View Filing Data

Total other comprehensive income, net of income taxes

(3,679)

3,074

Comprehensive income

$ 41,468

$ 22,423

[1]	Net of income tax benefit (expense) of $2.8 million and $0.7 million for the three months ended March 31, 2013 and 2012, respectively.
[2]	Net of income tax benefit (expense) of $(0.2) million and $(2.4) million for the three months ended March 31, 2013 and 2012, respectively.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parentheticals) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Statement Of Other Comprehensive Income [Abstract]
Income tax benefit (expense)	$ 2.8	$ 0.7
Income tax benefit (expense)	$ (0.2)	$ (2.4)

Tax effect of the income statement impact of the reclassification adjustment of accumulated gain (loss) from derivative instruments designated and qualifying as the effective portion of cash flow hedges realized in net income. Also includes reclassification adjustments of an entity's share of an equity investee's deferred hedging gain (loss) realized in net income.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited) - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss, Net of Taxes	Total
Balance at Dec. 31, 2011	$ 1,299	$ 826,121	$ 523,787	$ (7,896)	$ 1,343,311
Balance (in shares) at Dec. 31, 2011	129,899,288
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			19,349		19,349
Conversion of 3.25% Convertible Notes	$ 46	56,364			56,410
Conversion of 3.25% Convertible Notes (in shares)	4,635,159
Exercise of common stock options	$ 3	1,016			1,019
Exercise of common stock options (in shares)	313,028
Equity-based compensation		2,850			2,850
Other comprehensive income, net of income taxes				3,074	3,074
Balance at Mar. 31, 2012	$ 1,348	886,351	543,136	(4,822)	1,426,013
Balance (in shares) at Mar. 31, 2012	134,847,475
Balance at Dec. 31, 2012	$ 1,356	911,942	704,565	(6,441)	$ 1,611,422
Balance (in shares) at Dec. 31, 2012	135,637,932				135,637,932
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			45,147		$ 45,147
Preferred stock dividend ($9.17 per share			(1,485)		(1,485)
Deemed dividend related to beneficial conversion feature of preferred stock			(1,086)		(1,086)
Issuance of employee stock award (in shares)	5,715
Equity-based compensation		1,353			1,353
Other comprehensive income, net of income taxes				(3,679)	(3,679)
Balance at Mar. 31, 2013	$ 1,356	$ 913,295	$ 747,141	$ (10,120)	$ 1,651,672
Balance (in shares) at Mar. 31, 2013	135,643,647				135,643,647

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Statement Of Stockholders' Equity [Abstract]
Conversion of convertible notes		3.25%
Preferred stock dividends per share	$ 9.17

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flows from operating activities
Net income	$ 45,147	$ 19,349
Adjustments to reconcile net income to net cash provided by operating activities
Amortization of mortgage servicing rights	47,883	14,314
Amortization of debt discount	424	745
Amortization of debt issuance costs - senior secured term loans	894	920
Depreciation	4,513	833
Loss on sales of loans	1,081
Realized and unrealized losses on derivative financial instruments, net	5,736	3,262
Loss on extinguishment of debt	17,030
Increase in deferred tax assets, net	(98)	(112)
Origination and purchase of loans held for sale	(2,515,084)
Proceeds from sale and collection of loans held for sale	2,629,152	241
Changes in assets and liabilities:
Decrease in advances and match funded advances	186,420	318,386
Decrease (increase) in receivables and other assets, net	(47,860)	15,055
Increase in servicer liabilities	6,472	2,444
Increase (decrease) in other liabilities	12,511	(6,273)
Other, net	7,720	3,846
Net cash provided by operating activities	401,941	373,010
Cash flows from investing activities
Cash paid to acquire ResCap Servicing Operations (a component of Residential Capital, LLC)	(2,097,821)
Purchase of mortgage servicing rights, net	(971)
Proceeds from sale of advance financing subsidiary and special purpose entity		87,303
Proceeds from sale of match funded advances	713,582
Proceeds from sale of subsidiaries	86,950
Net cash acquired in step acquisition of Correspondent One S.A.	22,108
Distributions of capital from unconsolidated entities	1,300	1,688
Additions to premises and equipment	(4,201)	(10,661)
Other		1,508
Net cash (used in) provided by investing activities	(1,279,053)	79,838
Cash flows from financing activities
Net proceeds from match funded liabilities	450,239	79,707
Net proceeds from other borrowings	3,778,876
Repayment of other borrowings	(2,985,417)	(52,169)
Payment of debt issuance costs - senior secured term loan	(24,048)
Proceeds from sale of mortgage servicing rights accounted for as a financing	100,737	62,495
Redemption of 10.875% Capital Securities		(25)
Exercise of common stock options		1,023
Other		(4,167)
Net cash provided by financing activities	1,320,387	86,864
Net increase in cash	443,275	539,712
Cash at beginning of period	220,130	144,234
Cash at end of period	663,405	683,946
Supplemental non-cash investing and financing activities
Conversion of 3.25% Convertible Notes to common stock		56,410
Fair value of assets acquired
Premises and equipment	(22,398)
Goodwill	(204,743)
Receivables and other assets	(2,989)
Fair value of assets acquired, Total	(2,246,369)
Fair value of liabilities assumed
Accrued expenses and other liabilities	74,340
Total consideration	(2,172,029)
Amount due to seller for purchase price adjustments	(74,208)
Less cash acquired
Advances
Fair value of assets acquired
Other assets	(1,622,348)
Mortgage Servicing Rights
Fair value of assets acquired
Other assets	(393,891)
Cash paid
Fair value of liabilities assumed
Cash paid	(2,097,821)
Cash paid net
Fair value of liabilities assumed
Cash paid	$ (2,097,821)

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Parentheticals)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Statement Of Cash Flows [Abstract]
Conversion of convertible notes		3.25%
Redemption of capital securities	10.875%	10.875%

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Note 1

Summary of Significant Accounting Policies

Organization

Ocwen Financial Corporation (NYSE: OCN) (Ocwen, OCN, “we”, or “us”) 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.

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).

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 “private label”, 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.

On December 27, 2012, Ocwen completed the merger by and among Ocwen, O&H Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Ocwen, Homeward Residential Holdings, Inc. (Homeward Holding) and WL Ross & Co. LLC, a Delaware limited liability company as shareholder representative, pursuant to which O&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.

Basis of Presentation

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.

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.

Principles of Consolidation

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.

Variable Interest Entities

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.

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.

Securitizations and Asset Backed Financing Arrangements

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.

Securitizations of Residential Mortgage Loans. 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 “private label” 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.

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.

Financings of Advances on Loans Serviced for Others. 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.

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.

See Note 8 – Match Funded Advances, Note 12 – Debt Service Accounts and Note 14 – Match Funded Liabilities for additional information.

Reclassification

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.

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.

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 – for securitization investors of $42 thousand and Principal payments received on loans – restricted for securitization investors of $1.0 million to Other. Within the financing activities section we reclassified Repayment of secured borrowings – owed to securitization investors of $(1.7) million to Other.

NOTE 2 RECENT ACCOUNTING PRONOUNCEMENT

3 Months Ended

Mar. 31, 2013

New Accounting Pronouncements and Changes In Accounting Principles [Abstract]

RECENT ACCOUNTING PRONOUNCEMENT

Note 2

Recent Accounting Pronouncements

Accounting Standards Update (ASU) 2011-11, (Accounting Standards Codification (ASC) 210, Balance Sheet): Disclosures about Offsetting Assets and Liabilities. The amendments in this ASU require an entity to disclose information that will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements on an entity’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 ASU 2013-01: Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, 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.

ASU 2013-02 (ASC 220, Comprehensive Income): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. 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):

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.

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.

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.

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). 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 “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:

The amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors

Any additional amount the reporting entity expects to pay on behalf of its co-obligors.”

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’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.

ASU 2013-05 (ASC 830, Foreign Currency Matters): Parent’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. 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’s investment in a foreign entity should be released when there has been a:

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,

loss of a controlling financial interest in an investment in a foreign entity (i.e., the foreign entity is deconsolidated) or

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).

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.

The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Direct Effects of a Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6510796

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6507316

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6801783&loc=d3e22583-107794

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Indirect Effects of a Change in Accounting Principle
-URI http://asc.fasb.org/extlink&oid=6515603

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 270
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.10-01.(b)(6))
-URI http://asc.fasb.org/extlink&oid=6958853&loc=d3e46468-122699

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6801783&loc=d3e22580-107794

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Accounting Change
-URI http://asc.fasb.org/extlink&oid=6503790

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6801783&loc=d3e22499-107794

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Retrospective Application
-URI http://asc.fasb.org/extlink&oid=6523989

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 270
-SubTopic 10
-Section 45
-Paragraph 12
-URI http://asc.fasb.org/extlink&oid=6372559&loc=d3e725-108305

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 270
-SubTopic 10
-Section 45
-Paragraph 13
-URI http://asc.fasb.org/extlink&oid=6372559&loc=d3e765-108305

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 01
-Paragraph b
-Subparagraph 6
-Article 10

Asset Sales and Financing [Abstract]

NOTE 3 BUSINESS ACQUISITIONS

3 Months Ended

Mar. 31, 2013

Business Combinations [Abstract]

BUSINESS ACQUISITIONS

NOTE 3

BUSINESS ACQUISITIONS

We completed the acquisitions of ResCap and Homeward as part of our ongoing strategy to expand our residential servicing business. 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. In a business combination, the initial allocation of the purchase price is considered preliminary and therefore subject to change until the end of the measurement period (up to one year from the acquisition date). Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined business.

The pro forma consolidated results presented below for each business acquisition are not indicative of what our consolidated net earnings would have been had we completed the acquisitions on the dates indicated because of differences in servicing practices and cost structure between Ocwen and the acquiree. In addition, the pro forma consolidated results do not purport to project our combined future results nor do they reflect the expected realization of any cost savings associated with the acquisitions.

The acquisition of ResCap is treated as an asset acquisition for U.S. tax purposes. We expect the opening tax basis for the acquired assets and liabilities to be the fair value as shown in the purchase price allocation tables below. We expect the MSRs and goodwill to be treated as intangible assets acquired in connection with the purchase of a trade or business and as such, amortized over 15 years for U.S. tax purposes. The acquisition of Homeward was treated as a stock purchase for U.S. tax purposes.

Preliminary Purchase Price Allocation

The following table summarizes the fair values of assets acquired and liabilities assumed as part of the ResCap and Homeward Acquisitions:

Purchase Price Allocation	ResCap			Homeward
Cash	$	—		$	79,511
Loans held for sale (1)		—			558,721
Mortgage servicing rights (1)		393,891			358,119
Advances and match funded advances (1)		1,622,348			2,266,882
Deferred tax assets (1)		—			47,346
Premises and equipment (1)		22,398			16,803
Debt service accounts		—			69,287
Investment in unconsolidated entities (1)		—			5,485
Receivables and other assets (1)		2,989			56,886
Match funded liabilities		—			(1,997,459	)
Other borrowings		—			(864,969	)
Accrued bonuses		—			(35,201	)
Checks held for escheat (1)		—			(16,418	)
Other liabilities (1)		(74,340	)		(80,112	)
Total identifiable net assets		1,967,286			464,881
Goodwill (1)		204,743			300,843
Total consideration	$	2,172,029		$	765,724

(1)

Initial fair value estimate

The estimated fair values of the assets acquired and liabilities assumed at the acquisition date, as set forth in the table above, includes some amounts based on preliminary fair value estimates. The following factors led to certain balances having preliminary fair value estimates:

The complex nature of certain acquired assets and liabilities prevented us from completing our valuations and reconciliations;

We engaged a third party specialist to assist in valuing certain assets and liabilities and this work is not yet complete; and

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.

ResCap Acquisition

We completed the ResCap Acquisition on February 15, 2013. We acquired MSRs to “private label”, 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.

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.

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.

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. Ocwen assumed all liabilities related to servicing loans that are guaranteed by Ginnie Mae, whether arising prior to or after the closing date.

Post-Acquisition Results of Operations

The following table presents the revenue and earnings of the ResCap Business operations that are included in our unaudited Consolidated Statement of Operations from the acquisition date of February 15, 2013 through March 31, 2013:

Revenues		$	74,853
Net income		$	14,879

Pro Forma Results of Operations

The following table presents supplemental pro forma information for the three months ended March 31, 2013 and 2012 as if the ResCap Acquisition occurred on January 1, 2012. Pro forma adjustments include:

conforming servicing revenues to the revenue recognition policies followed by Ocwen;

conforming the accounting for MSRs to the valuation and amortization policies of Ocwen;

adjusting interest expense to eliminate the pre-acquisition interest expense of ResCap and to recognize interest expense as if the acquisition-related debt of Ocwen had been outstanding at January 1, 2012; and

	·	reporting acquisition-related charges for professional services related to the acquisition as if they had been incurred in 2012 rather than 2013.

For Three Months Ended March 31:	2013		2012
Revenues	$	529,250	$	303,735
Net income (loss)	$	51,180	$	(6,197	)

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.

Homeward Acquisition

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’s loan origination platform and its diversified fee-based business that includes property valuation, REO management, title, closing and advisory services.

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. Any measurement period adjustments that we determine to be material will be applied retrospectively to the period of acquisition in our consolidated financial statements and, depending on the nature of the adjustments, other periods subsequent to the period of acquisition could also be affected.

On March 29, 2013, Ocwen sold the Homeward diversified fee-based to Altisource Solutions S.à r.l. and Altisource Portfolio Solutions, Inc., wholly-owned subsidiaries of Altisource Portfolio Solutions S.A. (Altisource), for an aggregate purchase price of $87.0 million in cash. Ocwen sold its investment in two subsidiaries of Homeward, Beltline Road Insurance Agency, Inc. and Power Default Services, Inc. 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. In connection with this transaction, Ocwen entered into amendments to certain of its services and intellectual property agreements with Altisource. See Note 22 – Related Party Transactions for a discussion of these amendments.

Pro Forma Results of Operations

The following table presents supplemental pro forma information for the three months ended March 31, 2012 as if the acquisition of Homeward occurred on January 1, 2011. Pro forma adjustments include:

conforming servicing revenues to the revenue recognition policy followed by Ocwen;

conforming the accounting for MSRs to the valuation and amortization policies of Ocwen;

reversing depreciation recognized by Homeward and reporting depreciation based on the estimated fair values and remaining lives of the acquired premises and equipment at the date of acquisition;

adjusting interest expense to eliminate the pre-acquisition interest expense of Homeward and to recognize interest expense as if the acquisition-related debt of Ocwen had been outstanding at January 1, 2011 and

reporting acquisition-related charges for professional services related to the acquisition as if they had been incurred in 2011 rather than 2012.

Revenues		$	277,635
Net income		$	22,928

Other

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 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.

NOTE 4 ASSET SALES AND FINANCING

3 Months Ended

Mar. 31, 2013

ASSET SALES AND FINANCING

Note 4

Asset Sales and Financing

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.

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. See Note 22 – Related Party Transactions for additional information.

The following table provides a summary of the assets and liabilities sold to HLSS in connection with the HLSS Transactions during the three months ended March 31:

	2013		2012
Sale of MSRs accounted for as a financing	$	100,707	$	62,458
Sale of match funded advances		703,206		—
Sale of advance SPEs:
Match funded advances		—		413,374
Debt service account		—		14,786
Prepaid lender fees and debt issuance costs		—		5,422
Other prepaid expenses		—		1,928
Match funded liabilities		—		(358,335	)
Accrued interest payable and other accrued expenses		—		(841	)
Net assets of advance SPEs		—		76,334
Sales price, as adjusted		803,913		138,792
Amount due to HLSS for post-closing adjustments at March 31		10,406		11,006
Cash received	$	814,319	$	149,798

Because we retained legal title to the MSRs, the sales of Rights to MSRs are accounted for as financings. The related advance sales meet the requirements for sale accounting under GAAP. When HLSS acquired advance SPEs from Ocwen, we derecognized the consolidated assets and liabilities of the Advance SPEs at the time of the sale. To the extent that we obtain all third party consents, legal title will transfer to HLSS, at which point we will derecognize the related MSRs. Upon derecognition, any resulting gain or loss will be deferred and amortized over the expected life of the related subservicing agreement. Until such time, we continue to recognize the full amount of servicing revenue and amortization of the MSRs.

NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Note 5

Fair Value of Financial Instruments

Fair value is estimated based on a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs to valuation techniques into three broad levels whereby the highest priority is given to Level 1 inputs and the lowest to Level 3 inputs.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

We classify assets in their entirety based on the lowest level of input that is significant to the fair value measurement.

The carrying amounts and the estimated fair values of our financial instruments and our nonfinancial assets measured at fair value are as follows:

			March 31, 2013						December 31, 2012
	Level		Carrying Value			Fair Value			Carrying Value			Fair Value
Financial assets:
Loans held for sale, at fair value (1)		2	$	295,514		$	295,514		$	426,480		$	426,480
Loans held for sale, at lower of cost or fair value (2)		3		62,615			62,615			82,866			82,866
Advances and match funded advances (3)		3		3,966,255			3,966,255			3,233,707			3,233,707
Receivables, net (3)		3		155,558			155,558			167,459			167,459

Financial liabilities:
Match funded liabilities (3)		3	$	2,982,984		$	2,982,984		$	2,532,745		$	2,533,278
Other borrowings (3)		3		1,987,894			1,989,104			1,096,679			1,101,504

Derivative financial instruments (1):
Interest rate lock commitments (IRLCs)		2	$	4,652		$	4,652		$	5,781		$	5,781
Interest rate swaps		3		(18,758	)		(18,758	)		(10,836	)		(10,836	)
Forward MBS trades		1		(1,108	)		(1,108	)		(1,719	)		(1,719	)
U.S. Treasury futures		1		—			—			(1,258	)		(1,258	)
Interest rate caps		3		123			123			168			168

MSRs, at fair value (1)		3	$	84,534		$	84,534		$	85,213		$	85,213

(1)

Measured at fair value on a recurring basis.

(2)

Measured at fair value on a non-recurring basis.

(3)

Financial instruments disclosed, but not carried, at fair value.

The following tables present a reconciliation of the changes in fair value of Level 3 assets that we measure at fair value on a recurring basis:

	Derivative Financial Instruments			MSRS at Fair Value			Total

Three Months Ended March 31, 2013:
Beginning balance	$	(10,668	)	$	85,213		$	74,545

Purchases, issuances, sales and settlements:
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		310			—			310
		310			—			310

Total realized and unrealized gains and (losses) (1):
Included in Other, net		(1,353	)		(679	)		(2,032	)
Included in Other comprehensive income (loss)		(6,924	)		—			(6,924	)
		(8,277	)		(679	)		(8,956	)

Transfers in and / or out of Level 3		—			—			—
Ending balance	$	(18,635	)	$	84,534		$	65,899

	Derivative Financial Instruments			MSRS at Fair Value		Total
Three Months Ended March 31, 2012:
Beginning balance	$	(16,676	)	$	—	$	(16,676	)

Purchases, issuances, sales and settlements:
Purchases		—			—		—
Issuances		—			—		—
Sales		—			—		—
Settlements		2,357			—		2,357
		2,357			—		2,357

Total realized and unrealized gains and (losses) (2):
Included in Other, net		3,468			—		3,468
Included in Other comprehensive income (loss)		(1,955	)		—		(1,955	)
		1,513			—		1,513

Transfers in and / or out of Level 3		—			—		—
Ending balance	$	(12,806	)	$	—	$	(12,806	)

(1)

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.

The methodologies that we use and key assumptions that we make to estimate the fair value of financial instruments and other assets and liabilities measured at fair value on a recurring or non-recurring basis are described below:

Loans Held for Sale

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.

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.

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. The fair value of these loans is estimated using published forward Ginnie Mae prices. Loans repurchased in connection with loan resolution activities are modified or otherwise remediated through loss mitigation activities or are reclassified to receivables. 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.

Mortgage Servicing Rights

Amortized Cost MSRs

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. 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:

·	Cost of servicing	·	Interest rate used for computing float earnings

·	Discount rate	·	Compensating interest expense

·	Interest rate used for computing the cost of Servicing advances	·	Collection rate of other ancillary fees

The significant components of the estimated future cash inflows for MSRs include servicing fees, late fees, 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. 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.

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.

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. 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:

Prepayment speeds ranging from 2.45% to 24.67% (weighted average of 15.57%) depending on loan type;

Delinquency rates ranging from 6.63% to 46.55% (weighted average of 16.25%) depending on loan type;

Interest rate of 1-month LIBOR plus 4% for computing the cost of financing advances;

Interest rate of 1-month LIBOR for computing float earnings; and

Discount rates ranging from 12.23% to 20% (weighted average of 17.14%).

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:

Mortgage prepayment speeds;

Delinquency rates and

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%.

Advances

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.

Receivables

The carrying value of receivables generally approximates fair value because of the relatively short period of time between their origination and realization.

Borrowings

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.

Derivative Financial Instruments

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.

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

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
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Reference 2: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 825
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 4: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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-SubTopic 10
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Reference 5: http://www.xbrl.org/2003/role/presentationRef
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15B
-Subparagraph a, b
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44A, 44B
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 159
-Paragraph 17-22, 27, 28
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15A
-Subparagraph a-d
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15C, 15D
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 32, 33, 34
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 3, 10, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Mortgage Loans On Real Estate [Abstract]

NOTE 6 LOANS HELD FOR SALE, AT FAIR VALUE

3 Months Ended

Mar. 31, 2013

LOANS HELD FOR SALE, AT FAIR VALUE

Note 6

Loans Held For Sale, at fair value

Loans held for sale, at fair value represent mortgage loans originated or purchased and held until sold to secondary market investors, such as GSEs or other third party investors. The following table summarizes the activity in the balance of loans held for sale during the three months ended March 31, 2013:

Balance at December 31, 2012	$	426,480
Originations and purchase of loans held for sale		2,462,531
Proceeds from sale		(2,563,247	)
Loss on sale of loans		(29,786	)
Decrease in fair value		(440	)
Other		(24	)
Balance at March 31, 2013	$	295,514

The following table summarizes the activity in Gain on loans held for sale, net, during the three months ended March 31:

	2013			2012
Loss on sales of loans (1)	$	(1,081	)	$	—
Changes in fair value of IRLCs		(1,237	)		—
Change in fair value of loans held for sale		(440	)		—
Gain on hedge instruments		10,189			—
Provision for representations and warranties		(512	)		—
Other		(170	)		—
	$	6,749		$	—

(1)

Net of a gain of $28,705 representing the value assigned to MSRs retained on sales of loans.

NOTE 7 ADVANCES

3 Months Ended

Mar. 31, 2013

Advances [Abstract]

ADVANCES

Note 7

Advances

Advances, representing payments made on behalf of borrowers or on foreclosed properties, consisted of the following at the dates indicated:

	March 31, 2013		December 31, 2012
Servicing:
Principal and interest	$	162,341	$	83,617
Taxes and insurance		342,216		51,447
Foreclosures, bankruptcy and other		17,475		41,296
		522,032		176,360
Corporate Items and Other		8,140		8,103
	$	530,172	$	184,463

NOTE 8 MATCH FUNDED ADVANCES

3 Months Ended

Mar. 31, 2013

Match Funded Advances [Abstract]

MATCH FUNDED ADVANCES

NOTE 8

MATCH FUNDED ADVANCES

Match funded advances on residential mortgage loans that we service for others are comprised of the following at the dates indicated:

	March 31, 2013		December 31, 2012
Principal and interest	$	1,716,624	$	1,577,808
Taxes and insurance		1,215,431		1,148,486
Foreclosures, bankruptcy, real estate and other		504,028		322,950
	$	3,436,083	$	3,049,244

NOTE 9 MORTGAGE SERVICING

3 Months Ended

Mar. 31, 2013

Transfers and Servicing [Abstract]

MORTGAGE SERVICING

Note 9

Mortgage Servicing

Mortgage Servicing Rights – Amortization Method

The following table summarizes our activity related to MSRs for the three months ended March 31:

	2013			2012
Balance at December 31, 2012	$	676,712		$	293,152
Additions recognized in connection with purchase transactions (1)		394,862			—
Additions recognized on sale of residential mortgage loans		28,705			—
Servicing transfers, adjustments and other		(124	)		(204	)
Amortization (2)		(47,987	)		(15,232	)
Balance at March 31, 2013	$	1,052,168		$	277,716
Estimated fair value at March 31	$	1,288,732		$	316,078

(1)

Includes $393.9 million acquired in the ResCap Acquisition. See Note 3 – Business Acquisitions for additional information.

(2)

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.

As disclosed in Note 4 – Asset Sales and Financing, we sold certain Rights to MSRs during 2012 and in the first quarter of 2013 as part of the HLSS Transactions. The carrying value of the related MSRs which have not been derecognized at March 31, 2013 was $357.0 million.

Mortgage Servicing Rights—Fair Value Measurement Method

This portfolio comprises servicing rights for which we elected the fair value option and includes prime mortgage loans that were acquired by Homeward through asset or flow purchases or retained on loans originated and subsequently sold for which we hedged the related market risks. The following table summarizes our activity related to our fair value MSRs for the three months ended March 31, 2013:

Balance at December 31, 2012	$	85,213
Changes in fair value:
Due to changes in valuation assumptions		4,650
Realization of cash flows and other changes		(5,329	)
Balance at March 31, 2013	$	84,534

Because the mortgages underlying these MSRs permit the borrowers to prepay the loans, the value of the 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). The following table summarizes the estimated change in the fair value of our MSRs as of March 31, 2013 given hypothetical instantaneous parallel shifts in the yield curve:

	Adverse change in fair value
	10%			20%
Weighted average prepayment speeds	$	(5,164	)	$	(9,912	)
Discount rate (Option-adjusted spread)	$	(2,804	)	$	(5,444	)

The sensitivity analysis measures the potential impact on fair values based on hypothetical changes (increases and decreases) in interest rates.

Servicing Revenue

The following table presents the components of servicing and subservicing fees for the three months ended March 31:

	2013		2012
Loan servicing and subservicing fees	$	269,022	$	112,589
Home Affordable Modification Program (HAMP) fees		40,147		12,684
Late charges		25,896		18,845
Loan collection fees		6,382		3,339
Float earnings		1,680		787
Other		26,182		6,859
	$	369,309	$	155,103

Portfolio of Assets Serviced

The following table presents the composition of our servicing and subservicing portfolios by type of property serviced as measured by UPB. The servicing portfolio represents loans for which we own the MSRs while subservicing represents all other loans.

	Residential		Commercial		Total
UPB at March 31, 2013
Servicing (1)	$	273,970,522	$	—	$	273,970,522
Subservicing		195,484,010		392,584		195,876,594
	$	469,454,532	$	392,584	$	469,847,116

UPB at December 31, 2012
Servicing (1)	$	175,762,161	$	—	$	175,762,161
Subservicing		27,903,555		401,031		28,304,586
	$	203,665,716	$	401,031	$	204,066,747

(1)

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.

Residential assets serviced consist principally of residential mortgage loans, but also include foreclosed real estate. Residential assets serviced also include small-balance commercial assets with a UPB of $2.0 billion and $2.1 billion at March 31, 2013 and December 31, 2012, respectively, that are managed using the REALServicing™ application. Commercial assets consist of large-balance foreclosed real estate. Assets serviced for others are not included on our unaudited Consolidated Balance Sheet.

Custodial accounts, which hold funds representing collections of principal and interest that we receive from borrowers, are held in escrow by an unaffiliated bank and are excluded from our unaudited Consolidated Balance Sheet. Custodial accounts amounted to $4.7 billion and $1.3 billion at March 31, 2013 and December 31, 2012, respectively.

The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 860
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-Section 50
-Paragraph 3
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
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Reference 8: http://www.xbrl.org/2003/role/presentationRef
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-Topic 860
-SubTopic 10
-Section 50
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
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-Name FASB Staff Position (FSP)
-Number FAS140-4/FIN46(R)-8
-Paragraph B1-B12
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 140
-Paragraph 17
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Staff Position (FSP)
-Number FAS140-4/FIN46(R)-8
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

NOTE 10 RECEIVABLE

3 Months Ended

Mar. 31, 2013

Receivables [Abstract]

RECEIVABLES

Note 10

Receivables

Receivables consisted of the following:

March 31, 2013	Receivables		Allowance for Losses			Net
Servicing (1)	$	74,820	$	(2,024	)	$	72,796
Income taxes receivable		52,593		—			52,593
Due from related parties (2)		28,048		—			28,048
Other		4,117		(1,996	)		2,121
	$	159,578	$	(4,020	)	$	155,558

December 31, 2012	Receivables		Allowance for Losses			Net
Servicing (1)	$	84,870	$	(1,647	)	$	83,223
Income taxes receivable		55,292		—			55,292
Due from related parties (2)		12,361		—			12,361
Other		18,577		(1,994	)		16,583
	$	171,100	$	(3,641	)	$	167,459

(1)

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.

(2)

See Note 22 – Related Party Transactions for additional information regarding transactions with Altisource and HLSS.

Receivable balances are evaluated individually for collectibility. The change in the allowance for credit losses for the three months ended March 31, 2013 and 2012 and the balance of the related receivables at those dates were as follows:

	March 31, 2013		March 31, 2012
Allowance for credit losses balance at beginning of the period	$	1,994	$	6,281
Charge offs		—		—
Provision		—		455
Other		2		(19	)
Allowance for credit losses balance at end of the period	$	1,996	$	6,717

Receivables balance	$	4,117	$	8,416

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=7512638&loc=d3e5066-111524

Reference 2: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
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-Paragraph 1
-Subparagraph (SX 210.5-02.3,4)
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 4: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 5: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 01-6
-Paragraph 13
-Subparagraph d
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph 3, 4
-Article 5

Reference 8: http://www.xbrl.org/2003/role/presentationRef
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-Name Regulation S-X (SX)
-Number 210
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph k
-Article 4

NOTE 11 GOODWILL

3 Months Ended

Mar. 31, 2013

Goodwill [Abstract]

GOODWILL

Note 11

Goodwill

The following table provides a summary of activity in the carrying value of goodwill during the three months ended March 31, 2013:

	ResCap Acquisition		Homeward Acquisition			Litton Acquisition		HomEq Acquisition		Total
Balance at December 31, 2012	$	—	$	300,843		$	57,430	$	12,810	$	371,083
Derecognition of goodwill in connection with the sale of a business (1)		—		(72,309	)		—		—		(72,309	)
ResCap Acquisition (2)		204,743		—			—		—		204,743
		204,743		228,534			57,430		12,810		503,517
Step acquisition - Correspondent One (3)		—		—			—		—		100
Balance at March 31, 2013	$	204,743	$	228,534		$	57,430	$	12,810	$	503,617

(1)

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.

(2)

See Note 3 – Business Acquisitions for additional information regarding this transaction.

(3)

See Note 13 – Other Assets for additional information regarding this transaction.

In the ResCap Acquisition, $76.0 million of the recognized goodwill is assigned to the Servicing segment and $128.8 million is assigned to the diversified fee-based business which is included in Corporate Items and Other. On April 12, 2013, we sold the diversified fee-based business to Altisource and derecognized the assigned goodwill. See Note 25 – Subsequent Events for additional information.

For Homeward, $108.1 million of the remaining goodwill is assigned to the Servicing segment and $120.4 million is assigned to the Lending segment. Subsequent to the initial assignment and prior to the sale to Altisource, $4.7 million of the purchase price allocated to the diversified fee-based business was reallocated to Servicing and Lending. For Litton and HomEq, the entire balance of goodwill pertains to the Servicing segment.

NOTE 12 DEBT SERVICE ACCOUNTS

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

DEBT SERVICE ACCOUNTS

Note 12

Debt Service Accounts

Under our advance funding facilities, we are contractually required to remit collections on pledged advances to the trustee within two days of receipt. The collected funds are not applied to reduce the related match funded debt until the payment dates specified in the indenture. The balances also include amounts that have been set aside from the proceeds of our match funded advance facilities to provide for possible shortfalls in the funds available to pay certain expenses and interest. These funds are held in interest earning accounts in the name of the SPE created in connection with the match funded financing facility. The balance of such debt service accounts at March 31, 2013 and December 31, 2012 was $134.2 million and $88.7 million, respectively.

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

Secured and Unsecured Debt Other [Abstract]

NOTE 13 OTHER ASSETS

3 Months Ended

Mar. 31, 2013

Other Assets [Abstract]

OTHER ASSETS

Note 13

Other Assets

Other assets consisted of the following:

	March 31, 2013		December 31, 2012
Loans held for sale, at lower of cost or fair value (1)	$	62,615	$	82,866
Prepaid lender fees and debt issuance costs, net (2)		37,123		14,389
Acquisition deposits (3)		31,149		57,000
Interest earning collateral deposits (4)		30,648		31,710
Prepaid income taxes		23,112		23,112
Investment in unconsolidated entities (5)		12,353		25,187
Real estate, net		8,533		6,205
Derivatives, at fair value (6)		6,646		10,795
Prepaid expenses and other		26,628		21,414
	$	238,807	$	272,678

(1)

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.

(2)

These balances relate to match funded liabilities and other secured borrowings.

(3)

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.

(4)

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.

(5)

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. As disclosed in Note 3 – Business Acquisitions, we increased our ownership to 100% on March 31, 2013. Effective on that date, we began including the accounts of Correspondent One in our consolidated financial statements and have eliminated our current investment in consolidation.

(6)

See Note 18 – Derivative Financial Instruments for additional information.

NOTE 14 MATCH FUNDED LIABILITIES

3 Months Ended

Mar. 31, 2013

Match Funded Liabilities [Abstract]

MATCH FUNDED LIABILITIES

Note 14

Match Funded Liabilities

Match funded liabilities are comprised of the following at the dates indicated:

				Available		Balance Outstanding
Borrowing Type	Interest Rate	Maturity (1)	Amortization Date (1)	Borrowing Capacity (2)		March 31, 2013		December 31, 2012
2011-Servicer Advance Revolving Trust 1 (3)	2.23%	May 2043	May 2013		—		—	$	325,000
2011-Servicer Advance Revolving Trust 1 (3)	3.37 – 5.92%	May 2043	May 2013		—		—		525,000
2012-Servicing Advance Revolving Trust 2 (3)	3.27 – 6.90%	Sep. 2043	Sept. 2013		—		—		250,000
2012-Servicing Advance Revolving Trust 3 (3)	2.98%	Mar. 2043	Mar. 2013		—		—		248,999
2012-Servicing Advance Revolving Trust 3 (3)	3.72 – 7.04%	Mar. 2044	Mar. 2014		—		—		299,278
Total fixed rate					—		—		1,648,277
Advance Receivable Backed Notes (4)	1ML + 285 bps	Apr. 2015	Apr. 2014		125,003		174,997		205,016
Advance Receivable Backed Notes Series 2012-ADV1 (5)	CP rate + 225 or 335 bps	Dec. 2043	Dec. 2013		258,172		191,828		232,712
Advance Receivable Backed Notes Series 2012-ADV1	1ML + 250 bps	June 2016	June 2014		21,391		178,609		94,095
Advance Receivable Backed Note	1ML + 300 bps	Dec. 2015	Dec. 2014		2,392		47,608		49,138
2011-Servicing Advance Revolving Trust 1 (3)	1ML + 300 bps	May 2043	May 2013		—		—		204,633
2012-Servicing Advance Revolving Trust 2 (3)	1ML + 315 bps	Sep. 2043	Sept. 2013		—		—		22,003
2012-Servicing Advance Revolving Trust 3 (3)	1ML + 300 bps – 675 bps	Mar. 2044	Mar. 2014		—		—		40,626
2012-Homeward Agency Advance Funding Trust 2012-1	1ML + 300 bps	Sept. 2013	Sept. 2013		4,665		20,335		16,094
2012-Homeward DSF Advance Revolving Trust 2012-1 (3)	1ML + 450 bps	Feb. 2013	Feb. 2013		—		—		20,151
Homeward Residential Bridge Loan Trust – 2013 Series-Bridge-VF1 and VF2 (3)	1ML + 150 bps	Aug. 2043	Aug. 2013		246,752		1,153,248		—
Ocwen Servicer Advance Receivables Trust – Series 2013-VF1 Class A, B, C and D Notes	1ML + 150 – 525 bps	Feb. 2044	Feb. 2014		318,081		881,919		—
Ocwen Servicer Advance Receivables Trust II – Series 2013-VF1 Class A, B, C and D Notes	1ML + 287.5 bps	Feb. 2044	Feb. 2014		15,560		334,440		—
Total variable rate					992,016		2,982,984		884,468
				$	992,016	$	2,982,984	$	2,532,745

(1)

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.

(2)

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.

(3)

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.

(4)

The maximum borrowing capacity under this facility was reduced from $650 million to $300 million on December 26, 2012.

(5)

The maximum borrowing capacity under this facility was increased from $250 million to $450 million on December 26, 2012.

(6)

We entered into these facilities in connection with the ResCap Acquisition (See Note 3 – Business Acquisitions).

NOTE 15 OTHER BORROWINGS

3 Months Ended

Mar. 31, 2013

OTHER BORROWINGS

Note 15

Other Borrowings

Lines of credit and other secured and unsecured borrowings are comprised of the following at the dates indicated:


				Available		Balance Outstanding
Borrowings	Collateral	Interest Rate	Maturity	Borrowing Capacity		March 31, 2013			December 31, 2012
Servicing:
		1ML + 550 bps with a LIBOR floor of 150 bps
SSTL (1)	(1)	(1)	Sept. 2016	$	—	$	—		$	314,229
SSTL (2)	(2)	(2)	Feb. 2018		—		1,300,000			—

Senior unsecured term loan (3)		1-Month Euro-dollar rate + 675 bps with a Eurodollar floor of 150 bps	Mar. 2017		—		—			75,000
Financing liability – MSRs pledged (4)	MSRs (4)	(4)	(4)		—		393,776			303,705
Financing liability – MSRs pledged (5)	MSRs (5)	(5)	(5)		—		1,890			2,603
Promissory note (6)	MSRs	1ML + 350 bps	May 2017		—		18,467			18,466
					—		1,714,133			714,003

Lending:
Master repurchase agreement (7)	Loans held for sale (LHFS)	1ML + 175 bps	Mar. 2014		194,788		105,212			88,122
Participation agreement (8)	LHFS	N/A	Apr. 2013		—		50,682			58,938
Master repurchase agreement (9)	LHFS	1ML + 200 bps	May 2013		195,996		54,004			133,995
Master repurchase agreement	LHFS	1ML + 200 bps	Jul. 2013		232,392		67,608			107,020
					623,176		277,506			388,075

Corporate Items and Other
Securities sold under an agreement to repurchase (10)	Ocwen Real Estate Asset Liquidating Trust 2007-1 Notes	Class A-2 notes: 1ML + 200 bps; Class A-3 notes: 1ML + 300 bps	Monthly		—		2,592			2,833
					623,176		1,994,231			1,104,911

Discount (1)(2)					—		(6,337	)		(8,232	)
				$	623,176	$	1,987,894		$	1,096,679

(1)

In February 2013, we repaid this loan in full and wrote off the remaining discount as part of the loss on extinguishment.

(2)

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%.

(3)

We repaid this loan in full in February 2013.

(4)

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.

(5)

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.

(6)

Prepayments of the balance on this note may be required if the borrowing base, as defined, falls below the amount of the note outstanding.

(7)

On March 19, 2013, we extended the Master Repurchase Agreement to March 18, 2014.

(8)

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.

(9)

On January 25, 2013, we extended the Master Repurchase Agreement maturity date to May 3, 2013.

(10)

This agreement has no stated credit limit and lending is determined for each transaction based on the acceptability of the securities presented as collateral.

NOTE 16 OTHER LIABILITIES

3 Months Ended

Mar. 31, 2013

Other Liabilities [Abstract]

OTHER LIABILITIES

Note 16

Other Liabilities

Other liabilities were comprised of the following:

	March 31, 2013		December 31, 2012
Accrued expenses (1)	$	174,645	$	106,376
Amount due seller for purchase price adjustments – ResCap Acquisition		74,208		—
Due to related parties (2)		47,884		45,034
Checks held for escheat		31,645		33,225
Payable to servicing and subservicing investors (3)		24,023		9,973
Liability for selected tax items		22,338		22,702
Derivatives, at fair value (4)		21,863		18,658
Servicing liabilities (5)		9,726		9,830
Accrued interest payable		6,978		5,410
Other		57,697		26,456
	$	471,007	$	277,664

(1)

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.

(2)

See Note 22 – Related Party Transactions for additional information.

(3)

The balance represents amounts due to investors in connection with loans we service under servicing and subservicing agreements.

(4)

See Note 18 – Derivative Financial Instruments for additional information.

(5)

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.

NOTE 17 MEZZANINE EQUITY

3 Months Ended

Mar. 31, 2013

Equity [Abstract]

MEZZANINE EQUITY

Note 17

Mezzanine Equity

Preferred Stock

On December 27, 2012, we issued 162,000 shares of Series A Perpetual Convertible Preferred Stock (the Preferred Shares) having a par value of $0.01 per share and paying dividends at a rate of 3.75% on the liquidation preference of $1,000 per share. The dividends are payable quarterly at the end of each calendar quarter.

The Preferred Shares are accounted for as equity and are classified as “mezzanine” equity in the unaudited Consolidated Balance Sheets. The conversion option of the Preferred Shares represents a Beneficial Conversion Feature (BCF) with an intrinsic value of $8.7 million which we accounted for as a discount on the Preferred Shares with an offsetting increase in additional paid in capital upon issuance. The BCF will be amortizing through the second anniversary of the issue date, the first date at which we can redeem the Preferred Shares.

We amortize the BCF discount on the Preferred Shares as a deemed dividend with an offsetting reduction in retained earnings. As of March 31, 2013, we have accrued the mandatory and cumulative dividends payable of $1.6 million.

The carrying value of our Preferred Shares reflects the following:

Initial issuance price on December 27, 2012	$	162,000
Discount for beneficial conversion feature		(8,688	)
Accretion of BCF discount (Deemed dividend)		60
Carrying value at December 31, 2012		153,372
Accretion of discount (Deemed dividend)		1,086
Carrying value at March 31, 2013	$	154,458

NOTE 18 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Mar. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Note 18

Derivative Financial Instruments and Hedging Activities

Because many of our current derivative agreements are not exchange-traded, we are exposed to credit loss in the event of nonperformance by the counterparty to the agreements. We control this risk through credit monitoring procedures including financial analysis, dollar limits and other monitoring procedures. The notional amount of our contracts does not represent our exposure to credit loss.

The following table summarizes the changes in the notional balance of our holdings of derivatives during the three months ended March 31, 2013:

	IRLCs			U.S. Treasury Futures			Forward MBS Trades			Interest Rate Caps			Interest Rate Swaps

Balance at December 31, 2012	$	1,112,519		$	109,000		$	1,638,979		$	1,025,000		$	1,495,955
Additions		1,468,218			85,000			4,479,506			—			1,280,000
Amortization		(227,171	)		—			—			(12,000	)		—
Maturities		(1,651,514	)		—			(2,940,387	)		—			(232,174	)
Terminations		(84,778	)		(194,000	)		(2,471,538	)		—			(105,000	)
Balance at March 31, 2013	$	617,274		$	—		$	706,560		$	1,013,000		$	2,438,781

Fair value of net derivative assets (liabilities) at:
March 31, 2013	$	4,652		$	—		$	(1,108	)	$	123		$	(18,758	)
December 31, 2012	$	5,781		$	(1,258	)	$	(1,719	)	$	168		$	(10,836	)

Maturity		Apr. 2013 – Jun. 2013			—			Mar. 2013 – May 2013			Feb. 2015 – May 2016			Mar. 2013 – May 2027

Interest Rate Management

Match Funded Liabilities

We 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 Value

The 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.

IRLCs

IRLCs 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 Value

The 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.

MSR Purchase

In 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 at the same time. See Note 25 – Subsequent Events for additional information regarding this transaction.

The following summarizes our use of derivatives at March 31, 2013 and the gains (losses) on those derivatives for the three months then ended. The table also indicates whether or not each derivative was designated as a hedge for accounting purposes at March 31, 2013:

Purpose	Expiration Date		Notional Amount		Fair Value (1)			Gains / (Losses)			Consolidated Statement of Operations Caption
*Interest rate risk of borrowings*
Interest rate swaps
Not designated as qualifying hedges:
Hedge the effects of a change in 1ML on borrowing under an advance funding facility (2)		2013	$	250,000	$	(1,569	)	$	1,143		Other, net
Hedge the effects of a change in the lender’s CP rate and 1ML on borrowing under an advance funding facility (3)		2013		297,180		(1,917	)		1,028		Other, net
Total not designated as hedges				547,180		(3,486	)		2,171

Designated as qualifying hedges:
Hedge the effects of changes in 1ML or the lenders’ CP rate on advance funding facilities (4)		2015		201,892		(7,801	)		(55	)	AOCL
Hedge the effects of changes in 1ML or the lenders’ CP rate on advance funding facilities (5)		2015		217,209		(1,915	)		285		AOCL
Total designated as hedges				419,101		(9,716	)		230
Total swaps				966,281		(13,202	)		2,401

Interest rate caps
Not designated as hedges:
Hedge the effects of changes in 1ML on advance funding facilities		2015-2016		1,013,000		123			46		Other, net
Total hedges of debt				1,979,281		(13,079	)		2,447

*Interest rate risk of MSRs*
Not designated as qualifying hedges:
Interest rate swaps		2014-2027		222,500		1,597			(2,480	)	Other net; Servicing and origination
U.S. Treasury futures		—		—		—			(1,149	)	Other, net
Forward MBS trades		—		—		—			(2,667	)	Other, net
Total hedges of MSRs				222,500		1,597			(6,296	)

*Risk of change in purchase price of MSRs*
Designated as a qualifying hedge:
Interest rate swap (6)		2013		1,250,000		(7,153	)		(7,153	)	AOCL

*Interest rate risk of mortgage loans held for sale and IRLCs*
Not designated as qualifying hedges:
Forward MBS trades		2013		706,560		(1,108	)		10,189		Loss on loans held for sale, net

*IRLCs*		2013		617,274		4,652			(1,237	)	Loss on loans held for sale, net
Total derivatives			$	4,775,615	$	(15,091	)	$	(2,050	)

(1)

Derivatives are reported at fair value in Receivables, Other assets or in Other liabilities on our unaudited Consolidated Balance Sheets.

(2)

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.

(3)

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.

(4)

Monthly settlements on this forward-starting swap begin June 2013.

(5)

Projected net settlements on the swap for the next twelve months total approximately $5.3 million of payments to the counterparties.

(6)

This swap was closed out on April 15, 2013 concurrent with the closing of the last stage of the MSR purchase.

Included in AOCL at March 31, 2013 and December 31, 2012, respectively, were $16.1 million and $9.9 million of deferred unrealized losses, before taxes of $6.1 million and $3.6 million, respectively, on the interest rate swaps that we designated as cash flow hedges. The change in deferred unrealized losses on cash flow hedges includes $6.9 million of losses recognized during the three months ended March 31, 2013, net of $0.7 million of losses reclassified to Other, net, because of the ineffectiveness of certain of the hedges. The statements of operations include the following related to derivative financial instruments for the three months ended March 31:

	2013			2012
Servicing and origination expense
Gains on economic hedges	$	1,000		$	—
Loss on loans held for resale, net
Gains (losses) on economic hedges		8,952			—
Other, net
Gains (losses) on economic hedges (1)		(5,079	)		3,405
Ineffectiveness of cash flow hedges		(657	)		63
Write-off of losses in AOCL for a discontinued hedge relationship		—			(772	)
Write-off of losses in AOCL for hedge of a financing facility assumed by HLSS (See Note 4 – Asset Sales and Financing)		—			(5,958	)
	$	4,216		$	(3,262	)

(1)

Includes a gain of $3.4 million recognized during the three months ended March 31, 2012 from the termination of foreign exchange forward contracts.

The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items.

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Earnings Per Share, Basic and Diluted [Abstract]

NOTE 19 INTEREST EXPENSE

3 Months Ended

Mar. 31, 2013

Interest Expense [Abstract]

INTEREST EXPENSE

Note 19

Interest Expense

The following table presents the components of interest expense:

Three Months Ended March 31	2013		2012
Match funded liabilities	$	30,351	$	31,115
Other borrowings (1)		60,523		14,222
Debt securities:
3.25% Convertible Notes		—		153
10.875% Capital Trust Securities		—		710
Other		2,542		724
	$	93,416	$	46,924

(1)

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.

NOTE 20 BASIC AND DILUTED EARNINGS PER SHARE (EPS)

3 Months Ended

Mar. 31, 2013

BASIC AND DILUTED EARNINGS PER SHARE (EPS)

Note 20

Basic and Diluted Earnings Per Share (EPS)

Basic EPS excludes common stock equivalents and is calculated by dividing net income attributable to Ocwen common stockholders by the weighted average number of common shares outstanding during the year. We calculate diluted EPS by dividing net income attributable to Ocwen, as adjusted to add back preferred stock dividends and interest expense net of income tax on the Convertible Notes, by the weighted average number of common shares outstanding including the potential dilutive common shares related to outstanding stock options, restricted stock awards, the Preferred Shares and the Convertible Notes. The following is a reconciliation of the calculation of basic EPS to diluted EPS:

Three Months Ended March 31	2013		2012
Basic EPS:
Net income attributable to Ocwen common stockholders	$	42,576	$	19,349

Weighted average shares of common stock		135,638,567		130,649,595

Basic EPS	$	0.31	$	0.15

Diluted EPS:
Net income attributable to Ocwen common stockholders	$	42,576	$	19,349
Preferred stock dividends (1)		—		—
Interest expense on Convertible Notes, net of income tax (2)		—		99
Adjusted net income attributable to Ocwen	$	42,576	$	19,448

Weighted average shares of common stock		135,638,567		130,649,595
Effect of dilutive elements:
Preferred Shares (1)		—		—
Convertible Notes (2)		—		4,057,736
Stock options		3,902,390		3,337,571
Common stock awards		18,200		1,368
Dilutive weighted average shares of common stock		139,559,157		138,046,270

Diluted EPS	$	0.31	$	0.14

Stock options excluded from the computation of diluted EPS:
Anti-dilutive(3)		—		151,250
Market-based(4)		1,535,000		558,750

(1)

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.

(2)

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.

(3)

These stock options were anti-dilutive because their exercise price was greater than the average market price of our stock.

(4)

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.

NOTE 21 BUSINESS SEGMENT REPORTING

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

BUSINESS SEGMENT REPORTING

Note 21

Business Segment Reporting

Our business segments reflect the internal reporting that we use to evaluate operating performance of services and to assess the allocation of our resources. A brief description of our current business segments is as follows:

Servicing. This segment is primarily comprised of our core residential servicing business. We provide residential and commercial mortgage loan servicing, special servicing and asset management services. We earn fees for providing these services to owners of the mortgage loans and foreclosed real estate. In most cases, we provide these services either because we purchased the MSRs from the owner of the mortgage, retained the MSRs on the sale of residential mortgage loans or because we entered into a subservicing or special servicing agreement with the entity that owns the MSR. Our residential servicing portfolio includes 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.

Lending. 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.

Corporate Items and Other. 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.

We allocate interest income and expense to each business segment for funds raised or for funding of investments made, including interest earned on cash balances and short-term investments and interest incurred on corporate debt. We also allocate expenses generated by corporate support services to each business segment.

Financial information for our segments is as follows:

	Servicing			Lending			Corporate Items and Other			Corporate Eliminations			Business Segments Consolidated
Results of Operations

Three Months Ended March 31, 2013:

Revenue	$	376,084		$	13,908		$	16,712		$	(45	)	$	406,659
Operating expenses (1)		211,505			11,098			20,968			(45	)		243,526
Income (loss) from operations		164,579			2,810			(4,256	)		—			163,133
Other income (expense), net:
Interest income		(614	)		4,780			1,019			—			5,185
Interest expense (1)		(90,460	)		(2,829	)		(127	)		—			(93,416	)
Other		(26,085	)		267			2,251			—			(23,567	)
Other income (expense), net		(117,159	)		2,218			3,143			—			(111,798	)
Income (loss) before income taxes	$	47,420		$	5,028		$	(1,113	)	$	—		$	51,335

Three Months Ended March 31, 2012:

Revenue	$	164,192		$	—		$	658		$	(304	)	$	164,546
Operating expenses (1)		82,879			—			3,395			(147	)		86,127
Income (loss) from operations		81,313			—			(2,737	)		(157	)		78,419
Other income (expense), net:
Interest income		—			—			2,312			—			2,312
Interest expense (1)		(46,526	)		—			(398	)		—			(46,924	)
Other		(310	)		—			(3,535	)		157			(3,688	)
Other income (expense), net		(46,836	)		—			(1,621	)		157			(48,300	)
Income (loss) before income taxes	$	34,477		$	—		$	(4,358	)	$	—		$	30,119

Total Assets
March 31, 2013	$	5,713,500		$	430,915		$	1,103,600		$	—		$	7,248,015

December 31, 2012	$	4,461,755		$	551,733		$	658,394		$	—		$	5,671,882

March 31, 2012	$	3,530,184		$	—		$	964,327		$	—		$	4,494,511

(1)

Depreciation and amortization expense are as follows:

	Servicing		Lending		Corporate Items and Other		Business Segments Consolidated
Three Months Ended March 31, 2013:
Depreciation expense	$	2,699	$	234	$	1,580	$	4,513
Amortization of MSRs		47,883		—		—		47,883
Amortization of debt discount		424		—		—		424
Amortization of debt issuance costs – SSTL		894		—		—		894

Three Months Ended March 31, 2012:
Depreciation expense	$	255	$	—	$	578	$	833
Amortization of MSRs		14,314		—		—		14,314
Amortization of debt discount		745		—		—		745
Amortization of debt issuance costs – SSTL		920		—		—		920

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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RELATED PARTY TRANSACTIONS

NOTE 22 RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2013

Note 22

Related Party Transactions

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 24% of the common stock of Residential and approximately 24% of the common stock of AAMC.

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. 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 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 as they relate to the Homeward servicing platform acquired by Altisource.

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 2025. 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 3 – Business Acquisitions, 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 $75.0 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 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.

Relationship with Residential

On December 21, 2012, OMS entered into a 15-year servicing agreement with Altisource Residential, L.P., the operating partnership of Residential, pursuant to which Ocwen will service residential mortgage loans acquired by Residential and provide loan modification, assisted deed-in-lieu, assisted deed-for-lease and other loss mitigation programs.

On February 14, 2013, OLS sold a pool of non-performing residential mortgage loans to Altisource Residential, L.P. pursuant to a Master Mortgage Loan Sale Agreement. The aggregate purchase price for the pool of loans was $64.4 million.

Relationship with AAMC

On December 11, 2012, Mr. Erbey received 52,589 shares of AAMC restricted stock pursuant to the Altisource Asset Management Corporation 2012 Special Equity Incentive Plan and a Special Restricted Stock Award Agreement in his capacity as Chairman of the Board of AAMC and Altisource.

On December 11, 2012, Ronald M. Faris, our President and Chief Executive Officer and a director of Ocwen, received 29,216 shares of AAMC restricted stock pursuant to the Altisource Asset Management Corporation 2012 Special Equity Incentive Plan and a Special Restricted Stock Award Agreement, in connection with the services he provides AAMC through his employment with Ocwen.

Relationship with Former Owner of Homeward

As disclosed in Note 1 – Summary of Significant Accounting Policies, we completed the Homeward Acquisition on December 27, 2012. As consideration for the Homeward Acquisition, Ocwen paid an aggregate purchase price of approximately $766 million, of which approximately $604 million was paid in cash and $162 million was paid in 162,000 Preferred Shares issued to certain private equity firms ultimately controlled by WL Ross & Co. LLC (the Funds), that will pay a dividend of 3.75% per annum on a quarterly basis. Each Preferred Share, together with any accrued and unpaid dividends, may be converted into shares of Ocwen common stock at the option of the holder at a conversion price equal to $31.79. Mr. Ross, a director of Ocwen, is the Chairman and Chief Executive Officer of WL Ross & Co. LLC and Invesco Private Capital, Inc. and the managing member of El Vedado, LLC, each of which directly or indirectly controls the Funds.

The following table summarizes our revenues and expenses related to the various service agreements with Altisource and HLSS for periods indicated, and amounts receivable from or payable to at the dates indicated:

Three Months Ended March 31	2013		2012
Revenues and Expenses:
Altisource:
Revenues	$	4,233	$	3,612
Expenses		11,692		6,530
HLSS:
Revenues	$	112	$	10
Expenses		491		251

	March 31, 2013			December 31, 2012
Net Receivable (Payable)
Altisource	$	(40,376	)	$	(5,971	)
HLSS		20,540			(25,524	)
	$	(19,836	)	$	(31,495	)

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

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Commitments and Contingencies Disclosure [Abstract]

NOTE 23 REGULATORY REQUIREMENTS

3 Months Ended

Mar. 31, 2013

Regulatory Requirements [Abstract]

REGULATORY REQUIREMENTS

Note 23

Regulatory Requirements

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.

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−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.

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.

NOTE 24 COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2013

COMMITMENTS AND CONTINGENCIES

Note 24

Commitments and Contingencies

We are subject to various pending legal proceedings, including those subject to loss sharing and indemnification 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.

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’s motion for partial summary judgment and denying the Trustee’s motion for partial summary judgment. This order effectively rejects the bulk of the Trustee’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’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.

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’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’ policies, procedures and practices regarding lender-placed or “force-placed” 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’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’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’ 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.

Loan Put-Back and Related Contingencies

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.

The entire disclosure for commitments and contingencies.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Subparagraph (SX 210.5-02.25)
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
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-Name FASB Interpretation (FIN)
-Number 14
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 5
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

NOTE 25 SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2013

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

Note 25

Subsequent Events

Genworth Acquisition

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.

Ally Bank MSR Acquisition

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.

Sale of ResCap Fee-Based Businesses to Altisource

On April 12, 2013, Ocwen and OMS entered into an Agreement (the “Agreement”) with Altisource to extend terms related to the existing servicing arrangements between Altisource and Ocwen for mortgage servicing assets acquired from ResCap.

The Agreement provides that during the term of the existing servicing arrangements (which currently have terms expiring on August 31, 2025, subject to certain renewal rights) between Altisource and Ocwen, (i) 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) 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) Ocwen and all of its subsidiaries and affiliates will market and promote the utilization of Altisource’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’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 12, 2013, with the remaining $48.8 million to be paid in monthly installments for up to five months following the closing.

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Mar. 31, 2013
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation 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. 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.
Principles of Consolidation	Principles of Consolidation 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. Variable Interest Entities 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. 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. Securitizations and Asset Backed Financing Arrangements 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. Securitizations of Residential Mortgage Loans. 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 “private label” 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. 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. Financings of Advances on Loans Serviced for Others. 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. 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. See Note 8 – Match Funded Advances, Note 12 – Debt Service Accounts and Note 14 – Match Funded Liabilities for additional information.
Reclassification	Reclassification 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. 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. 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 – for securitization investors of $42 thousand and Principal payments received on loans – restricted for securitization investors of $1.0 million to Other. Within the financing activities section we reclassified Repayment of secured borrowings – owed to securitization investors of $(1.7) million to Other.

Disclosure of accounting policy regarding (1) the principles it follows in consolidating or combining the separate financial statements, including the principles followed in determining the inclusion or exclusion of subsidiaries or other entities in the consolidated or combined financial statements and (2) its treatment of interests (for example, common stock, a partnership interest or other means of exerting influence) in other entities, for example consolidation or use of the equity or cost methods of accounting. The accounting policy may also address the accounting treatment for intercompany accounts and transactions, noncontrolling interest, and the income statement treatment in consolidation for issuances of stock by a subsidiary.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
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-Subparagraph (SX 210.3A-02)
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
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Reference 8: http://www.xbrl.org/2003/role/presentationRef
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
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Reference 10: http://www.xbrl.org/2003/role/presentationRef
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Reference 13: http://www.xbrl.org/2003/role/presentationRef
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Reference 14: http://www.xbrl.org/2003/role/presentationRef
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 15: http://www.xbrl.org/2003/role/presentationRef
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 16: http://www.xbrl.org/2003/role/presentationRef
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-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph k
-Article 1

Reference 17: http://www.xbrl.org/2003/role/presentationRef
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 18: http://www.xbrl.org/2003/role/presentationRef
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-Name Regulation S-X (SX)
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Reference 19: http://www.xbrl.org/2003/role/presentationRef
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Schedule of purchase price allocation

NOTE 3 BUSINESS ACQUISITIONS (Tables)

3 Months Ended

Mar. 31, 2013

ResCap and Homeward

Purchase Price Allocation	ResCap			Homeward
Cash	$	—		$	79,511
Loans held for sale (1)		—			558,721
Mortgage servicing rights (1)		393,891			358,119
Advances and match funded advances (1)		1,622,348			2,266,882
Deferred tax assets (1)		—			47,346
Premises and equipment (1)		22,398			16,803
Debt service accounts		—			69,287
Investment in unconsolidated entities (1)		—			5,485
Receivables and other assets (1)		2,989			56,886
Match funded liabilities		—			(1,997,459	)
Other borrowings		—			(864,969	)
Accrued bonuses		—			(35,201	)
Checks held for escheat (1)		—			(16,418	)
Other liabilities (1)		(74,340	)		(80,112	)
Total identifiable net assets		1,967,286			464,881
Goodwill (1)		204,743			300,843
Total consideration	$	2,172,029		$	765,724

(1)

Initial fair value estimate

Schedule of revenue and earnings

Revenues		$	74,853
Net income		$	14,879

Schedule of pro forma results of operations

For Three Months Ended March 31:	2013		2012
Revenues	$	529,250	$	303,735
Net income (loss)	$	51,180	$	(6,197	)

Schedule of pro forma results of operations

Revenues		$	277,635
Net income		$	22,928

Tabular disclosure of pro forma results of operations for a material business acquisition or series of individually immaterial business acquisitions that are material in the aggregate.

Asset Sales and Financing [Abstract]

NOTE 4 ASSET SALES AND FINANCING (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of assets and liabilities sold to HLSS

	2013		2012
Sale of MSRs accounted for as a financing	$	100,707	$	62,458
Sale of match funded advances		703,206		—
Sale of advance SPEs:
Match funded advances		—		413,374
Debt service account		—		14,786
Prepaid lender fees and debt issuance costs		—		5,422
Other prepaid expenses		—		1,928
Match funded liabilities		—		(358,335	)
Accrued interest payable and other accrued expenses		—		(841	)
Net assets of advance SPEs		—		76,334
Sales price, as adjusted		803,913		138,792
Amount due to HLSS for post-closing adjustments at March 31		10,406		11,006
Cash received	$	814,319	$	149,798

NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

Schedule of carrying and estimated fair values of financial instruments

			March 31, 2013						December 31, 2012
	Level		Carrying Value			Fair Value			Carrying Value			Fair Value
Financial assets:
Loans held for sale, at fair value (1)		2	$	295,514		$	295,514		$	426,480		$	426,480
Loans held for sale, at lower of cost or fair value (2)		3		62,615			62,615			82,866			82,866
Advances and match funded advances (3)		3		3,966,255			3,966,255			3,233,707			3,233,707
Receivables, net (3)		3		155,558			155,558			167,459			167,459

Financial liabilities:
Match funded liabilities (3)		3	$	2,982,984		$	2,982,984		$	2,532,745		$	2,533,278
Other borrowings (3)		3		1,987,894			1,989,104			1,096,679			1,101,504

Derivative financial instruments (1):
Interest rate lock commitments (IRLCs)		2	$	4,652		$	4,652		$	5,781		$	5,781
Interest rate swaps		3		(18,758	)		(18,758	)		(10,836	)		(10,836	)
Forward MBS trades		1		(1,108	)		(1,108	)		(1,719	)		(1,719	)
U.S. Treasury futures		1		—			—			(1,258	)		(1,258	)
Interest rate caps		3		123			123			168			168

MSRs, at fair value (1)		3	$	84,534		$	84,534		$	85,213		$	85,213

(1)

Measured at fair value on a recurring basis.

(2)

Measured at fair value on a non-recurring basis.

(3)

Financial instruments disclosed, but not carried, at fair value.

Schedule of reconciliation of the changes in fair value of Level 3 assets measured on a recurring basis

	Derivative Financial Instruments			MSRS at Fair Value			Total

Three Months Ended March 31, 2013:
Beginning balance	$	(10,668	)	$	85,213		$	74,545

Purchases, issuances, sales and settlements:
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		310			—			310
		310			—			310

Total realized and unrealized gains and (losses) (1):
Included in Other, net		(1,353	)		(679	)		(2,032	)
Included in Other comprehensive income (loss)		(6,924	)		—			(6,924	)
		(8,277	)		(679	)		(8,956	)

Transfers in and / or out of Level 3		—			—			—
Ending balance	$	(18,635	)	$	84,534		$	65,899

	Derivative Financial Instruments			MSRS at Fair Value		Total
Three Months Ended March 31, 2012:
Beginning balance	$	(16,676	)	$	—	$	(16,676	)

Purchases, issuances, sales and settlements:
Purchases		—			—		—
Issuances		—			—		—
Sales		—			—		—
Settlements		2,357			—		2,357
		2,357			—		2,357

Total realized and unrealized gains and (losses) (2):
Included in Other, net		3,468			—		3,468
Included in Other comprehensive income (loss)		(1,955	)		—		(1,955	)
		1,513			—		1,513

Transfers in and / or out of Level 3		—			—		—
Ending balance	$	(12,806	)	$	—	$	(12,806	)

(1)

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.

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

Mortgage Loans On Real Estate [Abstract]

NOTE 6 LOANS HELD FOR SALE, AT FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of loans held for sale

Balance at December 31, 2012	$	426,480
Originations and purchase of loans held for sale		2,462,531
Proceeds from sale		(2,563,247	)
Loss on sale of loans		(29,786	)
Decrease in fair value		(440	)
Other		(24	)
Balance at March 31, 2013	$	295,514

Schedule of gain on loans held for sale

	2013			2012
Loss on sales of loans (1)	$	(1,081	)	$	—
Changes in fair value of IRLCs		(1,237	)		—
Change in fair value of loans held for sale		(440	)		—
Gain on hedge instruments		10,189			—
Provision for representations and warranties		(512	)		—
Other		(170	)		—
	$	6,749		$	—

(1)

Net of a gain of $28,705 representing the value assigned to MSRs retained on sales of loans.

NOTE 7 ADVANCES (Tables)

3 Months Ended

Mar. 31, 2013

Advances [Abstract]

Schedule Of advances, representing payments made on behalf of borrowers or on foreclosed properties

	March 31, 2013		December 31, 2012
Servicing:
Principal and interest	$	162,341	$	83,617
Taxes and insurance		342,216		51,447
Foreclosures, bankruptcy and other		17,475		41,296
		522,032		176,360
Corporate Items and Other		8,140		8,103
	$	530,172	$	184,463

NOTE 8 MATCH FUNDED ADVANCES (Tables)	3 Months Ended
NOTE 8 MATCH FUNDED ADVANCES (Tables)	Mar. 31, 2013
Match Funded Advances [Abstract]
Scheduleof match funded advances on residential mortgage loans	<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;" 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;">Principal and interest</td> <td style="width: 3%;"> </td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">1,716,624</td> <td style="width: 1%; text-align: left;"> </td> <td style="width: 3%;"> </td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">1,577,808</td> <td style="width: 1%; text-align: left;"> </td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: left;">Taxes and insurance</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,215,431</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,148,486</td> <td style="text-align: left;"> </td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="text-align: left; padding-bottom: 1pt;">Foreclosures, bankruptcy, real estate and 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;">504,028</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;">322,950</td> <td style="text-align: left; padding-bottom: 1pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <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;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">3,436,083</td> <td style="text-align: left; padding-bottom: 2.5pt;"> </td> <td style="padding-bottom: 2.5pt;"> </td> <td style="text-align: left; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">$</td> <td style="text-align: right; border-bottom-color: black; border-bottom-width: 2.5pt; border-bottom-style: double;">3,049,244</td> <td style="text-align: left; padding-bottom: 2.5pt;"> </td> </tr> </table> </div>

NOTE 9 MORTGAGE SERVICING (Tables)

3 Months Ended

Mar. 31, 2013

Transfers and Servicing [Abstract]

Schedule of mortgage servicing rights - amortization method

	2013			2012
Balance at December 31, 2012	$	676,712		$	293,152
Additions recognized in connection with purchase transactions (1)		394,862			—
Additions recognized on sale of residential mortgage loans		28,705			—
Servicing transfers, adjustments and other		(124	)		(204	)
Amortization (2)		(47,987	)		(15,232	)
Balance at March 31, 2013	$	1,052,168		$	277,716
Estimated fair value at March 31	$	1,288,732		$	316,078

(1)

Includes $393.9 million acquired in the ResCap Acquisition. See Note 3 – Business Acquisitions for additional information.

(2)

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.

Schedule of mortgage servicing rights - fair value measurement method

Balance at December 31, 2012	$	85,213
Changes in fair value:
Due to changes in valuation assumptions		4,650
Realization of cash flows and other changes		(5,329	)
Balance at March 31, 2013	$	84,534

Scheduel of estimated change in the fair value of MSRs

<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="6" nowrap="nowrap">Adverse change in fair value</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: justify; padding-bottom: 1pt;"> </td> <td style="padding-bottom: 1pt;"> </td> <td style="text-align: center; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2">10%</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"> </td> <td style="text-align: center; border-bottom-color: black; border-bottom-width: 1pt; border-bottom-style: solid;" colspan="2">20%</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="vertical-align: bottom; background-color: #cceecc;"> <td style="width: 74%; text-align: justify;">Weighted average prepayment speeds</td> <td style="width: 3%;"> </td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">(5,164</td> <td style="width: 1%; text-align: left;">)</td> <td style="width: 3%;"> </td> <td style="width: 1%; text-align: left;">$</td> <td style="width: 8%; text-align: right;">(9,912</td> <td style="width: 1%; text-align: left;">)</td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="text-align: justify;">Discount rate (Option-adjusted spread)</td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">(2,804</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">(5,444</td> <td style="text-align: left;">)</td> </tr> </table>

Schedule of components of servicing and subservicing fees

	2013		2012
Loan servicing and subservicing fees	$	269,022	$	112,589
Home Affordable Modification Program (HAMP) fees		40,147		12,684
Late charges		25,896		18,845
Loan collection fees		6,382		3,339
Float earnings		1,680		787
Other		26,182		6,859
	$	369,309	$	155,103

Schedule of composition of servicing and subservicing portfolios by type of property serviced as measured by UPB

	Residential		Commercial		Total
UPB at March 31, 2013
Servicing (1)	$	273,970,522	$	—	$	273,970,522
Subservicing		195,484,010		392,584		195,876,594
	$	469,454,532	$	392,584	$	469,847,116

UPB at December 31, 2012
Servicing (1)	$	175,762,161	$	—	$	175,762,161
Subservicing		27,903,555		401,031		28,304,586
	$	203,665,716	$	401,031	$	204,066,747

(1)

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.

Tabular disclosure of the activity in the balance of servicing assets subsequently measured at amortized value (including a description of where changes in carrying value are reported in the statement of income for each period for which results of operations are presented), including but not limited to, the following: beginning and ending balances, additions (through purchases of servicing assets and servicing assets that result from transfers of financial assets), disposals, amortization, application of valuation allowances, other-than-temporary impairments, and other changes that affect the balance along with a description of those changes.

Schedule of change in allowance for credit losses

NOTE 10 RECEIVABLE (Tables)

3 Months Ended

Mar. 31, 2013

Receivables [Abstract]

Schdule of receivables

March 31, 2013	Receivables		Allowance for Losses			Net
Servicing (1)	$	74,820	$	(2,024	)	$	72,796
Income taxes receivable		52,593		—			52,593
Due from related parties (2)		28,048		—			28,048
Other		4,117		(1,996	)		2,121
	$	159,578	$	(4,020	)	$	155,558

December 31, 2012	Receivables		Allowance for Losses			Net
Servicing (1)	$	84,870	$	(1,647	)	$	83,223
Income taxes receivable		55,292		—			55,292
Due from related parties (2)		12,361		—			12,361
Other		18,577		(1,994	)		16,583
	$	171,100	$	(3,641	)	$	167,459

(1)

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.

(2)

See Note 22 – Related Party Transactions for additional information regarding transactions with Altisource and HLSS.

	March 31, 2013		March 31, 2012
Allowance for credit losses balance at beginning of the period	$	1,994	$	6,281
Charge offs		—		—
Provision		—		455
Other		2		(19	)
Allowance for credit losses balance at end of the period	$	1,996	$	6,717

Receivables balance	$	4,117	$	8,416

NOTE 11 GOODWILL (Tables)

3 Months Ended

Mar. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of summary of activity in the carrying value of goodwill

	ResCap Acquisition		Homeward Acquisition			Litton Acquisition		HomEq Acquisition		Total
Balance at December 31, 2012	$	—	$	300,843		$	57,430	$	12,810	$	371,083
Derecognition of goodwill in connection with the sale of a business (1)		—		(72,309	)		—		—		(72,309	)
ResCap Acquisition (2)		204,743		—			—		—		204,743
		204,743		228,534			57,430		12,810		503,517
Step acquisition - Correspondent One (3)		—		—			—		—		100
Balance at March 31, 2013	$	204,743	$	228,534		$	57,430	$	12,810	$	503,617

(1)

(2)

See Note 3 – Business Acquisitions for additional information regarding this transaction.

(3)

See Note 13 – Other Assets for additional information regarding this transaction.

Tabular disclosure of goodwill by reportable segment and in total which includes a rollforward schedule.

Scheduel of match funded liabilities

NOTE 13 OTHER ASSETS (Tables)

3 Months Ended

Mar. 31, 2013

Other Assets [Abstract]

Schedule of other assets

	March 31, 2013		December 31, 2012
Loans held for sale, at lower of cost or fair value (1)	$	62,615	$	82,866
Prepaid lender fees and debt issuance costs, net (2)		37,123		14,389
Acquisition deposits (3)		31,149		57,000
Interest earning collateral deposits (4)		30,648		31,710
Prepaid income taxes		23,112		23,112
Investment in unconsolidated entities (5)		12,353		25,187
Real estate, net		8,533		6,205
Derivatives, at fair value (6)		6,646		10,795
Prepaid expenses and other		26,628		21,414
	$	238,807	$	272,678

(1)

(2)

These balances relate to match funded liabilities and other secured borrowings.

(3)

(4)

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.

(5)

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. As disclosed in Note 3 – Business Acquisitions, we increased our ownership to 100% on March 31, 2013. Effective on that date, we began including the accounts of Correspondent One in our consolidated financial statements and have eliminated our current investment in consolidation.

(6)

See Note 18 – Derivative Financial Instruments for additional information.

NOTE 14 MATCH FUNDED LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2013

Match Funded Liabilities [Abstract]

				Available		Balance Outstanding
Borrowing Type	Interest Rate	Maturity (1)	Amortization Date (1)	Borrowing Capacity (2)		March 31, 2013		December 31, 2012
2011-Servicer Advance Revolving Trust 1 (3)	2.23%	May 2043	May 2013		—		—	$	325,000
2011-Servicer Advance Revolving Trust 1 (3)	3.37 – 5.92%	May 2043	May 2013		—		—		525,000
2012-Servicing Advance Revolving Trust 2 (3)	3.27 – 6.90%	Sep. 2043	Sept. 2013		—		—		250,000
2012-Servicing Advance Revolving Trust 3 (3)	2.98%	Mar. 2043	Mar. 2013		—		—		248,999
2012-Servicing Advance Revolving Trust 3 (3)	3.72 – 7.04%	Mar. 2044	Mar. 2014		—		—		299,278
Total fixed rate					—		—		1,648,277
Advance Receivable Backed Notes (4)	1ML + 285 bps	Apr. 2015	Apr. 2014		125,003		174,997		205,016
Advance Receivable Backed Notes Series 2012-ADV1 (5)	CP rate + 225 or 335 bps	Dec. 2043	Dec. 2013		258,172		191,828		232,712
Advance Receivable Backed Notes Series 2012-ADV1	1ML + 250 bps	June 2016	June 2014		21,391		178,609		94,095
Advance Receivable Backed Note	1ML + 300 bps	Dec. 2015	Dec. 2014		2,392		47,608		49,138
2011-Servicing Advance Revolving Trust 1 (3)	1ML + 300 bps	May 2043	May 2013		—		—		204,633
2012-Servicing Advance Revolving Trust 2 (3)	1ML + 315 bps	Sep. 2043	Sept. 2013		—		—		22,003
2012-Servicing Advance Revolving Trust 3 (3)	1ML + 300 bps – 675 bps	Mar. 2044	Mar. 2014		—		—		40,626
2012-Homeward Agency Advance Funding Trust 2012-1	1ML + 300 bps	Sept. 2013	Sept. 2013		4,665		20,335		16,094
2012-Homeward DSF Advance Revolving Trust 2012-1 (3)	1ML + 450 bps	Feb. 2013	Feb. 2013		—		—		20,151
Homeward Residential Bridge Loan Trust – 2013 Series-Bridge-VF1 and VF2 (3)	1ML + 150 bps	Aug. 2043	Aug. 2013		246,752		1,153,248		—
Ocwen Servicer Advance Receivables Trust – Series 2013-VF1 Class A, B, C and D Notes	1ML + 150 – 525 bps	Feb. 2044	Feb. 2014		318,081		881,919		—
Ocwen Servicer Advance Receivables Trust II – Series 2013-VF1 Class A, B, C and D Notes	1ML + 287.5 bps	Feb. 2044	Feb. 2014		15,560		334,440		—
Total variable rate					992,016		2,982,984		884,468
				$	992,016	$	2,982,984	$	2,532,745

(1)

(2)

(3)

(4)

The maximum borrowing capacity under this facility was reduced from $650 million to $300 million on December 26, 2012.

(5)

The maximum borrowing capacity under this facility was increased from $250 million to $450 million on December 26, 2012.

(6)

We entered into these facilities in connection with the ResCap Acquisition (See Note 3 – Business Acquisitions).

NOTE 15 OTHER BORROWINGS (Tables)

3 Months Ended

Mar. 31, 2013

Secured and Unsecured Debt Other [Abstract]

Schedule of lines of credit and other secured and unsecured borrowings

				Available		Balance Outstanding
Borrowings	Collateral	Interest Rate	Maturity	Borrowing Capacity		March 31, 2013			December 31, 2012
Servicing:
		1ML + 550 bps with a LIBOR floor of 150 bps
SSTL (1)	(1)	(1)	Sept. 2016	$	—	$	—		$	314,229
SSTL (2)	(2)	(2)	Feb. 2018		—		1,300,000			—

Senior unsecured term loan (3)		1-Month Euro-dollar rate + 675 bps with a Eurodollar floor of 150 bps	Mar. 2017		—		—			75,000
Financing liability – MSRs pledged (4)	MSRs (4)	(4)	(4)		—		393,776			303,705
Financing liability – MSRs pledged (5)	MSRs (5)	(5)	(5)		—		1,890			2,603
Promissory note (6)	MSRs	1ML + 350 bps	May 2017		—		18,467			18,466
					—		1,714,133			714,003

Lending:
Master repurchase agreement (7)	Loans held for sale (LHFS)	1ML + 175 bps	Mar. 2014		194,788		105,212			88,122
Participation agreement (8)	LHFS	N/A	Apr. 2013		—		50,682			58,938
Master repurchase agreement (9)	LHFS	1ML + 200 bps	May 2013		195,996		54,004			133,995
Master repurchase agreement	LHFS	1ML + 200 bps	Jul. 2013		232,392		67,608			107,020
					623,176		277,506			388,075

Corporate Items and Other
Securities sold under an agreement to repurchase (10)	Ocwen Real Estate Asset Liquidating Trust 2007-1 Notes	Class A-2 notes: 1ML + 200 bps; Class A-3 notes: 1ML + 300 bps	Monthly		—		2,592			2,833
					623,176		1,994,231			1,104,911

Discount (1)(2)					—		(6,337	)		(8,232	)
				$	623,176	$	1,987,894		$	1,096,679

(1)

In February 2013, we repaid this loan in full and wrote off the remaining discount as part of the loss on extinguishment.

(2)

(3)

We repaid this loan in full in February 2013.

(4)

(5)

(6)

Prepayments of the balance on this note may be required if the borrowing base, as defined, falls below the amount of the note outstanding.

(7)

On March 19, 2013, we extended the Master Repurchase Agreement to March 18, 2014.

(8)

(9)

On January 25, 2013, we extended the Master Repurchase Agreement maturity date to May 3, 2013.

(10)

This agreement has no stated credit limit and lending is determined for each transaction based on the acceptability of the securities presented as collateral.

NOTE 16 OTHER LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2013

Other Liabilities [Abstract]

Schedule of other liabilities

	March 31, 2013		December 31, 2012
Accrued expenses (1)	$	174,645	$	106,376
Amount due seller for purchase price adjustments – ResCap Acquisition		74,208		—
Due to related parties (2)		47,884		45,034
Checks held for escheat		31,645		33,225
Payable to servicing and subservicing investors (3)		24,023		9,973
Liability for selected tax items		22,338		22,702
Derivatives, at fair value (4)		21,863		18,658
Servicing liabilities (5)		9,726		9,830
Accrued interest payable		6,978		5,410
Other		57,697		26,456
	$	471,007	$	277,664

(1)

(2)

See Note 22 – Related Party Transactions for additional information.

(3)

The balance represents amounts due to investors in connection with loans we service under servicing and subservicing agreements.

(4)

See Note 18 – Derivative Financial Instruments for additional information.

(5)

NOTE 17 MEZZANINE EQUITY (Tables)

3 Months Ended

Mar. 31, 2013

Equity [Abstract]

Schedule of carrying value of preferred shares

Initial issuance price on December 27, 2012	$	162,000
Discount for beneficial conversion feature		(8,688	)
Accretion of BCF discount (Deemed dividend)		60
Carrying value at December 31, 2012		153,372
Accretion of discount (Deemed dividend)		1,086
Carrying value at March 31, 2013	$	154,458

Tabular disclosure of preferred units of master limited partnerships that have priority over limited partner units in areas including liquidation, redemption, conversion, tax status of distribution or sharing in distributions. This schedule ordinarily includes a description of the preferred units that details various rights including redemption, conversion, liquidation, and sharing in distributions; capital contributed by preferred partners; number of preferred units authorized to be issued, issued, and outstanding; aggregate cumulative cash distributions made to the preferred partners; aggregate cumulative net income earned by the preferred partners; capital account balance of the preferred partners.

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE 18 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of changes in notional balance of holdings of derivatives

	IRLCs			U.S. Treasury Futures			Forward MBS Trades			Interest Rate Caps			Interest Rate Swaps

Balance at December 31, 2012	$	1,112,519		$	109,000		$	1,638,979		$	1,025,000		$	1,495,955
Additions		1,468,218			85,000			4,479,506			—			1,280,000
Amortization		(227,171	)		—			—			(12,000	)		—
Maturities		(1,651,514	)		—			(2,940,387	)		—			(232,174	)
Terminations		(84,778	)		(194,000	)		(2,471,538	)		—			(105,000	)
Balance at March 31, 2013	$	617,274		$	—		$	706,560		$	1,013,000		$	2,438,781

Fair value of net derivative assets (liabilities) at:
March 31, 2013	$	4,652		$	—		$	(1,108	)	$	123		$	(18,758	)
December 31, 2012	$	5,781		$	(1,258	)	$	(1,719	)	$	168		$	(10,836	)

Maturity		Apr. 2013 – Jun. 2013			—			Mar. 2013 – May 2013			Feb. 2015 – May 2016			Mar. 2013 – May 2027

Schedule of gains (losses) on derivative

Purpose	Expiration Date		Notional Amount		Fair Value (1)			Gains / (Losses)			Consolidated Statement of Operations Caption
*Interest rate risk of borrowings*
Interest rate swaps
Not designated as qualifying hedges:
Hedge the effects of a change in 1ML on borrowing under an advance funding facility (2)		2013	$	250,000	$	(1,569	)	$	1,143		Other, net
Hedge the effects of a change in the lender’s CP rate and 1ML on borrowing under an advance funding facility (3)		2013		297,180		(1,917	)		1,028		Other, net
Total not designated as hedges				547,180		(3,486	)		2,171

Designated as qualifying hedges:
Hedge the effects of changes in 1ML or the lenders’ CP rate on advance funding facilities (4)		2015		201,892		(7,801	)		(55	)	AOCL
Hedge the effects of changes in 1ML or the lenders’ CP rate on advance funding facilities (5)		2015		217,209		(1,915	)		285		AOCL
Total designated as hedges				419,101		(9,716	)		230
Total swaps				966,281		(13,202	)		2,401

Interest rate caps
Not designated as hedges:
Hedge the effects of changes in 1ML on advance funding facilities		2015-2016		1,013,000		123			46		Other, net
Total hedges of debt				1,979,281		(13,079	)		2,447

*Interest rate risk of MSRs*
Not designated as qualifying hedges:
Interest rate swaps		2014-2027		222,500		1,597			(2,480	)	Other net; Servicing and origination
U.S. Treasury futures		—		—		—			(1,149	)	Other, net
Forward MBS trades		—		—		—			(2,667	)	Other, net
Total hedges of MSRs				222,500		1,597			(6,296	)

*Risk of change in purchase price of MSRs*
Designated as a qualifying hedge:
Interest rate swap (6)		2013		1,250,000		(7,153	)		(7,153	)	AOCL

*Interest rate risk of mortgage loans held for sale and IRLCs*
Not designated as qualifying hedges:
Forward MBS trades		2013		706,560		(1,108	)		10,189		Loss on loans held for sale, net

*IRLCs*		2013		617,274		4,652			(1,237	)	Loss on loans held for sale, net
Total derivatives			$	4,775,615	$	(15,091	)	$	(2,050	)

(1)

Derivatives are reported at fair value in Receivables, Other assets or in Other liabilities on our unaudited Consolidated Balance Sheets.

(2)

(3)

(4)

Monthly settlements on this forward-starting swap begin June 2013.

(5)

Projected net settlements on the swap for the next twelve months total approximately $5.3 million of payments to the counterparties.

(6)

This swap was closed out on April 15, 2013 concurrent with the closing of the last stage of the MSR purchase.

Schedule of statements of operations include following related to derivative financial instrument

	2013			2012
Servicing and origination expense
Gains on economic hedges	$	1,000		$	—
Loss on loans held for resale, net
Gains (losses) on economic hedges		8,952			—
Other, net
Gains (losses) on economic hedges (1)		(5,079	)		3,405
Ineffectiveness of cash flow hedges		(657	)		63
Write-off of losses in AOCL for a discontinued hedge relationship		—			(772	)
Write-off of losses in AOCL for hedge of a financing facility assumed by HLSS (See Note 4 – Asset Sales and Financing)		—			(5,958	)
	$	4,216		$	(3,262	)

(1)

Includes a gain of $3.4 million recognized during the three months ended March 31, 2012 from the termination of foreign exchange forward contracts.

Tabular disclosure of the location and amount of gains and losses reported in the statement of financial performance, or when applicable, the statement of financial position. For example, (a) gains and losses recognized in the income statement on derivative instruments designated and qualifying as hedging instruments in fair value hedges and related hedged items designated and qualifying in fair value hedges and (b) gains and losses initially recognized in other comprehensive income on derivative instruments designated and qualifying as cash flow hedges.

Tabular disclosure of pertinent information about a derivative or group of derivatives on a disaggregated basis, such as for individual instruments, or small groups of similar instruments. May include a combination of the type of instrument, risks being hedged, notional amount, hedge designation, related hedged item, inception date, maturity date, or other relevant item.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4B
-URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41678-113959

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 1B
-URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5580258-113959

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4C
-URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 1
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 25
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(n)(2))
-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41620-113959

Schedule of components of interest expense

NOTE 19 INTEREST EXPENSE (Tables)

3 Months Ended

Mar. 31, 2013

Interest Expense [Abstract]

Three Months Ended March 31	2013		2012
Match funded liabilities	$	30,351	$	31,115
Other borrowings (1)		60,523		14,222
Debt securities:
3.25% Convertible Notes		—		153
10.875% Capital Trust Securities		—		710
Other		2,542		724
	$	93,416	$	46,924

(1)

NOTE 20 BASIC AND DILUTED EARNINGS PER SHARE (EPS) (Tables)

3 Months Ended

Mar. 31, 2013

Earnings Per Share, Basic and Diluted [Abstract]

Schedule of reconciliation of the calculation of basic EPS to diluted EPS

Three Months Ended March 31	2013		2012
Basic EPS:
Net income attributable to Ocwen common stockholders	$	42,576	$	19,349

Weighted average shares of common stock		135,638,567		130,649,595

Basic EPS	$	0.31	$	0.15

Diluted EPS:
Net income attributable to Ocwen common stockholders	$	42,576	$	19,349
Preferred stock dividends (1)		—		—
Interest expense on Convertible Notes, net of income tax (2)		—		99
Adjusted net income attributable to Ocwen	$	42,576	$	19,448

Weighted average shares of common stock		135,638,567		130,649,595
Effect of dilutive elements:
Preferred Shares (1)		—		—
Convertible Notes (2)		—		4,057,736
Stock options		3,902,390		3,337,571
Common stock awards		18,200		1,368
Dilutive weighted average shares of common stock		139,559,157		138,046,270

Diluted EPS	$	0.31	$	0.14

Stock options excluded from the computation of diluted EPS:
Anti-dilutive(3)		—		151,250
Market-based(4)		1,535,000		558,750

(1)

(2)

(3)

These stock options were anti-dilutive because their exercise price was greater than the average market price of our stock.

(4)

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.

NOTE 21 BUSINESS SEGMENT REPORTING (Tables)

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

Schedule of Financial information for segments

	Servicing			Lending			Corporate Items and Other			Corporate Eliminations			Business Segments Consolidated
Results of Operations

Three Months Ended March 31, 2013:

Revenue	$	376,084		$	13,908		$	16,712		$	(45	)	$	406,659
Operating expenses (1)		211,505			11,098			20,968			(45	)		243,526
Income (loss) from operations		164,579			2,810			(4,256	)		—			163,133
Other income (expense), net:
Interest income		(614	)		4,780			1,019			—			5,185
Interest expense (1)		(90,460	)		(2,829	)		(127	)		—			(93,416	)
Other		(26,085	)		267			2,251			—			(23,567	)
Other income (expense), net		(117,159	)		2,218			3,143			—			(111,798	)
Income (loss) before income taxes	$	47,420		$	5,028		$	(1,113	)	$	—		$	51,335

Three Months Ended March 31, 2012:

Revenue	$	164,192		$	—		$	658		$	(304	)	$	164,546
Operating expenses (1)		82,879			—			3,395			(147	)		86,127
Income (loss) from operations		81,313			—			(2,737	)		(157	)		78,419
Other income (expense), net:
Interest income		—			—			2,312			—			2,312
Interest expense (1)		(46,526	)		—			(398	)		—			(46,924	)
Other		(310	)		—			(3,535	)		157			(3,688	)
Other income (expense), net		(46,836	)		—			(1,621	)		157			(48,300	)
Income (loss) before income taxes	$	34,477		$	—		$	(4,358	)	$	—		$	30,119

Total Assets
March 31, 2013	$	5,713,500		$	430,915		$	1,103,600		$	—		$	7,248,015

December 31, 2012	$	4,461,755		$	551,733		$	658,394		$	—		$	5,671,882

March 31, 2012	$	3,530,184		$	—		$	964,327		$	—		$	4,494,511

(1)

Depreciation and amortization expense are as follows:

Schedule of depreciation and amortization expense of business segment

	Servicing		Lending		Corporate Items and Other		Business Segments Consolidated
Three Months Ended March 31, 2013:
Depreciation expense	$	2,699	$	234	$	1,580	$	4,513
Amortization of MSRs		47,883		—		—		47,883
Amortization of debt discount		424		—		—		424
Amortization of debt issuance costs – SSTL		894		—		—		894

Three Months Ended March 31, 2012:
Depreciation expense	$	255	$	—	$	578	$	833
Amortization of MSRs		14,314		—		—		14,314
Amortization of debt discount		745		—		—		745
Amortization of debt issuance costs – SSTL		920		—		—		920

Tabular disclosure of the profit or loss and total assets for each reportable segment. An entity discloses certain information on each reportable segment if the amounts (a) are included in the measure of segment profit or loss reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss.

Schedule of revenues and expenses related to the various service agreements with Altisource and HLSS

NOTE 22 RELATED PARTY TRANSACTIONS (Tables)

3 Months Ended

Mar. 31, 2013

Three Months Ended March 31	2013		2012
Revenues and Expenses:
Altisource:
Revenues	$	4,233	$	3,612
Expenses		11,692		6,530
HLSS:
Revenues	$	112	$	10
Expenses		491		251

Schedule of net receivable (payable) of related party

	March 31, 2013			December 31, 2012
Net Receivable (Payable)
Altisource	$	(40,376	)	$	(5,971	)
HLSS		20,540			(25,524	)
	$	(19,836	)	$	(31,495	)

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2012 USD ($)	Mar. 31, 2013 Trust
Business acquisition, percentage of voting interests acquired		50.00%
Beneficial interests held in number of trust \| Trust		4
Residual and subordinated interests acquired in number of trust \| Trust		6
Reclassified Process management fees	$ 8,800
Reclassified Loss on loans held for resale, net	(400)
Increase (decrease) in equity	300
Reclassified provision for valuation allowance on mortgage servicing assets	200
Proceeds from sales of real estate	500
Restricted Cash For Securitization Investors
Decrease in restricted cash	42
Loans, Net - Restricted For Securitization Investors
Principal payments received on loans	1,000
Secured Borrowings Owed To Securitization Investors
Repayment of secured borrowings	$ (1,700)

NOTE 3 BUSINESS ACQUISITIONS (Detail) - (Table 1) - USD ($)
$ in Thousands

Mar. 31, 2013

Mar. 31, 2012

Cash

Total consideration

(2,172,029)

Investment in unconsolidated entities

Cash

79,511

Loans held for sale

^[1]

558,721

Deferred tax assets

^[1]

47,346

Premises and equipment

^[1]

16,803

Debt service accounts

69,287

^[1]

5,485

^[1]

56,886

(864,969)

Total identifiable net assets

^[1]

(80,112)

464,881

Goodwill

^[1]

300,843

Total consideration

765,724

Homeward Acquisitions | Mortgage Servicing Rights

Business acquisition, purchase price allocation, other assets

^[1]

358,119

Homeward Acquisitions | Match funded advances

Business acquisition, purchase price allocation, other assets

^[1]

2,266,882

^[1]

^[1]

Premises and equipment

^[1]

22,398

Investment in unconsolidated entities

^[1]

2,989

Total identifiable net assets

^[1]

(74,340)

1,967,286

Goodwill

^[1]

204,743

Total consideration

2,172,029

Rescap Acquisition | Mortgage Servicing Rights

Business acquisition, purchase price allocation, other assets

^[1]

393,891

Rescap Acquisition | Match funded advances

Business acquisition, purchase price allocation, other assets

^[1]

1,622,348

Match Funded Liabilities | Homeward Acquisitions

Match Funded Liabilities | Rescap Acquisition

(1,997,459)

Accrued Bonus | Homeward Acquisitions

Accrued Bonus | Rescap Acquisition

(35,201)

Checks Held for Escheat | Homeward Acquisitions

Checks Held for Escheat | Rescap Acquisition

^[1]

(16,418)

Business acquisition, purchase price allocation, other assets

^[1]

[1]	Initial fair value estimate

NOTE 3 BUSINESS ACQUISITIONS (Detail) - (Table 2) - Rescap Acquisition $ in Thousands	2 Months Ended
	Mar. 31, 2013 USD ($)
Revenues	$ 74,853
Net income	$ 14,879

NOTE 3 BUSINESS ACQUISITIONS (Detail) - (Table 3) - Rescap Acquisition $ in Thousands	3 Months Ended
	Mar. 31, 2013 USD ($)
Fiscal Year 2013
Revenues	$ 529,250
Net income (loss)	51,180
Fiscal Year 2012
Revenues	303,735
Net income (loss)	$ (6,197)

NOTE 3 BUSINESS ACQUISITIONS (Detail) - (Table 4) - Homeward Acquisitions $ in Thousands	3 Months Ended
	Mar. 31, 2013 USD ($)
Revenues	$ 277,635
Net income	$ 22,928

NOTE 3 BUSINESS ACQUISITIONS (Detail)
$ in Thousands

3 Months Ended

Mar. 31, 2013

USD ($)

Loan

Mar. 31, 2012

USD ($)

Feb. 28, 2013

USD ($)

Dec. 31, 2012

Professional Fees

$ 14,065

$ 8,559

Impaired financing receivable, unpaid principal balance

107,300,000

Acquired cash

Correspondent One

Business acquisition, purchase price allocation, goodwill amount

100

Acquired net assets

26,300

Acquired cash

23,000

Acquired residential mortgage loans

1,100

Amount of loss recognized in remeasurement of previously held investment at fair value

400

Correspondent One | Unrelated Entity

Business acquisition, cost of acquired entity, equity interests issued and issuable

900

New Senior Secured Term Loan

Senior secured term loan facility

1,300,000

Three Servicing Advance Facilities

Line of credit facility, amount outstanding

1,200,000

Subservicing Contracts

Servicing asset

$ 25,900,000

Mortgage Servicing Rights

Amortized period of intangible assets

15 years

Impaired financing receivable, unpaid principal balance

$ 5,000,000

Servicing assets unpaid loan balance

$ 9,000,000

Mortgage loans on real estate, number of loans | Loan

421,000

Mortgage loans on real estate, carrying amount of mortgages

$ 77,000,000

Business acquisition, cost of acquired entity, cash paid

604

Professional Fees

1,800

Business acquisition, purchase price allocation, goodwill amount

^[1]

300,843

^[1]

56,886

Acquired net assets

^[1]

5,485

Acquired cash

79,511

Business acquisition, cost of acquired entity, cash paid

840,000

Business acquisition, purchase price allocation, goodwill amount

^[1]

204,743

Business acquisition, purchase price allocation, liabilities assumed

2,989

59,300

42,100,000

^[1]

Business acquisition, cost of acquired entity, cash paid

87,000

Business acquisition, purchase price allocation, goodwill amount

72,300

Business acquisition, purchase price allocation, liabilities assumed

18,700

$ 4,000

Altisource | Correspondent One

Noncontrolling Interest, Ownership Percentage By Parent

100.00%

49.00%

Business acquisition, cost of acquired entity, equity interests issued and issuable

$ 12,600

[1]	Initial fair value estimate

NOTE 4 ASSET SALES AND FINANCING (Detail) - (Table 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Sales of financing receivables	$ (703,206)
Sales price, as adjusted	803,913	$ 138,792
Amount due from HLSS for post-closing adjustments	10,406	11,006
Cash received	814,319	149,798
Sale of other liabilities	(12,511)	6,273
Mortgage Servicing Rights
Sales of financing receivables	$ 100,707	62,458
Match funded advances \| Advance SPE's
Sales of other deposits		413,374
Sale of other liabilities		(358,335)
Accured Interest Payable and Other Accrued Expenses \| Advance SPE's
Sale of other liabilities		(841)
Net assets of Advance SPEs		76,334
Debt Service Account \| Advance SPE's
Sales of other deposits		14,786
Prepaid Lender Fees & Debt Issuance Cost \| Advance SPE's
Sales of other deposits		5,422
Other Prepaid Expenses \| Advance SPE's
Sales of other deposits		$ 1,928

NOTE 4 ASSET SALES AND FINANCING (Detail) - USD ($) $ in Billions	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Asset Sale Transaction H
Unpaid principal balance of loans related to servicing assets sold	$ 15.9	$ 15.2

NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (Detail) - (Table 1) - USD ($)
$ in Thousands

Mar. 31, 2013

Dec. 31, 2012

Financial assets:

Loans held for sale, at lower of cost or fair value

^[1]

$ 62,615

$ 82,866

Financial liabilities:

Loans held for sale, at fair value

^[2]

174,645

106,376

Carrying Value

Financial assets:

^[3]

295,514

426,480

Loans held for sale, at lower of cost or fair value

^[4]

62,615

82,866

Advances and match funded advances

^[5]

3,966,255

3,233,707

Receivables, net

^[5]

155,558

167,459

Financial liabilities:

^[5]

2,982,984

2,532,745

Interest rate lock commitments (IRLCs)

^[5]

1,987,894

1,096,679

Derivative financial instruments :

^[3]

4,652

5,781

Interest rate swaps

^[3]

(18,758)

(10,836)

Forward MBS trades

^[3]

(1,108)

(1,719)

U.S. Treasury futures

^[3]

(1,258)

Interest rate caps

^[3]

123

168

MSRs, at fair value

^[3]

84,534

85,213

Fair Value

Financial assets:

Loans held for sale, at fair value

^[3]

295,514

426,480

Loans held for sale, at lower of cost or fair value

^[4]

62,615

82,866

Advances and match funded advances

^[5]

3,966,255

3,233,707

Receivables, net

^[5]

155,558

167,459

Financial liabilities:

^[5]

2,982,984

2,533,278

Interest rate lock commitments (IRLCs)

^[5]

1,989,104

1,101,504

Derivative financial instruments :

^[3]

4,652

5,781

Interest rate swaps

^[3]

(18,758)

(10,836)

Forward MBS trades

^[3]

(1,108)

(1,719)

U.S. Treasury futures

^[3]

(1,258)

Interest rate caps

^[3]

123

168

MSRs, at fair value

^[3]

$ 84,534

$ 85,213

[1]	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.
[2]	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.
[3]	Measured at fair value on a recurring basis.
[4]	Measured at fair value on a non-recurring basis.
[5]	Financial instruments disclosed, but not carried, at fair value.

NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (Detail) - (Table 2) - USD ($)
$ in Thousands

3 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Derivative Financial Instruments

Beginning balance

$ (10,668)

$ (16,676)

Purchases, issuances, sales and settlements:

310

2,357

Total realized and unrealized gains and (losses)

310

2,357

Total realized and unrealized gains and (losses) :

Included in Other, net

^[1]

(1,353)

3,468

Included in Other comprehensive income (loss)

^[1]

(6,924)

(1,955)

Fair Value, Measurement With Unobservable Inputs Reconciliation, Recurring Basis, Asset, Period Increase (Decrease)

^[1]

(8,277)

1,513

Transfers in and / or out of Level 3

Ending balance

(18,635)

(12,806)

MSRS at Fair Value

Beginning balance

85,213

Purchases, issuances, sales and settlements:

Total realized and unrealized gains and (losses)

Total realized and unrealized gains and (losses) :

Included in Other, net

^[1]

(679)

Included in Other comprehensive income (loss)

^[1]

Fair Value, Measurement With Unobservable Inputs Reconciliation, Recurring Basis, Asset, Period Increase (Decrease)

^[1]

(679)

Transfers in and / or out of Level 3

Ending balance

84,534

Total

Beginning balance

74,545

(16,676)

Purchases, issuances, sales and settlements:

310

2,357

Total realized and unrealized gains and (losses)

310

2,357

Total realized and unrealized gains and (losses) :

Included in Other, net

^[1]

(2,032)

3,468

Included in Other comprehensive income (loss)

^[1]

(6,924)

(1,955)

Fair Value, Measurement With Unobservable Inputs Reconciliation, Recurring Basis, Asset, Period Increase (Decrease)

^[1]

(8,956)

1,513

Transfers in and / or out of Level 3

Ending balance

$ 65,899

$ (12,806)

[1]	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.

NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Derivative, description of terms	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.
Gain (loss) on sale of derivatives (in Dollars)	$ (4.8)	$ (4.3)
Long-term debt, description	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: · Cost of servicing · Interest rate used for computing float earnings · Discount rate · Compensating interest expense · Interest rate used for computing the cost of Servicing advances · 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. · 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. · 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: · Prepayment speeds ranging from 2.45% to 25.26% (weighted average of ___%) depending on loan type; · Delinquency rates ranging from 7.43% to 46.55% (weighted average of ___%) depending on loan type; · Interest rate of 1-month LIBOR plus 4% for computing the cost of financing advances; · Interest rate of 1-month LIBOR for computing float earnings; and · 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: · Mortgage prepayment speeds; · Delinquency rates and · 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%.
Receivables, credit card, third party intermediaries, arrangements, description	<div>The carrying value of receivables generally approximates fair value because of the relatively short period of time between their origination and realization.</div>
Debt instrument, description	<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>
Fair value measured on a recurring basis
Finance, loan and lease receivables, held-for-sale, description	<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. The fair value of these loans is estimated using published forward Ginnie Mae prices. Loans repurchased in connection with loan resolution activities are modified or otherwise remediated through loss mitigation activities or are reclassified to receivables. 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>
Mortgage Servicing Rights
Fair value inputs, prepayment rate	13.20%
Fair value inputs interest rate	4.00%
Mortgage Servicing Rights \| Minimum
Fair value inputs, prepayment rate	2.45%
Fair value inputs, amortized cost discount rate	12.23%
Fair value inputs, probability of default	6.63%
Fair value inputs, discount rate	7.50%
Mortgage Servicing Rights \| Maximum
Fair value inputs, prepayment rate	24.67%
Fair value inputs, amortized cost discount rate	20.00%
Fair value inputs, probability of default	46.55%
Fair value inputs, discount rate	9.35%
Mortgage Servicing Rights \| Weighted Average
Fair value inputs, prepayment rate	15.57%
Fair value inputs, amortized cost discount rate	17.14%
Fair value inputs, probability of default	16.25%
Match funded advances
Derivative, description of terms	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.
Fair value inputs, discount rate	5.16%

NOTE 6 LOANS HELD FOR SALE, AT FAIR VALUE (Detail) - (Table 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Movement In Mortgage Loans [Roll Forward]
Balance at December 31, 2012	$ 426,480
Originations and purchase of loans held for sale	2,462,531
Proceeds from sale	(2,563,247)
Loss on sale of loans	(29,786)
Decrease in fair value	(440)
Other	(24)
Balance at March 31, 2013	$ 295,514

Carrying amount of mortgage loans to individuals not classified as held for investment but are held-for-sale.

The cash inflow from sales of loans that are secured with real estate mortgages and are held with the intention to resell in the near future.

NOTE 6 LOANS HELD FOR SALE, AT FAIR VALUE (Detail) - (Table 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Mortgage Loans on Real Estate [Line Items]
Loss (gain) on loans held for sale, net	$ (1,081)
Decrease in fair value	(440)
Gain on hedge instruments	10,189
Provision for representations and warranties	(512)
Other	(170)
Gain on loans held for sale, net	6,749
IRLCs
Mortgage Loans on Real Estate [Line Items]
Decrease in fair value	$ (1,237)

NOTE 6 LOANS HELD FOR SALE, AT FAIR VALUE (Parenthetical) (Detail) - (Table 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Mortgage Loans On Real Estate [Abstract]
Mortgage servicing rights (Msr) impairment (recovery)	$ 28,705

NOTE 7 ADVANCES (Detail) - (Table 1) - USD ($) $ in Thousands	Mar. 31, 2013	Dec. 31, 2012
Servicing:
Advances	$ 530,172	$ 184,463
Servicing, Principal and Interest
Servicing:
Advances	162,341	83,617
Servicing, Taxes and Insurance
Servicing:
Advances	342,216	51,447
Servicing, Foreclosures and Bankruptcy Costs
Servicing:
Advances	17,475	41,296
Servicing
Servicing:
Advances	522,032	176,360
Corporate Items and Other
Servicing:
Advances	$ 8,140	$ 8,103

NOTE 8 MATCH FUNDED ADVANCES (Detail) - (Table 1) - USD ($) $ in Thousands	Mar. 31, 2013	Dec. 31, 2012
Match funded advances	$ 3,436,083	$ 3,049,244
Servicing, Principal and Interest
Match funded advances	1,716,624	1,577,808
Servicing, Taxes and Insurance
Match funded advances	1,215,431	1,148,486
Servicing, Foreclosures and Bankruptcy Costs
Match funded advances	$ 504,028	$ 322,950

NOTE 9 MORTGAGE SERVICING (Detail) - (Table 1) - USD ($)
$ in Thousands

3 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Transfers and Servicing [Abstract]

Additions recognized in connection with purchase transactions

$ 676,712

$ 293,152

^[1]

394,862

Additions recognized on sale of residential mortgage loans

28,705

Servicing transfers, adjustments and other

(124)

(204)

Amortization

^[2]

(47,987)

(15,232)

Estimated fair value at March 31

1,052,168

277,716

$ 1,288,732

$ 316,078

[1]	Includes $393.9 million acquired in the ResCap Acquisition. See Note 3 Business Acquisitions for additional information.
[2]	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.

Amortized carrying amount (balance) as of the balance sheet date of an asset representing net future revenues from contractually specified servicing fees, late charges, and other ancillary revenues, in excess of future costs related to servicing arrangements.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 860
-SubTopic 50
-Section 25
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=7524895&loc=d3e120260-111741

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 860
-SubTopic 50
-Section 45
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6469459&loc=d3e122492-111745

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 860
-SubTopic 50
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6469459&loc=d3e122501-111745

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 860
-SubTopic 50
-Section 50
-Paragraph 4
-Subparagraph (a)(1)
-URI http://asc.fasb.org/extlink&oid=7882072&loc=d3e122739-111746

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 140
-Paragraph 13A, 13B
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Staff Position (FSP)
-Number FAS140-4/FIN46(R)-8
-Paragraph B10
-Subparagraph a(1)
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 140
-Paragraph 17
-Subparagraph g(1)(a)
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

NOTE 9 MORTGAGE SERVICING (Detail) - (Table 2) $ in Thousands	3 Months Ended
	Mar. 31, 2013 USD ($)
Servicing Asset at Fair Value, Amount [Roll Forward]
Balance at December 31, 2012	$ 85,213
Changes in fair value:
Balance at March 31, 2013	84,534
Mortgage Servicing Rights
Servicing Asset at Fair Value, Amount [Roll Forward]
Balance at December 31, 2012	85,213
Changes in fair value:
Due to changes in valuation assumptions	4,650
Realization of cash flows and other changes	(5,329)
Balance at March 31, 2013	$ 84,534

Fair value as of the balance sheet date of an asset representing net future revenues from contractually specified servicing fees, late charges, and other ancillary revenues, in excess of future costs related to servicing arrangements.

NOTE 9 MORTGAGE SERVICING (Detail) - (Table 3) $ in Thousands	3 Months Ended
	Mar. 31, 2013 USD ($)
Interest Rate Change of 10%
Fair value measurements, changes in significant assumptions	10
Weighted average prepayment speeds	$ (5,164)
Discount rate (Option-adjusted spread)	$ (2,804)
Interest Rate Change Of 20%
Fair value measurements, changes in significant assumptions	20
Weighted average prepayment speeds	$ (9,912)
Discount rate (Option-adjusted spread)	$ (5,444)

NOTE 9 MORTGAGE SERVICING (Detail) - (Table 4) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Servicing and subservicing fees	$ 369,309	$ 155,103
Loan Servicing and Subservicing Fees
Servicing and subservicing fees	269,022	112,589
HAMP Fees
Servicing and subservicing fees	40,147	12,684
Late Fees
Servicing and subservicing fees	25,896	18,845
Loan Collection Fees
Servicing and subservicing fees	6,382	3,339
Float Earnings
Servicing and subservicing fees	1,680	787
Other Income
Servicing and subservicing fees	$ 26,182	$ 6,859

NOTE 9 MORTGAGE SERVICING (Detail) - (Table 5) - USD ($)
$ in Thousands

Mar. 31, 2013

Dec. 31, 2012

Residential Mortgage

Total of property serviced as measured by UPB

^[1]

$ 273,970,522

$ 175,762,161

Subservicing

195,484,010

27,903,555

469,454,532

203,665,716

Commercial Real Estate

Total of property serviced as measured by UPB

^[1]

Subservicing

392,584

401,031

392,584

401,031

Total

Total of property serviced as measured by UPB

^[1]

273,970,522

175,762,161

Subservicing

195,876,594

28,304,586

$ 469,847,116

$ 204,066,747

[1]	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.

NOTE 9 MORTGAGE SERVICING (Detail) - USD ($)
$ in Thousands

Mar. 31, 2013

Feb. 28, 2013

Dec. 31, 2012

Impaired financing receivable, unpaid principal balance

$ 107,300,000

Unpaid principal balance of small balance commerical loans serviced

2,000,000

$ 2,100,000

Fair value disclosure, off-balance sheet risks, amount, asset

4,700,000

1,300,000

Mortgage Servicing Rights

Impaired financing receivable, unpaid principal balance

$ 5,000,000

Fair value of mortgage servicing rights

357,000

Homeward Acquisitions | Mortgage Servicing Rights

Business acquisition, purchase price allocation, other assets

^[1]

358,119

Rescap Acquisition | Mortgage Servicing Rights

Business acquisition, purchase price allocation, other assets

^[1]

393,891

HLSS

Impaired financing receivable, unpaid principal balance

$ 92,500,000

$ 79,400,000

[1]	Initial fair value estimate

NOTE 10 RECEIVABLE (Detail) - (Table 1) - USD ($)
$ in Thousands

Mar. 31, 2013

Dec. 31, 2012

Income taxes receivable

$ 52,593

$ 55,292

Due from related parties

^[1]

28,048

12,361

2,121

16,583

Receivables balance

155,558

167,459

^[2]

72,796

83,223

Receivables

^[2]

74,820

84,870

Income taxes receivable

52,593

55,292

Due from related parties

^[1]

28,048

12,361

Allowance for Credit Losses

4,117

18,577

Receivable gross

159,578

171,100

^[2]

(2,024)

(1,647)

Due from related parties

^[1]

(1,996)

(1,994)

Allowance for losses

$ (4,020)

$ (3,641)

[1]	See Note 22 - Related Party Transactions for additional information regarding transactions with Altisource and HLSS.
[2]	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.

NOTE 10 RECEIVABLE (Detail) - (Table 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Receivables balance	$ 155,558		$ 167,459
Total
Allowance for credit losses balance at beginning of the period	1,994	$ 6,281
Receivables balance	4,117	8,416
Charge offs
Provision		455
Other	2	(19)
Allowance for credit losses balance at end of the period	$ 1,996	$ 6,717

An amount representing an agreement for an unconditional promise by the maker to pay the Company (holder) a definite sum of money within one year from the balance sheet date (or the normal operating cycle, whichever is longer), net of any write-downs taken for collection uncertainty on the part of the holder. Such amount may include accrued interest receivable in accordance with the terms of the debt. The debt also may contain provisions and related items including a discount or premium, payable on demand, secured, or unsecured, interest bearing or noninterest bearing, among a myriad of other features and characteristics. This amount does not include amounts related to receivables held-for-sale.

NOTE 11 GOODWILL (Details) - (Table 1)
$ in Thousands

3 Months Ended

Mar. 31, 2013

USD ($)

Derecognition of goodwill in connection with the sale of a business

^[1]

204,743

^[2]

204,743

^[3]

204,743

Derecognition of goodwill in connection with the sale of a business

300,843

(72,309)

^[1]

^[2]

228,534

^[3]

228,534

Litton Acquisition

Derecognition of goodwill in connection with the sale of a business

57,430

^[1]

^[2]

57,430

^[3]

57,430

HomEq Acquisition

Derecognition of goodwill in connection with the sale of a business

12,810

^[1]

^[2]

12,810

^[3]

12,810

Derecognition of goodwill in connection with the sale of a business

371,083

(72,309)

^[1]

204,743

^[2]

503,517

100

^[3]

$ 503,617

[1]	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.
[2]	See Note 3 Business Acquisitions for additional information regarding this transaction.
[3]	See Note 13 - Other Assets for additional information regarding this transaction.

NOTE 11 GOODWILL (Details) - USD ($)
$ in Thousands

Mar. 31, 2013

Dec. 31, 2012

$ 503,617

$ 371,083

Amount of recognized goodwill

204,743

^[1]

204,743

Rescap Acquisition | Servicing

Rescap Acquisition | Corporate Items and Other

76,000

128,800

Amount of recognized goodwill

228,534

$ 300,843

^[1]

300,843

Homeward Acquisitions | Servicing

Homeward Acquisitions | Lending

108,100

Homeward Acquisitions | Servicing and Lending

120,400

Amount of recognized goodwill

$ 4,700

[1]	Initial fair value estimate

Carrying amount as of the balance sheet date, which is the cumulative amount paid and (if applicable) the fair value of any noncontrolling interest in the acquiree, adjusted for any amortization recognized prior to the adoption of any changes in generally accepted accounting principles (as applicable) and for any impairment charges, in excess of the fair value of net assets acquired in one or more business combination transactions.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=14024403&loc=d3e13816-109267

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-SubTopic 20
-Section 45
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6388280&loc=d3e13770-109266

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 142
-Paragraph 45
-Subparagraph e
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 142
-Paragraph 43
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Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141R
-Paragraph 72
-Subparagraph d
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
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-Number 142
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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141R
-Paragraph 68
-Subparagraph l
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141R
-Paragraph 34
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Interest-bearing deposits in banks and other financial institutions

NOTE 12 DEBT SERVICE ACCOUNTS (Detail) - USD ($)
$ in Thousands

Mar. 31, 2013

Dec. 31, 2012

^[1]

$ 30,648

$ 31,710

Advance Funding Facility

Interest-bearing deposits in banks and other financial institutions

$ 134,200

$ 88,700

[1]	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.

NOTE 13 OTHER ASSETS (Detail) - (Table 1) - USD ($)
$ in Thousands

Mar. 31, 2013

Dec. 31, 2012

Other Assets [Abstract]

Loans held for sale, at lower of cost or fair value

^[1]

$ 62,615

$ 82,866

Prepaid lender fees and debt issuance costs, net

^[2]

37,123

14,389

Acquisition deposits

^[3]

31,149

57,000

Interest earning collateral deposits

^[4]

30,648

31,710

Prepaid income taxes

23,112

Investment in unconsolidated entities

^[5]

12,353

25,187

Real estate, net

8,533

6,205

Derivatives, at fair value

^[6]

6,646

10,795

Prepaid expenses and other

26,628

21,414

Total other assets

$ 238,807

$ 272,678

[1]	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.
[2]	These balances relate to match funded liabilities and other secured borrowings.
[3]	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.
[4]	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.
[5]	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.
[6]	See Note 18 - Derivative Financial Instruments for additional information.

NOTE 13 OTHER ASSETS (Detail) - USD ($)
$ in Thousands

3 Months Ended

12 Months Ended

Mar. 31, 2013

Dec. 31, 2012

Non-performing mortgage loans with a carrying value

$ 2,515,084

Purchase of mortgage servicing rights, net

971

Amount of cash collateral held by the counterparties

25,700

$ 25,800

Investments in and advance to affiliates, subsidiaries, associates, and joint ventures (in Dollars)

^[1]

$ 12,353

25,187

Correspondent One | Altisource

Investments in and advance to affiliates, subsidiaries, associates, and joint ventures (in Dollars)

$ 13,400

Noncontrolling interest, ownership percentage by parent

100.00%

49.00%

Ginnie Mae

Debt instrument, repurchase amount

$ 42,000

Single family residential loans

Amount of valuation allowance

$ 21,900

$ 14,700

Non-performing mortgage loans with a carrying value

$ 65,400

[1]

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.

NOTE 14 MATCH FUNDED LIABILITIES (Detail) - (Table 1) - USD ($)
$ in Thousands

3 Months Ended

Mar. 31, 2013

Dec. 31, 2012