sell a loan or pool of loans to an investor at a set price, we value the loan or loans at the commitment price. We base the fair value of uncommitted loans on the expected future cash flows discounted at a rate commensurate with the risk of the estimated cash flows. Assumptions used in the valuation of performing loans include historical default rates, re-performance rates on defaulted loans, loss severity on defaulted loans, average resolution timeline, average coupon rate; and a discount rate. Significant assumptions used in the valuation of nonperforming loans include the current market value of the underlying collateral based on third party sources such as appraisals or broker price opinions, resolution timeline, estimated foreclosure and disposition costs that are based on historical experience and a discount rate. The assumptions we used in the valuation of these performing and non-performing loans at March 31, 2013 have not changed significantly from those we used in the December 31, 2012 valuations.</p> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 10pt 0px 0px; color: #000000; text-transform: none; text-indent: 0.25in; letter-spacing: normal; word-spacing: 0px; white-space: normal; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px;">We repurchase certain loans from Ginnie Mae guaranteed securitizations in connection with loan modifications and loan resolution activity as part of our servicing obligations. These are classified as loans held for sale (and carried at the lower of cost or fair value), as we expect to redeliver (sell) the loans to new Ginnie Mae guaranteed securitizations in the case of modified loans.&#160; The fair value of these loans is estimated using published forward Ginnie Mae prices.&#160; Loans repurchased in connection with loan resolution activities are modified or otherwise remediated through loss mitigation activities or are reclassified to receivables.&#160; Because these loans are insured or guaranteed by the Federal Housing Administration (FHA) or U.S Department of Veterans Affairs (VA), the fair value of these loans represents the net recovery value taking into consideration the insured or guaranteed claim.</p> We estimate the fair value of MSRs carried at amortized cost using a combination of internal models in connection with our non-Agency portfolio's and data provided by third-party valuation experts in connection with our Agency portfolio's. The most significant assumptions used in the valuation of MSRs are the speed at which mortgages prepay and delinquency experience. Other assumptions typically used in the valuation of MSRs are: &#183; Cost of servicing &#183; Interest rate used for computing float earnings &#183; Discount rate &#183; Compensating interest expense &#183; Interest rate used for computing the cost of Servicing advances &#183; Collection rate of other ancillary fees The significant components of the estimated future cash inflows for MSRs include servicing fees, late fees, prepayment penalties, float earnings and other ancillary fees. Significant cash outflows include the cost of servicing, the cost of financing servicing advances and compensating interest payments. We perform an impairment analysis based on the difference between the carrying amount and fair value after grouping our loans into the applicable strata based on one or more of the predominant risk characteristics of the underlying loans. As a result of the Homeward and ResCap Acquisitions, management has re-evaluated the portfolio and determined the appropriate strata are Agency and Non-Agency. The Agency stratum includes all GSE MSRs. The Non-Agency stratum includes all "private label" primary and master MSRs. &#183; Non-Agency fair value - We estimate fair value using internal models by calculating the present value of expected future cash flows utilizing assumptions that we believe are used by market participants. We derived prepayment speeds and delinquency assumptions from historical experience adjusted for prevailing market conditions. We develop the discount rate internally, and we consider external market-based assumptions in determining the interest rate for the cost of financing advances, the interest rate for float earnings and the cost of servicing. &#183; Agency fair value - We use third-party valuation experts in estimating the fair value of our Agency MSRs. These valuation experts generally utilize: (a) transactions involving instruments with similar collateral and risk profiles, adjusted as necessary based on specific characteristics of the asset or liability being valued; and/or (b) industry-standard modeling, such as a discounted cash flow model in arriving at their estimate of fair value. The prices provided by the valuation experts reflect their observations and assumptions related to market activity, including risk premiums and liquidity adjustments. The models and related assumptions used by the valuation experts are owned and managed by them and, in many cases, the significant inputs used in the valuation techniques are not reasonably available to us. However, we have an understanding of the processes and assumptions used to develop the prices based on our ongoing due diligence, which includes regular discussions with the valuation experts. We believe that the procedures executed by the valuation experts, combined with our internal verification and analytical procedures, provide assurance that the prices used in our consolidated financial statements comply with the accounting guidance for fair value measurements and disclosures and reflect the assumptions that a market participant would use. The more significant assumptions used in the March 31, 2013 valuation of our MSRs carried at amortized cost include: &#183; Prepayment speeds ranging from 2.45% to 25.26% (weighted average of ___%) depending on loan type; &#183; Delinquency rates ranging from 7.43% to 46.55% (weighted average of ___%) depending on loan type; &#183; Interest rate of 1-month LIBOR plus 4% for computing the cost of financing advances; &#183; Interest rate of 1-month LIBOR for computing float earnings; and &#183; Discount rates ranging from 12.23% to 20% (weighted average of 16.91%). We perform an impairment analysis based on the difference between the carrying amount and fair value after grouping our loans into the applicable strata based on one or more of the predominant risk characteristics of the underlying loans. As a result of the Homeward and ResCap Acquisitions, management has re-evaluated the portfolio and determined the appropriate strata are Agency and Non-Agency. The Agency stratum includes all GSE MSRs. The Non-Agency stratum includes all "private label" primary and master MSRs. Fair Value MSRs MSRs carried at fair value are classified within Level 3 of the valuation hierarchy due to the use of third party valuation expert pricing without adjustment. The fair value of these MSRs is within the range of prices provided by the valuation experts, however, a change in the valuation inputs utilized by the valuation expert or a change in the best point price in the range might result in a significantly higher or lower fair value measurement. The key assumptions (generally unobservable inputs) used in the valuation of these MSRs include: &#183; Mortgage prepayment speeds; &#183; Delinquency rates and &#183; Discount rates. The primary assumptions used in the March 31, 2013 valuation include a 13.2% weighted average constant prepayment rate and a discount rate equal to 1-Month LIBOR plus a range of 7.5% to 9.35%. 0.132 0.0245 0.2467 0.1557 0.0663 0.4655 0.1625 0.04 0.0516 0.075 0.0935 <div>The carrying value of receivables generally approximates fair value because of the relatively short period of time between their origination and realization.</div> <div>The carrying value of match funded liabilities and secured borrowings that bear interest at a rate that is adjusted regularly based on a market index approximates fair value. For other match funded or secured borrowings that bear interest at a fixed rate, we determine fair value by discounting the future principal and interest repayments at a market rate commensurate with the risk of the estimated cash flows. We estimate principal repayments of match funded liabilities during the amortization period based on our historical advance collection rates and taking into consideration any plans to refinance the notes. At March 31, 2013, the interest on all borrowings under match funded facilities was based on a variable rate adjusted regularly using a market index and therefore the carrying value approximates fair value. For the SSTL, we used a discount rate of 5.16% and the repayment schedule specified in the loan agreement to determine fair value.</div> 2462531000 -2563247000 -29786000 -440000 -1237000 24000 2100000000 2000000000 1300000000 4700000000 357000000 14700000 21900000 65400000 2515084000 25800000 25700000 42000000 0.49 0.49 900000 400000 650000000 250000000 300000000 450000000 1400000000 100000000 1300000 3300000 One-month Eurodollar rate (1-Month LIBOR) the prime rate in effect on such day the federal funds effective rate in effect on such day plus 0.50 the one-month Eurodollar rate (1-Month LIBOR)], plus a margin of 2.75% and a base rate floor of 2.25 the one month Eurodollar rate, plus a margin of 3.75% with a 1-Month LIBOR floor of 1.25 0.0275 0.0050 0.0275 0.0375 0.0225 0.0125 900000 100000 0.0375 0.0375 1000 8700000 1600000 Match Funded LiabilitiesWe entered into interest rate swaps in order to hedge against the effects of changes in interest rates on our borrowings under our advance funding facilities. These interest rate swap agreements require us to pay a fixed rate and receive a variable interest rate based on one-month LIBOR. At the time that we entered into the agreements, these swaps were designated as hedges for accounting purposes. We also purchased interest rate caps to minimize future interest rate exposure from increases in one-month LIBOR interest rates, as required by the certain of our advance financing arrangements. Loans Held for Sale, at Fair ValueThe mortgage loans held for sale which we carry at fair value are subject to interest rate and price risk from the loan funding date until the date the loan is sold into the secondary market. Generally, the fair value of a loan will decline in value when interest rates increase and will rise in value when interest rates decrease. To mitigate this risk, we enter into forward trades to provide an economic hedge against those changes in fair value on mortgage loans held for sale. Forward trades are primarily used to fix the forward sales price that will be realized upon the sale of mortgage loans into the secondary market. IRLCsIRLCs represent an agreement to purchase loans from a third-party originator or an agreement to extend credit to a mortgage applicant, whereby the interest rate is set prior to funding. The loan commitment binds us (subject to the loan approval process) to fund the loan at the specified rate, regardless of whether interest rates have changed between the commitment date and the loan funding date. As such, outstanding IRLCs are subject to interest rate risk and related price risk during the period from the date of the commitment through the loan funding date or expiration date. The borrower is not obligated to obtain the loan, thus we are subject to fallout risk related to IRLCs, which is realized if approved borrowers choose not to close on the loans within the terms of the IRLCs. Our interest rate exposure on these derivative loan commitments is hedged with derivatives, including forward contracts. We enter into forward contracts with respect to fixed rate loan commitments. MSRs, at Fair ValueThe MSRs which we measure at fair value are subject to interest rate risk as the mortgage loans underlying the MSRs permit the borrowers to prepay the loans. Therefore, the fair value of these MSRs generally tends to diminish in periods of declining interest rates (as prepayments increase) and increase in periods of rising interest rates (as prepayments decrease). Although the level of interest rates is a key driver of prepayment activity, there are other factors that influence prepayments, including home prices, underwriting standards and product characteristics. Effective April 1, 2013, we terminated our hedging program for fair value MSRs. Prior to their termination, we used economic hedges including interest rate swaps, U.S. Treasury futures and forward contracts to minimize the effects of loss in value of these MSRs associated with increased prepayment activity that generally results from declining interest rates. We may enter into economic hedges related to our MSRs in the future.MSR PurchaseIn March 2013, we entered into an interest rate swap to hedge the impact on cash flows of changes in the purchase price to be paid for MSRs acquired from Ally Bank. This purchase was forecasted to occur in stages with the purchase price subject to adjustment based on changes in the 10-year swap rate between the date of the MSR purchase agreement and the date of each closing. We entered into an interest rate swap with a notional amount sufficient to yield changes in the fair value of the interest rate swap in response to changes in the swap rate that were essentially equal to and offsetting to changes in the purchase price of the MSRs. We designated the swap as a hedge for accounting purposes. We completed the transaction in April and terminated the swap agreement. See Note 25 - Subsequent Events for additional information regarding this transaction. 6200000 2300000 6000000 5300000 9900000 16100000 3600000 6100000 3400000 2900000 44500000 4635159 56400000 Relationship with Altisource Under the Services Agreement, Altisource provides various business process outsourcing services, such as valuation services and property preservation and inspection services, among other things. Altisource also provides certain technology products and support services to Ocwen under the Technology Products Services Agreement and the Data Center and Disaster Recovery Services Agreement both of which had an initial term of eight years. In addition, under the Data Access and Services Agreement, Ocwen has agreed to make available to Altisource certain data from Ocwen's servicing portfolio in exchange for a per asset fee. Under the Support Services Agreement, Ocwen and Altisource provide to each other services which are similar to the those that Ocwen and Altisource provided to each other pursuant to the former Transition Services Agreement that expired August 10, 2012. These services are provided in such areas as human resources, vendor management, corporate services, accounting, tax matters, risk management, law and consumer psychology. The Support Services Agreement has an initial term of five years. In connection with the sale to Altisource of the diversified fee-based business acquired in connection with the Homeward Acquisition, Ocwen agreed to extend to August 31, 2025 the terms of the Services Agreement, the Technology Products Services Agreement, the Data Center and Disaster Recovery Services Agreement and the Intellectual Property Agreement with Altisource. In addition, Ocwen agreed to expand the terms of the Services Agreement to apply to the services as they relate to the Homeward servicing platform and further to establish Altisource as the exclusive provider of such services as they relate to the Homeward servicing platform. In addition, Ocwen agreed not to establish similar fee-based businesses (or establish relationships with other companies engaged in the line of similar fee-based businesses) that would directly or indirectly compete with diversified fee-based businesses acquired by Altisource as they relate to the Homeward servicing platform. Certain services provided by Altisource under these contracts are charged to the borrower and/or loan investor. Accordingly, such services, while derived from our loan servicing portfolio, are not reported as expenses by Ocwen. These services include residential property valuation, residential property preservation and inspection services, title services and real estate sales. Our business is currently dependent on many of the services and products provided under these long-term contracts which are effective through 2035. The contracts include renewal provisions. We believe the rates charged under these agreements are market rates as they are materially consistent with one or more of the following: the fees charged by Altisource to other customers for comparable services and the rates Ocwen pays to or observes from other service providers. As disclosed in Note 13 - Other Assets, on March 31, 2013 Ocwen acquired from Altisource its 49% equity interest in Correspondent One. On December 27, 2012, we entered into a senior unsecured term loan facility agreement with Altisource and borrowed $75 million. The proceeds of this loan were used to fund a portion of the Homeward Acquisition. Borrowings under the Unsecured Loan Agreement bear interest at a rate equal to the one-month Eurodollar Rate (1-Month LIBOR) plus 675 basis points with a Eurodollar Rate floor of 150 basis points. In February 2013, we repaid this loan in full. Relationship with Executive Chairman of the Board of Directors Ocwen's Executive Chairman of the Board of Directors, William C. Erbey, also serves as Chairman of the Board of Altisource, HLSS, Altisource Residential Corporation (Residential) and Altisource Asset Management Corporation (AAMC). As a result, he has obligations to Ocwen as well as to Altisource, HLSS, Residential and AAMC. As of March 31, 2013, Mr. Erbey owned or controlled approximately 13% of the common stock of Ocwen, approximately 26% of the common stock of Altisource, approximately 2% of the common stock of HLSS, approximately 28% of the common stock of Residential and approximately 28% of the common stock of AAMC. Relationship with HLSS Ocwen and HLSS Management entered into an agreement to provide to each other certain professional services including valuation analysis of potential MSR acquisitions, treasury management services and other similar services, legal, licensing and regulatory compliance support services, risk management services and other similar services. As disclosed in Note 4 - Asset Sales and Financing, Ocwen has sold to HLSS certain Rights to MSRs and related servicing advances. OLS also entered into a subservicing agreement with HLSS on February 10, 2012 under which it will subservice the MSRs after legal ownership of the MSRs has been transferred to HLSS. 0.26 0.02 0.24 0.24 0.13 P5Y 64400000 52589 29216 162000 162000000 31.79 <div>Litigation Contingencies In September 2006, the Bankruptcy Trustee in Chapter 7 proceedings involving American Business Financial Services, Inc. (ABFS) brought an action against multiple defendants, including Ocwen, in Bankruptcy Court. The action arises out of Debtor-in-Possession financing to ABFS by defendant Greenwich Capital Financial Products, Inc. and the subsequent purchases by Ocwen of MSRs and certain residual interests in mortgage-backed securities previously held by ABFS. The Trustee filed an amended complaint in March 2007 alleging various claims against Ocwen including turnover, fraudulent transfers, accounting, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract, fraud, civil conspiracy and conversion. The Trustee seeks compensatory damages in excess of $100.0 million and punitive damages jointly and severally against all defendants. In April 2008, Ocwen filed an answer denying all charges and a counterclaim for breach of contract, fraud, negligent misrepresentation and indemnification in connection with the MSR purchase transaction. On August 30, 2012, the Bankruptcy Court entered an order granting Ocwen&#8217;s motion for partial summary judgment and denying the Trustee&#8217;s motion for partial summary judgment. This order effectively rejects the bulk of the Trustee&#8217;s damage claims against Ocwen. In light of this order, the parties entered into a definitive written settlement agreement that provides for a final resolution and termination of this matter. This settlement has been approved by the Bankruptcy Court, and Ocwen&#8217;s involvement in the matter has ended. This settlement did not have a material effect on our financial condition, results of operations or cash flows.</div> 100000000 <div>Regulatory Contingencies We are subject to a number of pending federal and state regulatory investigations, examinations, inquiries, requests for information and/or other actions. In July 2010, OLS received two subpoenas from the Federal Housing Finance Agency as conservator for Freddie Mac and Fannie Mae in connection with ten private label mortgage securitization transactions where Freddie Mac and Fannie Mae have invested. The transactions include mortgage loans serviced but not originated by OLS or its affiliates. On November 24, 2010, OLS received a Civil Investigative Demand (CID) from the FTC requesting documents and information regarding various servicing activities. On June 6, 2012, the FTC notified OLS that it had referred this CID to the CFPB. On November 7, 2011, OLS received a CID from the Attorney General&#8217;s Office of the Commonwealth of Massachusetts requesting documents and information regarding certain foreclosures executed in Massachusetts. On January 18, 2012, OLS received a subpoena from the New York Department of Financial Services (NY DFS) requesting documents regarding OLS&#8217; policies, procedures and practices regarding lender-placed or &#8220;force-placed&#8221; insurance which is required to be provided for borrowers who allow their hazard insurance policies to lapse. Separately, on December 5, 2012, we entered into a Consent Order with the NY DFS in which we agreed to the appointment of an independent Monitor to oversee our compliance with the Agreement on Servicing Practices. Ocwen&#8217;s understanding is that NY DFS has selected the firm which will act as the Monitor, and we intend to continue to cooperate with the NY DFS and the Monitor once the NY DFS and the Monitor finalize the terms of the engagement. On August 13, 2012, OLS received a request from the Multi-State Mortgage Committee of the Conference of State Bank Supervisors (MMC) to provide information and data relating to our loan servicing portfolio, including loan count and volume data, loan modifications, fees assessed, delinquencies, short sales, loan-to-value data and rating agency reports. The MMC, along with the CFPB, certain state Attorneys General and other agencies who were involved in the National Mortgage Settlement executed on February 9, 2012 by the five large banks, also requested that we indicate our position on behalf of OLS and Litton on the servicing standards and consumer relief provisions contained in that settlement. We are cooperating with and providing requested information to each of the agencies involved in the foregoing actions. Specifically in response to the request from the MMC, CFPB, state Attorneys General and other agencies, we indicated our willingness to adopt the servicing standards set out in the National Mortgage Settlement with certain caveats. We further indicated our willingness to undertake various consumer assistance commitments in the form of loan modifications and other foreclosure avoidance alternatives. On February 26, 2013, the MMC, CFPB and state Attorneys General requested that we consider a proposal to contribute to a consumer relief fund that would provide cash payments to borrowers foreclosed upon by OLS and various entities we have acquired. We believe the maximum liability under this proposal would be approximately $135.0 million. We do not believe such a contribution from us is warranted under the circumstances and have so notified the requesting parties. Nevertheless, in an attempt to bring finality to this matter, we have entered into discussions with the requesting parties while reserving all our rights and defenses. It is reasonably possible, however, that a resolution may not be concluded in which case legal proceedings could ensue which we would defend vigorously. At this time, the amounts, if any, that ultimately could be incurred with regard to this matter are not reasonably estimable. On November 30, 2012, prior to our completion of the Homeward Acquisition, two CIDs were issued to Homeward by the U.S. Department of Justice, Eastern District of Texas, as part of an investigation of whether Homeward violated the False Claims Act in connection with its participation in HAMP. We were advised by Homeward that documents and information have been provided pursuant to these CIDs. The investigation remains open, and we intend to cooperate in the event there are further informational requests. As part of the ResCap Acquisition, OLS is required to service the ResCap loans in accordance with the requirements of the National Mortgage Settlement, although OLS is not responsible for any payment, penalty or financial obligation, including but not limited to providing Ally&#8217;s share of financial relief to borrowers under that settlement. The Office of Mortgage Settlement Oversight, which is responsible for monitoring compliance with obligations under the National Mortgage Settlement, issued a report on February 14, 2013 confirming that Ally/ResCap have completed its minimum consumer relief obligations. One or more of the foregoing regulatory actions or similar actions in the future against Ocwen, OLS, Litton or Homeward could cause us to incur fines, penalties, settlement costs, damages, legal fees or other charges in material amounts, or undertake remedial actions pursuant to administrative orders or court-issued injunctions, any of which could adversely affect our financial results or incur additional significant costs related to our loan servicing operations. In addition to these matters, Ocwen receives periodic inquires, both formal and informal in nature, from various state and federal agencies as part of those agencies&#8217; oversight of the mortgage servicing sector. Such ongoing inquiries, including those into servicer foreclosure processes, could result in additional actions by state or federal governmental bodies, regulators or the courts that could result in an extension of foreclosure timelines, which may be applicable generally to the servicing industry or to us in particular. In addition, a number of our match funded advance facilities contain provisions that limit the eligibility of advances to be financed based on the length of time that advances are outstanding, and two of our match funded advance facilities have provisions that limit new borrowings if average foreclosure timelines extend beyond a certain time period, either of which, if such provisions applied, could adversely affect liquidity by reducing our average effective advance rate. Increases in the amount of advances and the length of time to recover advances, fines or increases in operating expenses, and decreases in the advance rate and availability of financing for advances could result in increased borrowings, reduced cash and higher interest expense which could negatively impact our liquidity and profitability.</div> 135000000 5715 9.17 -1081000 22108000 <table style="margin-top: 0pt; width: 100%; font: bold 10pt times new roman, times, serif; margin-bottom: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0%;"></td> <td style="text-align: left; width: 8%;"><font style="text-transform: uppercase;">Note 2</font></td> <td style="width: 92%;"><font style="text-transform: uppercase;">Recent Accounting Pronouncements</font></td> </tr> </table> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;"><font style="font: 10pt times new roman, times, serif;"><i>Accounting Standards Update (ASU) 2011-11,</i> <i>(Accounting Standards Codification (ASC) 210, Balance Sheet): Disclosures about Offsetting Assets and Liabilities.</i> The amendments in this ASU require an entity to disclose information that will enable users of an entity&#8217;s financial statements to evaluate the effect or potential effect of netting arrangements on an entity&#8217;s financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments. The disclosures relate to financial instruments and derivative instruments that are either (1) offset on the balance sheet under existing accounting guidance or (2) subject to an enforceable master netting arrangement or similar agreement. The Financial Accounting Standards Board (FASB) subsequently issued <i>ASU 2013-01</i>:<i> Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, </i>on January 31, 2013 to clarify the scope of transactions that are subject to the disclosures about offsetting. ASU 2013-01 clarifies that ordinary trade receivables and payables are not in the scope of ASU 2011-11. Specifically, the amendments clarify that ASU 2011-11 applies to derivatives accounted for in accordance with ASC 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with ASC 210 or ASC 815 or subject to an enforceable master netting arrangement or similar agreement. Retrospective application is required for all comparative periods presented. Our adoption of these standards on January 1, 2013 did not have a material impact on our unaudited interim consolidated financial statements, as the requirements relate to disclosures only.</font></p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;"><i>ASU 2013-02 (ASC 220, Comprehensive Income): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.</i> On February 5, 2013, the FASB issued ASU 2013-02, which requires entities to disclose the following additional information about items reclassified out of accumulated other comprehensive income (AOCI):</p> <table style="margin-top: 10pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;"><font style="font: 10pt symbol;">&#183;</font></td> <td>Changes in AOCI balances by component (e.g., unrealized gains or losses on available-for sale securities or foreign-currency items). Both before-tax and net-of-tax presentations of the information are acceptable as long as an entity presents the income tax benefit or expense attributed to each component of OCI and reclassification adjustments in either the financial statements or the notes to the financial statements.</td> </tr> </table> <table style="margin-top: 10pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;"><font style="font: 10pt symbol;">&#183;</font></td> <td>Significant items reclassified out of AOCI by component either on the face of the income statement or as a separate footnote to the financial statements.</td> </tr> </table> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">The ASU does not change the current GAAP requirements for interim financial statement reporting of comprehensive income. That is, a total for comprehensive income must be reported in condensed interim financial statements in either (1) a single continuous statement or (2) two separate but consecutive statements. However, entities would also need to include information about (1) changes in AOCI balances by component and (2) significant items reclassified out of AOCI in their interim reporting periods. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The amendments in the ASU should be applied prospectively. Our adoption of these standards on January 1, 2013 did not have a material impact on our unaudited interim consolidated financial statements, as the requirements relate to disclosures only. However, we are required to disclose on the face of our statement of operations or in footnotes there to the line items affected by any significant items reclassified from accumulated other comprehensive income to earnings and the before tax amount and the related effect on income tax expense of the reclassification.</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;"><i>ASU 2013-04 (ASC 405, Liabilities): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date, a consensus of the FASB Emerging Issues Task Force (EITF).</i> On February 28, 2013, the FASB issued ASU 2013-04, which is based on a consensus reached by the EITF. The ASU requires entities to &#8220;measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the following:</p> <table style="margin-top: 10pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;">a.</td> <td>The amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors</td> </tr> </table> <table style="margin-top: 10pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;">b.</td> <td>Any additional amount the reporting entity expects to pay on behalf of its co-obligors.&#8221;</td> </tr> </table> <p style="text-indent: 0.25in; margin: 10pt 0px 0pt; font: 10pt times new roman, times, serif;">Required disclosures include a description of the joint-and-several arrangement and the total outstanding amount of the obligation for all joint parties. The ASU permits entities to aggregate disclosures (as opposed to providing separate disclosures for each joint-and-several obligation). These disclosure requirements are incremental to the existing related-party disclosure requirements in ASC 850. The ASU is effective for all prior periods in fiscal years beginning on or after December 15, 2013 (and interim reporting periods within those years). The ASU should be applied retrospectively to obligations with joint-and-several liabilities existing at the beginning of an entity&#8217;s fiscal year of adoption. Entities that elect to use hindsight in measuring their obligations during the comparative periods must disclose that fact. Early adoption is permitted. We are currently evaluating the effect of adopting this standard effective January 1, 2014, but we do not anticipate that our adoption will have a material impact on our consolidated financial statements.</p> <p style="text-indent: 0.25in; margin: 10pt 0px 0pt; font: 10pt times new roman, times, serif;">&#160;</p> <p style="text-indent: 0.25in; margin: 0px 0px 0pt; font: 10pt times new roman, times, serif;"><i>ASU 2013-05 (ASC 830, Foreign Currency Matters): Parent&#8217;s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, a consensus of the FASB Emerging Issues Task Force</i>. On March 4, 2013, the FASB issued ASU 2013-05, which indicates that the entire amount of a cumulative translation adjustment (CTA) related to an entity&#8217;s investment in a foreign entity should be released when there has been a:</p> <table style="margin-top: 10pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;"><font style="font: 10pt symbol;">&#183;</font></td> <td>sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity,</td> </tr> </table> <table style="margin-top: 10pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;"><font style="font: 10pt symbol;">&#183;</font></td> <td>loss of a controlling financial interest in an investment in a foreign entity (i.e., the foreign entity is deconsolidated) or</td> </tr> </table> <table style="margin-top: 10pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;"><font style="font: 10pt symbol;">&#183;</font></td> <td>step acquisition for a foreign entity (i.e., when an entity has changed from applying the equity method for an investment in a foreign entity to consolidating the foreign entity).</td> </tr> </table> <p style="text-indent: 0.25in; margin: 10pt 0px 0px; font: 10pt times new roman, times, serif;">The ASU does not change the requirement to release a pro rata portion of the CTA of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. The ASU is effective for fiscal years (and interim periods within those fiscal years) beginning on or after December 15, 2013. The ASU should be applied prospectively from the beginning of the fiscal year of adoption. We are currently evaluating the effect of adopting this standard effective January 1, 2014, but we do not anticipate that our adoption will have a material impact on our consolidated financial statements.</p> <div> <table style="font: bold 10pt/normal times new roman, times, serif; width: 100%; margin-top: 10pt; margin-bottom: 0px; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 8%; text-align: left;"><font style="text-transform: uppercase;">Note 11</font></td> <td style="width: 92%;"><font style="text-transform: uppercase;">Goodwill</font></td> </tr> </table> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;">The following table provides a summary of activity in the carrying value of goodwill during the three months ended March 31, 2013:</p> <p style="font: 10pt/normal times new roman, times, serif; margin: 10pt 0px 0px; text-indent: 0.25in; font-size-adjust: none; font-stretch: normal;"></p> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="text-align: center; text-indent: -8.65pt; padding-bottom: 1pt; padding-left: 8.65pt;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="text-align: center; font-weight: bold; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2" nowrap="nowrap">ResCap <br />Acquisition</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="text-align: center; font-weight: bold; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2" nowrap="nowrap">Homeward <br />Acquisition</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="text-align: center; font-weight: bold; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2" nowrap="nowrap">Litton<br />Acquisition</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="text-align: center; font-weight: bold; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2" nowrap="nowrap">HomEq <br />Acquisition</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="text-align: center; font-weight: bold; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2" nowrap="nowrap">Total</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="width: 35%; text-align: justify; text-indent: -8.65pt; padding-left: 8.65pt;">Balance at December 31, 2012</td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">&#8212;</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">300,843</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">57,430</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">12,810</td> <td style="width: 1%; text-align: left;"></td> <td style="width: 3%;"></td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">371,083</td> <td style="width: 1%; text-align: left;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left; text-indent: -8.65pt; padding-left: 12.96pt;">Derecognition of goodwill in connection with the sale of a business (1)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">(72,309</td> <td style="text-align: left;">)</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">&#8212;</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">(72,309</td> <td style="text-align: left;">)</td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: justify; text-indent: -8.65pt; padding-bottom: 1pt; padding-left: 12.96pt;">ResCap Acquisition (2)</td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">204,743</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">&#8212;</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;"></td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;">204,743</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: justify; text-indent: -8.65pt; padding-left: 8.65pt;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">204,743</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">228,534</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">57,430</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">12,810</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">503,517</td> <td style="text-align: left;"></td> </tr> <tr style="vertical-align: bottom; 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The effect of our Preferred Shares on diluted EPS is computed using the if-converted method. We assumed no conversion to common shares for the first quarter of 2013 because the effect was anti-dilutive. Prior to the redemption of the 3.25% Convertible Notes in March 2012, we also computed their effect on diluted EPS using the if-converted method. Interest expense and related amortization costs applicable to the Convertible Notes, net of income tax, were added back to net income. We issued 4,635,159 shares of common stock upon conversion of $56.4 million of the Convertible Notes. These stock options were anti-dilutive because their exercise price was greater than the average market price of our stock. Shares that are issuable upon the achievement of certain performance criteria related to OCN's stock price and an annualized rate of return to investors. Initial fair value estimate Measured at fair value on a recurring basis. Measured at fair value on a non-recurring basis. The carrying values at March 31, 2013 and December 31, 2012 are net of valuation allowances of $21.9 million and $14.7 million, respectively. The balances include non-performing subprime single-family residential loans that we do not intend to hold to maturity. The balance at December 31, 2012 includes non-performing mortgage loans with a carrying value of $65.4 million that we acquired in December 2012 and sold to Altisource Residential, LP in February 2013 for an insignificant gain. The balance at March 31, 2013 includes $42.0 million of loans that we were required to repurchase from Ginnie Mae guaranteed securitizations following the ResCap Acquisition in connection with loan modifications and loan resolutions. Financial instruments disclosed, but not carried, at fair value. Includes $59.3 million of accrued expenses attributable to the ResCap Acquisition including $49.0 million of accruals for compensatory fees for foreclosures that may ultimately exceed investor timelines. In February 2013, we repaid this loan in full and wrote off the remaining discount as part of the loss on extinguishment. We repaid this loan in full in February 2013. As part of the HLSS Transactions, we transfer certain Rights to MSRs to HLSS. Because we have not yet transferred legal title to the MSRs, we account for these transfers as financings with the proceeds from the sale of the Rights to MSRs recorded as a financing liability. The financing liability is amortized using the interest method with the servicing income that is remitted to HLSS representing payments of principal and interest. The liability has no contractual maturity but is amortized over the estimated life of transferred Rights to MSRs. The balance of the liability is reduced each month based on the change in the estimated fair value of the transferred rights to MSRs. See Note 4 - Asset Sales and Financing for additional information. We sold MSRs for certain loans to an unrelated third party in December 2012; however, we are required to repurchase the MSRs for any loans that cannot be refinanced by the purchaser under the federal government's Home Affordable Refinance Program (HARP). As a result, the sale is being accounted for as a financing. The financing liability is being amortized using the interest method with the servicing income that is remitted to the purchaser representing payments of principal and interest. Prepayments of the balance on this note may be required if the borrowing base, as defined, falls below the amount of the note outstanding. On March 19, 2013, we extended the Master Repurchase Agreement to March 18, 2014. On February 15, 2013, we entered into a new SSTL facility agreement and borrowed $1.3 billion that was used principally to fund the ResCap Acquisition and repay the balance of the previous SSTL. The loan was issued with an original issue discount of $6.5 million that we are amortizing over the term of the loan. We are required to repay the principal amount of the borrowings in consecutive quarterly installments of $3.3 million. In addition, we are required to use the net cash proceeds (as defined) from any asset sale (as defined) to repay loan principal. Generally, this provision applies to non-operating sales of assets, such as the HLSS Transactions, and generally, net cash proceeds represent the proceeds from the sale of the assets, net of the repayment of any debt secured by a lien on the assets sold. The borrowings are secured by a first priority security interest in substantially all of the assets of Ocwen. Borrowings bear interest, at the election of Ocwen, at a rate per annum equal to either (a) the base rate [the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 0.50% and (iii) the one-month Eurodollar rate (1-Month LIBOR)], plus a margin of 2.75% and a base rate floor of 2.25% or (b) the one month Eurodollar rate, plus a margin of 3.75% with a 1-Month LIBOR floor of 1.25%. On January 25, 2013, we extended the Master Repurchase Agreement maturity date to May 3, 2013. Under this participation agreement, the lender provides financing on an uncommitted basis for up to $100.0 million at the discretion of the lender. The participation agreement allows the lender to acquire a 100% beneficial interest in the underlying mortgage loans. However, the transaction does not qualify for sales accounting treatment as is, therefore, accounted for as a financing. The lender earns the stated interest rate of the underlying mortgage loans while the loans are financed under the participation agreement. In April 2013, we extended the participation agreement maturity date to May 31, 2014. Total net gains (losses) attributable to derivative financial instruments still held at March 31, 2013 and 2012 were $(4.8) million and $(4.3) million, respectively. Includes $393.9 million acquired in the ResCap Acquisition. See Note 3 Business Acquisitions for additional information. Amortization of mortgage servicing rights is reported net of the amortization of servicing liabilities and includes the amount of charges we recognized to increase servicing liability obligations. Includes UPB of $92.5 billion and $79.4 billion at March 31, 2013 and December 31, 2012, respectively, for which the Rights to MSRs have been sold to HLSS. The balances arise from our Servicing business and primarily include reimbursable expenditures due from investors and amounts to be recovered from the custodial accounts of the trustees. See Note 22 - Related Party Transactions for additional information regarding transactions with Altisource and HLSS. On March 29, 2013, we sold the diversified fee-based business acquired in the Homeward Acquisition to Altisource and derecognized the assigned goodwill. See Note 3 - Business Acquisitions for additional information. See Note 3 Business Acquisitions for additional information regarding this transaction. See Note 13 - Other Assets for additional information regarding this transaction. These balances relate to match funded liabilities and other secured borrowings. The balance at March 31, 2013 represents funds we transferred prior to the closing of our acquisition of Genworth Financial Home Equity Access, Inc. on April 1, 2013. See Note 25 - Subsequent Events for additional information regarding this acquisition. The balance at December 31, 2012 represents an earnest money cash deposit we made in connection with the ResCap Acquisition. This deposit was subsequently applied towards the purchase price upon closing of the transaction on February 15, 2013. See Note 3 - Business Acquisitions for additional information. These balances include $25.7 million and $25.8 million of cash collateral held by the counterparties to certain of our derivative agreements at March 31, 2013 and December 31, 2012, respectively. The balance at December 31, 2012 includes an investment of $13.4 million that represents our 49% equity interest in Correspondent One S.A. (Correspondent One), an entity formed with Altisource in March 2011. On March 31, 2013, we acquired the shares of Correspondent One held by Altisource (49% interest) for $12.6 million and acquired the remaining shares held by an unrelated entity for $0.9 million. We accounted for this transaction as a step acquisition and recognized the assets acquired and liabilities assumed at their fair values as of the acquisition date. The acquired net assets were $26.3 million and consisted primarily of cash. We remeasured our previously held investment at fair value and recognized a loss of $0.4 million. We also recognized goodwill of $0.1 million. We began including the accounts of Correspondent One in our consolidated financial statements effective on the date of acquisition and have eliminated our investment in consolidation. Correspondent One facilitates the purchase of conforming and government-guaranteed residential mortgages from approved mortgage originators and resells the mortgages to secondary market investors. See Note 18 - Derivative Financial Instruments for additional information. The 2011-Servicing Advance Revolving Trust 1, 2012-Servicing Advance Revolving Trust 2, 2012-Servicing Advance Revolving Trust 3 and 2012-Homeward DSF Advance Revolving Trust 2012-1 facilities were repaid in February 2013 from the proceeds of a new $1.4 billion bridge facility which has an amortization date of August 14, 2013. The amortization date of our facilities is the date on which the revolving period ends under each advance facility note and repayment of the outstanding balance must begin if the note is not renewed or extended. The maturity date is the date on which all outstanding balances must be repaid. In two advance facilities, there are multiple notes outstanding. For each note, after the amortization date, all collections that represent the repayment of advances pledged to the facility must be applied to reduce the balance of the note outstanding, and any new advances are ineligible to be financed. The maximum borrowing capacity under this facility was reduced from $650 million to $300 million on December 26, 2012. The maximum borrowing capacity under this facility was increased from $250 million to $450 million on December 26, 2012. Borrowing capacity is available to us provided that we have additional eligible collateral to pledge. Collateral may only be pledged to one facility. At March 31, 2013, none of the available borrowing capacity could be used because we had borrowed the maximum amount against the pledged collateral. This agreement has no stated credit limit and lending is determined for each transaction based on the acceptability of the securities presented as collateral. See Note 22 - Related Party Transactions for additional information. The balance represents amounts due to investors in connection with loans we service under servicing and subservicing agreements. During the three months ended March 31, 2013 and 2012, amortization of servicing liabilities exceeded the amount of charges we recognized to increase our servicing liability obligations by $0.1 million and $.0.9 million, respectively. Amortization of mortgage servicing rights is reported net of this amount in the unaudited Consolidated Statement of Operations. We discontinued hedge accounting for this hedging relationship effective July 1, 2011 and began amortizing to earnings the $6.2 million of deferred losses in accumulated other comprehensive income. In September 2012, we repaid the advance facility and wrote-off the remaining $2.3 million of unamortized deferred losses in AOCL. The hedging relationship was terminated when the advance facility was assumed on March 5, 2012 by HLSS. At that time, we wrote-off the $6.0 million of deferred losses in AOCL. See Note 4 Asset Sales and Financing and Note 14 Match Funded Liabilities for additional information. Derivatives are reported at fair value in Receivables, Other assets or in Other liabilities on our unaudited Consolidated Balance Sheets. Monthly settlements on this forward-starting swap begin June 2013. Projected net settlements on the swap for the next twelve months total approximately $5.3 million of payments to the counterparties. This swap was closed out on April 15, 2013 concurrent with the closing of the last stage of the MSR purchase. Includes a gain of $3.4 million recognized during the three months ended March 31, 2012 from the termination of foreign exchange forward contracts. Includes interest expense of $44.5 million and $2.9 million for the three months ended March 31, 2013 and 2012, respectively, related to financing liabilities recorded in connection with the HLSS Transactions. See Note 4 Asset Sales and Financing and Note 15 Other Borrowings for additional information. 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