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Document And Entity Information - USD ($)	12 Months Ended
Document And Entity Information - USD ($)	Dec. 31, 2014	Apr. 30, 2015	Jun. 30, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	Ocwen Financial Corporation
Entity Central Index Key	0000873860
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-K
Document Period End Date	Dec. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Common Stock, Shares Outstanding		125,306,121
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 4,094,234,386

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2014	Dec. 31, 2013
Assets
Cash	$ 129,473	$ 178,512
Mortgage servicing rights ($93,901 and $116,029 carried at fair value)	1,913,992	2,069,381
Advances	893,914	890,832
Match funded advances	2,409,442	2,552,383
Loans held for sale ($401,120 and $503,753 carried at fair value)	488,612	566,660
Loans held for investment - reverse mortgages, at fair value	1,550,141	618,018
Goodwill	0	420,201
Receivables, net	270,596	152,516
Deferred tax assets, net	76,987	115,571
Premises and equipment, net	43,310	53,786
Other assets ($7,335 and $0 carried at fair value)	490,811	309,143
Total assets	8,267,278	7,927,003
Liabilities
Match funded liabilities	2,090,247	2,364,814
Financing liabilities ($2,058,693 and $1,249,380 carried at fair value)	2,258,641	1,266,973
Other secured borrowings	1,733,691	1,777,669
Senior unsecured notes	350,000	0
Other liabilities	793,534	644,595
Total liabilities	7,226,113	6,054,051
Commitments and Contingencies
Mezzanine Equity
Series A Perpetual Convertible Preferred stock, $.01 par value; 200,000 shares authorized; 62,000 shares issued and outstanding at December 31, 2013	0	60,361
Equity
Common stock, $.01 par value; 200,000,000 shares authorized; 125,215,615 and 135,176,271 shares issued and outstanding at December 31, 2014 and 2013, respectively	1,252	1,352
Additional paid-in capital	515,194	818,427
Retained earnings	530,361	1,002,963
Accumulated other comprehensive loss, net of income taxes	(8,413)	(10,151)
Total Ocwen stockholders’ equity	1,038,394	1,812,591
Non-controlling interest in subsidiaries	2,771	0
Total equity	1,041,165	1,812,591
Total liabilities, mezzanine equity and equity	$ 8,267,278	$ 7,927,003

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2014	Dec. 31, 2013
Statement of Financial Position [Abstract]
Mortgage servicing rights, at fair value	$ 93,901	$ 116,029
Loans held for sale, at fair value	401,120	503,753
Other assets, at fair value	7,335	0
Financing liabilities, at fair value	$ 2,058,693	$ 1,249,380
Convertible preferred stock, Series A, par value (in dollars per share)		$ 0.01
Convertible preferred stock, Series A, shares authorized (in shares)		200,000
Convertible preferred stock, Series A, shared issued (in shares)		62,000
Convertible preferred stock, Series A, shares outstanding (in shares)		62,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	125,215,615	135,176,271
Common stock, shares outstanding (in shares)	125,215,615	135,176,271

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Revenue
Servicing and subservicing fees	$ 1,894,175	$ 1,823,559	$ 804,407
Gain on loans held for sale, net	134,297	121,694	215
Other revenues	82,853	93,020	40,581
Total revenue	2,111,325	2,038,273	845,203
Operating expenses
Compensation and benefits	415,530	442,777	122,341
Goodwill impairment loss	420,201	0	0
Amortization of mortgage servicing rights	250,375	282,781	72,897
Servicing and origination	202,739	112,127	25,542
Technology and communications	167,053	140,466	45,362
Professional services	326,667	123,886	29,213
Occupancy and equipment	109,179	105,145	47,044
Other operating expenses	143,464	94,112	21,508
Total operating expenses	2,035,208	1,301,294	363,907
Income from operations	76,117	736,979	481,296
Other income (expense)
Interest income	22,991	22,355	8,329
Interest expense	(541,757)	(395,586)	(223,455)
Gain (loss) on extinguishment of debt	2,609	(8,681)	(2,167)
Other, net	(3,119)	(2,588)	(6,495)
Total other expense, net	(519,276)	(384,500)	(223,788)
Income (loss) before income taxes	(443,159)	352,479	257,508
Income tax expense	26,396	42,061	76,585
Net income (loss)	(469,555)	310,418	180,923
Net income attributable to non-controlling interests	(245)	0	0
Net income (loss) attributable to Ocwen stockholders	(469,800)	310,418	180,923
Preferred stock dividends	(1,163)	(5,031)	(85)
Deemed dividends related to beneficial conversion feature of preferred stock	(1,639)	(6,989)	(60)
Net income (loss) attributable to Ocwen common stockholders	$ (472,602)	$ 298,398	$ 180,778
Earnings (loss) per share attributable to Ocwen common stockholders
Basic (in dollars per share)	$ (3.60)	$ 2.20	$ 1.35
Diluted (in dollars per share)	$ (3.60)	$ 2.13	$ 1.31
Weighted average common shares outstanding
Basic (in shares)	131,362,284	135,678,088	133,912,643
Diluted (in shares)	131,362,284	139,800,506	138,521,279

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($)
$ in Thousands

12 Months Ended

Dec. 31, 2014

Dec. 31, 2013

Dec. 31, 2012

Statement of Comprehensive Income [Abstract]

Net income (loss)

$ (469,555)

$ 310,418

$ 180,923

Other comprehensive income (loss), net of income taxes:

Change in deferred loss on cash flow hedges arising during the year

^[1]

(11,558)

(5,303)

Reclassification adjustment for losses on cash flow hedges included in net income

^[2]

1,734

7,843

6,753

Net change in deferred loss on cash flow hedges

1,734

(3,715)

1,450

Other

Total other comprehensive income (loss), net of income taxes

1,738

(3,710)

1,455

Comprehensive income (loss)

(467,817)

306,708

182,378

Comprehensive income attributable to non-controlling interests

(245)

Comprehensive income (loss) attributable to Ocwen stockholders

$ (468,062)

$ 306,708

$ 182,378

[1]	Net of tax benefit of $0.8 million and $3.0 million for 2013 and 2012, respectively.
[2]	Net of tax benefit (expense) of $(0.2) million, $(3.6) million and $3.8 million for 2014, 2013 and 2012, respectively. These losses are reclassified to Other, net in the Consolidated Statements of Operations.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Footnote) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
Income tax benefit on change in deferred gain (loss) on cash flow hedges		$ 0.8	$ 3.0
Income tax benefit (expense) on reclassification adjustment for losses on cash flow hedges	$ (0.2)	$ (3.6)	$ 3.8

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss), Net of Income Taxes [Member]	Noncontrolling Interest in Subsidiaries [Member]
Balance at at Dec. 31, 2011	$ 1,343,311	$ 1,299	$ 826,121	$ 523,787	$ (7,896)
Balance at (in shares) at Dec. 31, 2011		129,899,288.000
Net income (loss)	180,923			180,923
Discount – Preferred stock beneficial conversion feature	8,688		8,688
Preferred stock dividends	(85)			(85)
Deemed dividend related to beneficial conversion feature of preferred stock	(60)			(60)
Conversion of 3.25% Convertible Notes	56,410	$ 46	56,364
Conversion of 3.25% Convertible Notes (in shares)		4,635,159
Exercise of common stock options	6,287	$ 11	6,276
Exercise of common stock options (in shares)		1,082,944
Equity-based compensation and other	14,493		14,493
Equity-based compensation and other (in shares)		20,541
Other comprehensive income, net of income taxes	1,455				1,455
Balance at at Dec. 31, 2012	1,611,422	$ 1,356	911,942	704,565	(6,441)
Balance at (in shares) at Dec. 31, 2012		135,637,932.000
Net income (loss)	310,418			310,418
Preferred stock dividends	(5,031)			(5,031)
Deemed dividend related to beneficial conversion feature of preferred stock	(6,989)			(6,989)
Conversion of 3.25% Convertible Notes	0
Conversion of preferred stock	100,000	$ 31	99,969
Conversion of preferred stock (in shares)		3,145,640
Repurchase of common stock	(217,903)	$ (42)	(217,861)
Repurchase of common stock (in shares)		(4,271,347)
Exercise of common stock options	(2,605)	$ 7	(2,612)
Exercise of common stock options (in shares)		652,015
Equity-based compensation and other	26,989		26,989
Equity-based compensation and other (in shares)		12,031
Other comprehensive income, net of income taxes	(3,710)				(3,710)
Balance at at Dec. 31, 2013	$ 1,812,591	$ 1,352	818,427	1,002,963	(10,151)	$ 0
Balance at (in shares) at Dec. 31, 2013	135,176,271	135,176,271
Net income (loss)	$ (469,555)			(469,800)		245
Preferred stock dividends	(1,163)			(1,163)
Deemed dividend related to beneficial conversion feature of preferred stock	(1,639)			(1,639)
Conversion of 3.25% Convertible Notes	0
Conversion of preferred stock	62,000	$ 20	61,980
Conversion of preferred stock (in shares)		1,950,296
Repurchase of common stock	$ (382,487)	$ (124)	(382,363)
Repurchase of common stock (in shares)	(10,420,396)	(12,370,692)
Exercise of common stock options	$ (70)	$ 4	(74)
Exercise of common stock options (in shares)		434,054
Equity-based compensation and other	17,224		17,224
Equity-based compensation and other (in shares)		25,686
Non-controlling interest in connection with the acquisition of a controlling interest in Ocwen Structured Investments, LLC	2,526					2,526
Other comprehensive income, net of income taxes	1,738				1,738
Balance at at Dec. 31, 2014	$ 1,041,165	$ 1,252	$ 515,194	$ 530,361	$ (8,413)	$ 2,771
Balance at (in shares) at Dec. 31, 2014	125,215,615	125,215,615

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Statement of Stockholders' Equity [Abstract]
Stated percentage of convertible notes			3.25%
Preferred stock dividends (in dollars per share)	$ 18.75	$ 37.29	$ 0.26

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities
Net income (loss)	$ (469,555)	$ 310,418	$ 180,923
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Goodwill impairment loss	420,201	0	0
Amortization of mortgage servicing rights	250,375	282,781	72,897
Amortization of debt issuance costs – senior secured term loan	5,139	4,395	3,718
Depreciation	21,910	24,245	5,720
Provision for bad debts	84,751	34,816	5,030
Gain on loans held for sale, net	(134,297)	(121,694)	(215)
Loss on deconsolidation of variable interest entities	0	0	3,167
Realized and unrealized losses on derivative financial instruments	2,643	14,336	4,294
(Gain) loss on extinguishment of debt	(2,609)	8,681	2,167
Loss (gain) on valuation of mortgage servicing rights, at fair value	22,068	(30,816)	(30)
Decrease (increase) in deferred tax assets, net	37,842	(21,125)	62,393
Equity-based compensation expense	10,729	5,648	2,934
Origination and purchase of loans held for sale	(7,430,340)	(9,678,038)	(172,262)
Proceeds from sale and collections of loans held for sale	7,345,730	9,468,627	243,434
Changes in assets and liabilities:
Decrease in advances and match funded advances	291,989	295,108	1,443,643
(Increase) decrease in receivables and other assets, net	(37,394)	224,543	(53,870)
(Decrease) increase in other liabilities	(94,508)	70,336	(2,593)
Other, net	27,850	(7,842)	14,504
Net cash provided by operating activities	352,524	884,419	1,815,854
Cash flows from investing activities
Distributions of capital from unconsolidated entities	6,572	1,300	3,226
Purchase of mortgage servicing rights, net	(22,488)	(987,663)	(180,039)
Acquisition of advances in connection with the purchase of mortgage servicing rights	(85,521)	(2,588,739)	(1,920,437)
Acquisition of advances in connection with the purchase of loans	(60,482)	0	0
Proceeds from sale of advances and match funded advances	1,054	3,842,537	2,824,645
Net proceeds from sale of diversified fee-based businesses to Altisource Portfolio Solutions, SA	0	210,793	0
Proceeds from sale of mortgage servicing rights	287	34,754	0
Proceeds from sale of advance financing subsidiary and special purpose entity	0	0	76,334
Proceeds from sale of beneficial interest in consolidated variable interest entities	0	0	3,020
Origination of loans held for investment - reverse mortgages	(816,881)	(609,555)	0
Principal payments received on loans held for investment - reverse mortgages	86,234	5,886	0
Additions to premises and equipment	(11,430)	(28,915)	(19,217)
Other	6,461	(1,207)	(449)
Net cash (used in) provided by investing activities	(958,247)	(2,414,978)	262,870
Cash flows from financing activities
Repayment of match funded liabilities	(274,567)	(167,931)	(1,665,330)
Proceeds from other secured borrowings	5,677,291	9,633,914	204,784
Repayments of other secured borrowings	(5,809,239)	(8,804,558)	(822,137)
Proceeds from issuance of senior unsecured notes	350,000	0	0
Payment of debt issuance costs	(6,835)	(25,758)	(1,052)
Proceeds from sale of mortgage servicing rights accounted for as a financing	123,551	447,755	320,381
Proceeds from sale of loans accounted for as a financing	783,009	604,991	0
Proceeds from sale of advances accounted for as a financing	88,981	0	0
Repurchase of common stock	(382,487)	(217,903)	0
Redemption of 10.875% Capital Securities	0	0	(26,829)
Payment of preferred stock dividends	(1,163)	(5,115)	0
Proceeds from exercise of common stock options	1,840	2,302	6,005
Other	6,303	21,244	(18,650)
Net cash provided by (used in) financing activities	556,684	1,488,941	(2,002,828)
Net (decrease) increase in cash	(49,039)	(41,618)	75,896
Cash at beginning of year	178,512	220,130	144,234
Cash at end of year	129,473	178,512	220,130
Supplemental cash flow information
Interest paid	560,208	395,758	219,825
Income tax payments, net	38,293	14,747	37,199
Supplemental non-cash investing and financing activities
Transfers of loans held for sale to loans held for investment	110,874	0	0
Transfers of loans held for sale to real estate owned	8,808	4,775	999
Conversion of Series A preferred stock to common stock	62,000	100,000	0
Conversion of 3.25% Convertible Notes to common stock	0	0	56,410
Fair value of assets acquired
Cash	0	0	(79,511)
Loans held for sale	0	0	(558,721)
Advances	0	(1,786,409)	(2,266,882)
Mortgage servicing rights	0	(401,314)	(360,344)
Deferred tax assets	0		(52,103)
Premises and equipment	0	(16,423)	(12,515)
Goodwill	0	(211,419)	(345,936)
Debt service accounts	0		(69,287)
Receivables and other assets	0	(2,989)	(27,765)
Fair value of assets acquired	0	2,418,554	3,773,064
Fair value of liabilities assumed
Match funded liabilities	0	0	1,997,459
Other secured borrowings	0	0	864,969
Accrued expenses and other liabilities	0	74,625	145,812
Total consideration	0	(2,343,929)	(764,824)
Issuance of preferred stock as consideration	0	0	162,000
Amount due to (from) seller for purchase price adjustments	0	54,220	(900)
Cash paid	0	(2,289,709)	(603,724)
Less cash acquired	0		79,511
Net cash paid	0	2,289,709	524,213
ResCap [Member]
Cash flows from investing activities
Payments to acquire business	(54,220)	(2,289,709)	0
Ocwen Structured Investments, LLC (OSI) [Member]
Cash flows from investing activities
Payments to acquire business	(7,833)	0	0
Liberty Acquisition [Member]
Cash flows from investing activities
Payments to acquire business	0	(26,568)	0
Correspondent One [Member]
Cash flows from investing activities
Net cash acquired in acquisition of Correspondent One S.A.	0	22,108	0
Homeward Residential Holdings, Inc. [Member]
Cash flows from investing activities
Payments to acquire business	$ 0	$ 0	$ (524,213)

Organization

12 Months Ended

Dec. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Note 1 — Organization

Ocwen Financial Corporation (NYSE: OCN) (Ocwen, we, us and our) 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 throughout the United States (U.S.) and in the United States Virgin Islands (USVI) with support operations in India and the Philippines. Ocwen is a Florida corporation organized in February 1988.

Ocwen owns all of the common stock of its primary operating subsidiary, Ocwen Mortgage Servicing, Inc. (OMS), and directly or indirectly owns all of the outstanding stock of its other primary operating subsidiaries: Ocwen Loan Servicing, LLC (OLS), Ocwen Financial Solutions Private Limited, Homeward Residential, Inc. (Homeward), and Liberty Home Equity Solutions, Inc. (Liberty).

We perform primary and master servicer activities on behalf of investors and other servicers, including the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the GSEs), the Government National Mortgage Association (Ginnie Mae) and private-label securitizations (non-Agency). As primary servicer, we may be required to make certain payments of property taxes and insurance premiums, default and property maintenance payments, as well as advances of principal and interest payments before collecting them from borrowers. As master servicer, we collect mortgage payments from primary servicers and distribute the funds to investors in the mortgage-backed securities. To the extent the primary servicer does not advance the scheduled principal and interest, as master servicer we are responsible for advancing the shortfall subject to certain limitations.

We originate, purchase, sell and securitize conventional (conforming to the underwriting standards of Fannie Mae or Freddie Mac; collectively referred to as Agency loans) and government-insured (Federal Housing Authority (FHA) or Department of Veterans Affairs (VA)) forward and reverse mortgages. The GSEs or Ginnie Mae guarantee these securitizations.

Note 1A — Business Environment and Other Uncertainties

We are facing certain challenges and uncertainties that could have significant adverse effects on our business, liquidity and financing activities. We may be adversely impacted by the following, among other things:


•	Failure to maintain sufficient liquidity to operate our servicing and lending businesses;


•	Failure to comply with covenants;


•	Downgrades in our third-party servicer ratings;


•	Regulatory actions against us; or


•	Our relationship with Home Loan Servicing Solutions, Ltd. (HLSS).

Liquidity

Our ability to finance servicing advances is a significant factor that affects our liquidity. Our use of advance facilities is integral to our servicing advance financing strategy, as these advance facilities are necessary for us to meet our daily advance funding obligations under our servicing agreements. Our advance funding facilities have a 364-day term and the revolving periods for all of our advance funding facilities end in 2015. At December 31, 2014, we had $2.1 billion outstanding under these facilities. In the event we are unable to renew, replace or extend one or more of these advance funding facilities, repayment of the outstanding balance must begin at the end of the respective revolving period. In addition, we use mortgage loan warehouse facilities to fund newly originated loans on a short-term basis until they are sold to secondary market investors, including GSEs or other third-party investors. All of our master repurchase and participation agreements for financing new loan originations have 364-day terms and mature in 2015 under the same construct of 364-day facilities that are typically renewed annually. At December 31, 2014, we had $428.5 million outstanding under these financing arrangements.

We currently plan to renew, replace or extend all of these debt agreements consistent with our historical experience. We currently are in negotiations with our lenders for the renewal, replacement or extension of our debt arrangements that mature or begin amortization in 2015. We may also consider other capital markets transactions including, but not limited to, the sale and financing of advance receivables in the event we do not renew, replace or extend a portion or all of our existing advance financing facilities. We have entered into commitment letters to refinance certain of our debt agreements and extended certain facilities ahead of their scheduled maturity, as detailed below under “Recent Actions.” Our lenders’ obligations to fund under these commitment letters are subject to conditions precedent, some of which are outside our control. In the event we are unable to renew, replace or extend all of these debt agreements, we may not have adequate sources of funding for our business. Due to the significant level of cash requirements related to servicing advances, we may not have sufficient levels of liquidity to fund the operations without our advance facilities. We typically require significantly more liquidity to meet our advance funding obligations than our available cash on hand.

Covenants

Under the terms of our existing debt agreements, we are subject to various qualitative and quantitative covenants. These covenants include:


•	Financial covenants;


•	Covenants to operate in material compliance with applicable laws;


•	Restrictions on our ability to engage in various activities, including but not limited to incurring additional debt, paying dividends, repurchasing or redeeming capital stock, transferring assets or making loans, investments or acquisitions;


•	Monitoring and reporting of various specified transactions or events, including specific reporting on defined events affecting collateral underlying certain debt agreements; and

•

Requirements to provide audited financial statements within specified timeframes, including a requirement under our SSTL that Ocwen’s financial statements and the related audit report be unqualified as to going concern. As described in “Recent Actions” below, we amended our SSTL in April 2015 to remove the requirement that Ocwen’s 2014 financial statements and the related audit report be unqualified as to going concern.

Financial covenants in our debt agreements require that we maintain, among other things:


•	a specified interest coverage ratio, which is defined under our SSTL as the ratio of trailing four quarter adjusted EBITDA to trailing four quarter interest expense (each as defined therein);


•	a specified corporate leverage ratio, which is defined under our SSTL as consolidated debt to trailing four quarter adjusted EBITDA (each as defined therein);


•	a specified consolidated total debt to consolidated tangible net worth ratio;


•	a specified loan to value ratio, as defined under our SSTL; and


•	specified levels of consolidated tangible net worth, liquidity and, at the OLS level, net operating income.

As a result of the covenants to which we are subject, we may be limited in the manner in which we conduct our business and may be limited in our ability to engage in favorable business activities or raise additional capital to finance future operations or satisfy future liquidity needs. In addition, breaches or events that may result in a default under our debt agreements include, among other things, noncompliance with our covenants, nonpayment of principal or interest, material misrepresentations, the occurrence of material adverse change, insolvency, bankruptcy, certain material judgments and changes of control. Covenants and defaults of this type are commonly found in debt agreements such as ours. Certain of these covenants and defaults are open to subjective interpretation and, if our interpretation were contested by a lender, a court may ultimately be required to determine compliance or lack thereof. In addition, our debt agreements generally include cross default provisions such that a default under one agreement could trigger defaults under other agreements. If we fail to comply with our debt agreements and are unable to avoid, remedy or secure a waiver of any resulting default, we may be subject to adverse action by our lenders, including termination of further funding, acceleration of outstanding obligations, enforcement of liens against the assets securing or otherwise supporting our obligations, and other legal remedies. Our lenders can waive their contractual rights in the event of a default.

In connection with certain of our secured borrowings, failure to provide audited financial statements timely constitutes a default. We did not provide audited financial statements for Homeward as of and for the year ended September 30, 2014, or for OLS and Liberty as of and for the year ended December 31, 2014, within the original contractually required timeframes. We received waivers of the resulting defaults from all applicable lenders through at least May 29, 2015.

OLS, Homeward and Liberty are parties to seller/servicer agreements and/or subject to guidelines and regulations (collectively, seller/servicer obligations) with one or more of the GSEs, HUD, FHA, VA and Ginnie Mae. These seller/servicer obligations include financial covenants that include capital requirements related to tangible net worth, as defined by the applicable agency, an obligation to provide audited consolidated financial statements within 90 days of the applicable entity’s fiscal year end as well as extensive requirements regarding servicing, selling and other matters. To the extent that these requirements are not met or waived, the applicable agency may, at its option, utilize a variety of remedies including, requirements to deposit funds as security for our obligations, sanctions, suspension or even termination of approved seller/servicer status, which would prohibit future originations or securitizations of forward or reverse mortgage loans or servicing for the applicable agency. As noted previously, we were unable to provide audited financial statements for OLS, Homeward and Liberty within the required timeframes. To date, none of these agencies has communicated any material sanction, suspension or prohibition in connection with our seller/servicer obligations. We believe we were in compliance with the related net worth requirements at December 31, 2014. Our non-Agency servicing agreements also contain requirements regarding servicing practices and other matters, and a failure to comply with these requirements could have an adverse impact on our business.

Servicer Ratings

Standard & Poor’s (S&P), Moody’s Investors Service (Moody’s), Fitch Ratings Inc. (Fitch) and Morningstar, Inc. (Morningstar) rate us as a mortgage servicer. Each of these rating agencies has downgraded our servicer rating within the last nine months. Additionally, three of these rating agencies currently have our ratings outlook as ‘negative’ or ‘on review for downgrade.’ Maintaining minimum ratings from these agencies are important to the conduct of our loan servicing and lending businesses. Further downgrades in servicer ratings could adversely affect our ability to finance servicing advances and maintain our status as an approved servicer by Fannie Mae and Freddie Mac. The servicer rating requirements of Fannie Mae do not necessarily require or imply immediate action, as Fannie Mae has discretion with respect to whether we are in compliance with their requirements and what actions it deems appropriate under the circumstances in the event that we fall below their desired servicer ratings.

In addition, out of approximately 4,100 non-Agency servicing agreements, approximately 700 with approximately $45.0 billion of UPB as of December 31, 2014 have minimum servicer ratings criteria. As a result of downgrades in our servicer ratings, termination rights have been triggered in approximately 400 of these non-Agency servicing agreements. This represents approximately $26.0 billion in UPB as of December 31, 2014, or approximately 13% of our total non-Agency servicing portfolio. We recently received notices terminating us as the servicer under four of our non-Agency servicing agreements due to rating downgrades. Pursuant to our servicing agreements, generally we are entitled to payment of accrued and unpaid servicing fees through termination as well as all advances and certain other previously unreimbursed amounts, although we lose the future servicing fee revenue. While we believe the financial impact of the termination of servicing under these four servicing agreements, which represent 0.14% of our overall servicing portfolio as of December 31, 2014, will be immaterial to our overall financial condition, we could be subject to further terminations, either as a result of recent servicer ratings downgrades or future adverse actions by rating agencies, which could have an adverse effect on our business, financing activities, financial condition and results of operations.

Under one of its advance financing agreements, OLS must maintain certain minimum servicer ratings assigned by S&P, Moody’s and Fitch. If any of these rating agencies withdraws its rating or if the assigned ratings falls below the minimum ratings established in the lending agreement, an early amortization event occurs under the lending agreement if the lender’s agent notifies the indenture trustee that an early amortization event has occurred. As a result of downgrades in our servicer ratings, the lender has the right to deliver such notice at any time. The lender has agreed not to deliver such a notice to the indenture trustee subject to its ongoing monthly review. If an early amortization event occurs and is not waived by the lender, no new advances can be funded under the facility, all collections on advances funded through the facility must be used to pay interest and principal on currently outstanding borrowings under the facility, minimum facility balance repayments would be instituted, and the interest rate margin on 1-month LIBOR would increase. At December 31, 2014, we had $373.1 million of borrowings outstanding under this facility out of a maximum borrowing capacity of $450.0 million. The scheduled date to begin amortization of this facility is June 2015. As described below under “Recent Actions,” one of our commitment letters provides for replacement financing should the existing lender seek not to renew or extend the revolving period upon its completion in June 2015.

Downgrades in our servicer ratings could also affect the terms and availability of debt financing facilities that we may seek in the future.

Our failure to maintain minimum or specified ratings could adversely affect our dealings with contractual counterparties, including GSEs, and regulators, any of which could have a material adverse effect on our business, financing activities, financial condition and results of operations.

Regulatory Uncertainties

As a result of the current regulatory environment, we have faced, and expect to continue to face, increased regulatory and public scrutiny as well as stricter and more comprehensive regulation of our business. We have recently entered into a number of regulatory settlements which have significantly impacted our ability to grow our servicing portfolio and which subject us to ongoing monitoring or reporting. See Note 26 - Regulatory Requirements and Note 28 - Contingencies for further information regarding regulatory requirements, our recent regulatory settlements and regulatory-related contingencies.

To the extent that an examination or other regulatory engagement reveals a failure by us to comply with applicable law, regulation or licensing requirement, or if we fail to comply with the commitments we have made under our regulatory settlements or if other regulatory actions are taken in the future against us of a similar or different nature, this could lead to (i) loss of our licenses and approvals to engage in our servicing and lending businesses, (ii) governmental investigations and enforcement actions, (iii) administrative fines and penalties and litigation, (iv) civil and criminal liability, including class action lawsuits, (v) breaches of covenants and representations under our servicing, debt or other agreements, (vi) inability to raise capital and (vii) inability to execute on our business strategy. Any of these occurrences could increase our operating expenses and reduce our revenues, hamper our ability to grow or otherwise materially and adversely affect our business, reputation, financial condition and results of operations.

Our Relationship with HLSS

We have sold rights to receive servicing fees, excluding ancillary income, with respect to certain non-Agency MSRs (Rights to MSRs), together with the related servicing advances, to HLSS. As of December 31, 2014 and through the date of HLSS’ sale transaction with New Residential Investment Corp. (NRZ) on April 6, 2015, we were dependent upon HLSS for financing of servicing advance obligations for loans underlying Rights to MSRs where we are the servicer but HLSS assumed this obligation under the terms of our agreements with HLSS. HLSS, in turn, was dependent upon its advance financing facilities in order to fund a substantial portion of the servicing advances that it was contractually obligated to make pursuant to our agreements with HLSS. As of December 31, 2014, we were the servicer on Rights to MSRs pertaining to approximately $160.8 billion in UPB and the associated outstanding servicing advances as of such date were approximately $6.1 billion.

HLSS’ advance funding facilities had a 364-day term and the revolving periods for a significant portion of their advance funding facilities were scheduled to end in 2015. We are contractually required under our servicing agreements to make the relevant servicing advances even if HLSS did not, or was unable to, perform in accordance with its contractual obligations to fund those advances. If an event of default were to be determined, HLSS’ advance facilities revolving periods would terminate and the facilities would begin amortization. There were no provisions under which Ocwen would have been obligated to repay the HLSS advance facilities upon an event of default by HLSS. Instead, Ocwen, as servicer, would have been immediately responsible for all new advances. We do not have any committed or executed financial arrangements to provide for this need should it arise, and we cannot provide any assurances that such financing would be available, or if available, could be obtained at terms and conditions acceptable to us.

On April 6, 2015, HLSS closed on the sale of substantially all of its assets to NRZ. Following the sale, NRZ, is the owner of the Rights to MSRs and related advances and has assumed HLSS’ rights and obligations under the associated agreements. NRZ is a public company listed on the New York Stock Exchange, whose business is focused on investing in, and actively managing, investments related to residential real estate, including MSRs. NRZ is externally managed and advised by an affiliate of Fortress Investment Group LLC, a global investment management organization.

Recent Actions

To address the uncertainties set forth above, we have proactively engaged with our lenders to address our maturing debt agreements. Recent financing developments include the following:

•

On February 27, 2015, we entered into an agreement with a global financial institution to provide, subject to definitive documentation, the maintenance of our current servicer ratings with Standard & Poor’s Ratings Services, and other funding conditions, a replacement financing for an existing $450.0 million servicing advance facility should the existing lender seek not to renew or extend the revolving period upon its completion in June 2015.

•

On March 2, 2015, we entered into an amendment to our SSTL. Among other things, the amendment: (1) eliminates the dollar cap on the general asset sale basket and require us to use 75% of the net cash proceeds of permitted asset sales under such general asset basket to prepay the loans under the SSTL and, subject to certain conditions, permits us to use up to 25% of such net cash proceeds to reinvest in assets used in our business within 120 days of receipt thereof (subject to an extension of up to 90 days if a binding agreement is entered into within such 120 days); (2) increases the quarterly covenant levels of the corporate leverage ratio; and (3) makes certain modifications to the cross default and definition sections.


•	On March 10, 2015, we entered into agreements with an existing lender to extend the maturity dates of our two loan origination participation agreements to April 30, 2016. The combined maximum borrowing capacity under these two agreements is $200.0 million.


•	On March 19, 2015, we entered into an amendment to an existing servicing advance facility to clarify the treatment of certain costs incurred by us related to regulatory matters in connection with the agreement covenants.


•	On April 17, 2015, we entered into an agreement with a lender to provide, subject to a definitive master repurchase agreement and other funding conditions, up to $125.0 million of backup financing for new loan originations should existing facilities not renew at their maturity date.

•

On April 17, 2015, we entered into an amendment to the SSTL facility agreement. Effective as of April 20, 2015, the amendment, among other things (1) removed, with respect to the 2014 fiscal year, the requirement that our financial statements and the related audit report must be unqualified as to going concern; and (2) extended the required time period for delivery of the 2014 audited financial statements to May 29, 2015.

•

On May 11, 2015, we entered into an agreement with a global financial institution to refinance, subject to definitive documentation, the maintenance of our current servicer ratings with Standard & Poor’s Ratings Services, and other funding conditions, $500.0 million of commitments under an existing $1.8 billion servicing advance facility and to extend the applicable revolving period to or beyond March 31, 2016.


•	Prior to the issuance of these consolidated financial statements, we entered into amendments or obtained waivers from each lender, to the extent necessary, extending the contractually required time period for delivery of audited financial statements for fiscal year 2014 to May 29, 2015.

On April 6, 2015, we entered into an amendment to certain of the agreements governing our relationship with HLSS. In consideration of our consent to the assignment by HLSS to NRZ of all HLSS’ right, title and interest in, to and under our arrangements with HLSS (including the Rights to MSRs), the amendment, among other things:


•	extended the term during which we are scheduled to be the servicer on loans underlying the Rights to MSRs (along with the associated economic benefits) for two additional years or until April 30, 2020, whichever is earlier, which would depend on the sale date for the applicable Rights to MSRs (existing terms ranged from February 2018 through October 2019 prior to the amendment);


•	provided that such extension will not apply with respect to any servicing agreement that, as of the date that it was scheduled to terminate under our original agreements, is affected by an uncured termination event due to a downgrade of our servicer rating to “Below Average” or lower by S&P or to “SQ4” or lower by Moody’s;


•	provided that the parties will commence negotiating in good faith for an extension of the contract term and the servicing fees payable to us no later than six months prior to the end of the applicable term as extended pursuant to the amendment; and


•	imposed a two year standstill (until April 6, 2017 and subject to certain conditions) on the rights of NRZ to replace us as servicer.

In the event there is a future downgrade of our S&P servicer rating below our current rating of “Average,” we have also agreed to compensate NRZ, as successor to HLSS, for certain increased costs associated with its servicing advance financing facilities, including increased costs of funding, to the extent such costs are the direct result of such downgrade. The amendment provided that any such compensation, if required, shall not exceed $3.0 million for any calendar month or $36.0 million in the aggregate. In such an event, NRZ has agreed to use commercially reasonable efforts to assist us in curing any potential cost increases by obtaining amendments to the relevant financing agreements.

Consistent with our strategic plan to sell a significant portion of our Agency MSRs, we have announced or completed a number of asset sales, including the following:

•

On March 2, 2015, we signed a letter of intent with a buyer for the sale of MSRs on a portfolio consisting of approximately 277,000 performing Agency loans owned by Fannie Mae with a total UPB of approximately $45.0 billion. This transaction remains subject to approvals by FHFA and Fannie Mae and other customary closing conditions and is expected to close on June 1, 2015. In connection with this transaction, on April 17, 2015, we entered into a letter agreement with Fannie Mae pursuant to which we will designate a portion of the expected proceeds as prepayments to secure against certain future obligations. These future obligations include repurchases, indemnifications and various fees. The total cash pre-payments are $15.4 million, including $3.2 million paid on April 27, 2015 with the remainder to be paid on June 1, 2015. Another $37.5 million of escrowed collateral will be set aside on June 1, 2015 to secure potential future obligations not covered by the prepaid amount.

•

On March 18, 2015, OLS and Green Tree Loan Servicing, a subsidiary of Walter Investment Management Corp. (collectively Walter), signed an agreement in principle for the sale of residential MSRs on a portfolio consisting of approximately 55,000 largely performing loans owned by Freddie Mac with a total UPB of approximately $9.6 billion. We executed a definitive agreement on April 29, 2015 and initial funding occurred on April 30, 2015. We expect that servicing will begin to transfer on or around June 16, 2015.

•

On March 24, 2015, we announced that OLS and Nationstar Mortgage LLC, an indirectly held, wholly owned subsidiary of Nationstar Mortgage Holdings Inc. (collectively, “Nationstar”), have agreed in principle to the sale of residential MSRs on a portfolio consisting of approximately 142,000 loans owned by Freddie Mac and Fannie Mae with a total UPB of approximately $25.0 billion. We closed on the sale of a portion of these MSRs, with a total UPB of approximately $2.8 billion, on April 30, 2015. The sale of the remaining MSRs, subject to a definitive agreement, approvals by Freddie Mac, Fannie Mae and FHFA and other customary conditions, is expected to close in June 2015.


•	On March 31, 2015, OLS closed on a sale agreement with Nationstar for the sale of residential MSRs on a portfolio consisting of 76,000 performing loans owned by Freddie Mac with a UPB of $9.1 billion. Servicing was successfully transferred on April 16, 2015.

We currently expect to receive approximately $852.0 million of proceeds from the above described transactions, subject in each case to necessary approvals and the satisfaction of closing conditions. We expect that the majority approximately $840.0 million of such proceeds will be used for prepayments under our SSTL. In addition, on April 30, 2015, we announced agreements with Fannie Mae and Freddie Mac to sell portfolios of non-performing loan servicing. We expect these transactions to close over the coming months, with the first transfer on May 1, 2015. These transactions will include payments to the GSEs to assume the delinquent servicing and may, in some cases, include settlements of certain indemnification obligations. We expect these transactions to be cash flow positive as we will be reimbursed for outstanding advances.

We have been, and continue to, engage in communications with the ratings agencies and key stakeholders, including the GSEs, in connection with recent and planned future actions and developments, including the uncertainties identified above.

We also continue to work with our regulators, including the CFPB and state regulators and attorneys general, on enhancing our risk and compliance management systems and remediating deficiencies. We are currently unaware of any significant unresolved issues with state agencies and not aware of, nor anticipating, any material regulatory fines, penalties or settlements. We are not aware of any pending or threatened actions to suspend or revoke any state licenses.

There can be no assurances that management’s recent and future actions will be successful in mitigating the above risks and uncertainties in our business.

Note 1B — Basis of Presentation and Significant Accounting Policies

Consolidation and Basis of Presentation

Principles of Consolidation

Our financial statements include the accounts of Ocwen, its majority-owned subsidiaries and any variable interest entity (VIE) for which 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.

Foreign Currency Translation

Where the functional currency is not the U.S. dollar, we translate the assets and liabilities of foreign subsidiaries into U.S. dollars at the current rate of exchange existing at the balance sheet date, while revenues and expenses are translated at average exchange rates during the reported period. Non-current assets and equity are translated to U.S. dollars at historical exchange rates. We report the resulting translation adjustments as a component of Accumulated other comprehensive loss in Stockholders’ equity in our Consolidated Balance Sheets. Where the functional currency of a foreign subsidiary is the U.S. dollar, re-measurement adjustments of foreign-denominated amounts to U.S. dollars are included in Other, net in our Consolidated Statements of Operations.

Reclassifications

Within the Total assets section of the Consolidated Balance Sheet at December 31, 2013, we reclassified Debt service accounts (previously reported as a separate line item) of $129.9 million to Other assets. In addition, certain other insignificant amounts in the Consolidated Statements of Cash Flows for prior years have been reclassified to conform to the current year presentation. These reclassifications had no impact on our consolidated financial position, cash flows or results of operations.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, the reported amounts of revenues and expenses during the reporting period and the related disclosures in the accompanying notes. Such estimates and assumptions include, but are not limited to, those that relate to fair value measurements, the provision for potential losses that may arise from litigation proceedings, representation and warranty and other indemnification obligations and the valuation of goodwill. In developing estimates and assumptions, management uses all available information; however, actual results could materially differ because of uncertainties associated with estimating the amounts, timing and likelihood of possible outcomes.

Significant Accounting Policies

Cash

Cash includes both interest-bearing and non-interest-bearing demand deposits with financial institutions that have original maturities of 90 days or less.

Mortgage Servicing Rights

MSRs are assets representing our right to service portfolios of mortgage loans. We have primarily obtained MSRs through asset purchases or business combination transactions. We also retain MSRs on originated loans when they are sold in the secondary market. For servicing retained in connection with the securitization of reverse mortgage loans accounted for as secured financings, we do not recognize an MSR.

An agreement between the various parties to a mortgage securitization transaction typically specifies the rights and obligations of the holder of the MSRs which include guidelines and procedures for servicing the loans. Two examples of these guidelines and procedures include remittance and reporting requirements. The UPB of the loan portfolios that we service for others is not included on our balance sheet.

Custodial accounts, which hold funds representing collections of principal and interest that we receive from borrowers (float balances), are held in escrow by an unaffiliated bank and excluded from our balance sheet.

All newly acquired or retained MSRs are initially measured at fair value. We recognize a servicing liability for those portfolio contracts that are not expected to compensate us adequately for performing the servicing. For this purpose, we define contracts as conventional, government-insured or non-Agency (commonly referred to as non-prime, subprime or private-label loans) based on their general comparability with regard to servicing guidelines, underwriting standards and borrower risk characteristics. Servicing assets are not recognized for subservicing arrangements entered into with the entity that owns the MSRs. Subsequent to acquisition, we account for servicing assets and servicing liabilities using the amortization method or the fair value measurement method. The fair value election is irrevocable and can be made at the beginning of any fiscal year. Additionally, transferring servicing assets and servicing liabilities from a class subsequently measured using the amortization method to a class subsequently measured at fair value is permitted as of the start of any fiscal year. Once the fair value election is made for a particular class of MSRs, that election applies to all subsequently acquired or originated servicing assets and liabilities with characteristics consistent with the class. We defined our classes based on our strategy for managing the risks of the underlying portfolios. For certain of the servicing assets, we previously managed the effects of interest rate risk with derivative financial instruments. We elected to account for this class of servicing assets using the fair value measurement method.

For servicing assets or liabilities that we account for using the amortization method, we amortize the balances in proportion to, and over the period of, estimated net servicing income (if servicing revenues exceed servicing costs) or net servicing loss (if servicing costs exceed servicing revenues). We assess servicing assets or liabilities for impairment or increased obligation based on fair value at each reporting date. Estimated net servicing income is primarily driven by the estimated future cash flows of the underlying mortgage loan portfolio, which, absent new purchases, declines over time from prepayments and scheduled loan amortization. We adjust MSR amortization prospectively in response to changes in estimated projections of future cash flows. We perform an impairment analysis based on the difference between the carrying amount and estimated fair value after grouping the underlying portfolios into the applicable strata. We recognize any impairment through a valuation allowance. We adjust the valuation allowance to reflect subsequent changes in the measurement of impairment. However, we do not recognize fair value in excess of the carrying amount of servicing assets for that stratum.

For servicing assets or liabilities that we account for at fair value on a recurring basis, we measure the balances at fair value at each reporting date and report changes in fair value in earnings in the period in which the changes occur.

We earn fees for servicing mortgage loans. We collect servicing fees, generally expressed as a percent of UPB, from the borrowers’ payments. We also include late fees, prepayment penalties, float earnings and other ancillary fees in servicing revenue. We recognize servicing fees as revenue when the fees are earned which is generally when the borrowers’ payments are collected or when loans are modified or liquidated through the sale of the underlying real estate collateral or otherwise.

Advances and Match Funded Advances

During any period in which a borrower does not make payments, most of our servicing agreements require that we advance our own funds to meet contractual principal and interest remittance requirements for the investors, to pay property taxes and insurance premiums and to process foreclosures. We also advance funds to maintain, repair and market foreclosed real estate properties on behalf of investors. These advances are made pursuant to the terms of each servicing contract. Each servicing contract is associated with specific loans, identified as a pool.

When we make an advance on a loan under each servicing contract, we are entitled to recover that advance either from the borrower, for reinstated and performing loans, or from investors, for liquidated loans. Most of our servicing contracts provide that the advances made under the respective agreement have priority over all other cash payments from the proceeds of the loan, and in the majority of cases, the proceeds of the pool of loans that are the subject of that servicing contract. As a result, we are entitled to repayment from loan proceeds before any interest or principal is paid on the bonds, and in the majority of cases, advances in excess of loan proceeds may be recovered from pool level proceeds.

We establish an allowance for losses through a charge to earnings to the extent that we believe advances are uncollectible under the provisions of each servicing contract taking into consideration historical loss and delinquency experience, length of delinquency and the amount of the advance. However, we are generally only obligated to advance funds to the extent that we believe the advances are recoverable from expected proceeds from the loan. We assess collectibility using proprietary cash flow projection models that incorporate a number of different factors, depending on the characteristics of the mortgage loan or pool, including, for example, time to a foreclosure sale, estimated costs of foreclosure action, future property tax payments and the value of the underlying property net of carrying costs, commissions and closing costs.

Loans Held for Sale

Loans held for sale include residential mortgage loans that we originate or purchase and do not intend to hold until maturity. We report loans held for sale at either fair value or the lower of cost or fair value computed on an aggregate basis. For loans held for sale that are reported at the lower of cost or fair value, loan origination fees, as well as premium and discount, points and incremental direct origination costs, are initially recorded as an adjustment of the cost basis of the loan and are deferred until the loan is sold. For loans that we elected to measure at fair value on a recurring basis, we report changes in fair value in Gain on loans held for sale, net in the Consolidated Statements of Operations in the period in which the changes occur. These loans are expected to be sold into the secondary market to the GSEs or into Ginnie Mae guaranteed securitizations.

For all other loans held for sale which we report at the lower of cost or fair value, we account for the excess of cost over fair value as a valuation allowance and include changes in the valuation allowance in Other, net, in the Consolidated Statements of Operations in the period in which the change occurs.

We accrue interest income as earned. We place loans on non-accrual status after any portion of principal or interest has been delinquent for more than 89 days, or earlier if management determines the borrower is unable to continue performance. When we place a loan on non-accrual status, we reverse the interest that we have accrued but not yet received. We return loans to accrual status only when we reinstate the loan and there is no significant uncertainty as to collectability.

Loans Held for Investment

Loans held for investment include reverse residential mortgage loans that we originate and which we have elected to measure at fair value. These reverse mortgages are insured by the FHA and pooled into Ginnie Mae guaranteed securities that we sell into the secondary market with servicing rights retained. Loan transfers in these Ginnie Mae securitizations do not meet the definition of a participating interest and as a result, the transfers of the reverse mortgages do not qualify for sale accounting. Therefore, we account for these transfers as financings, with the reverse mortgages classified as Loans held for investment - reverse mortgages, at fair value, on our Consolidated Balance Sheets, with no gain or loss recognized on the transfer.

Unlike loans held for sale, upfront costs and fees related to loans held for investment, including broker fees, are recognized in earnings as incurred and are not capitalized. However, we capitalize premiums on loans purchased via the correspondent channel, because they represent part of the purchase price. Changes in the fair value of the reverse mortgages are included in Other revenues in our Consolidated Statements of Operations. Included in net fair value gains on reverse mortgages is interest income that we expect to collect on the reverse mortgages. We report originations and collections of reverse mortgages in investing activities in the Consolidated Statements of Cash Flows. We report net fair value gains on reverse mortgages as an adjustment to the net cash provided by or used in operating activities in the Consolidated Statements of Cash Flows. Proceeds from securitizations of reverse mortgages are included in financing activities in the Consolidated Statements of Cash Flows.

Transfers of Financial Assets

We securitize, sell and service forward and reverse residential mortgage loans. Securitization transactions typically involve the use of VIEs and are accounted for either as sales or as secured financings. We typically retain economic interests in the securitized assets in the form of servicing rights and obligations. In order to efficiently finance our assets and operations and create liquidity, we may sell servicing advances, MSRs or the right to receive servicing fees, excluding ancillary income, relating to certain of our MSRs (Rights to MSRs).

In order to determine whether or not a VIE is required to be consolidated, we consider our ongoing involvement with the VIE. In circumstances where we have both the power to direct the activities that most significantly impact the performance of the VIE and the obligation to absorb losses or the right to receive benefits that could be significant, we would conclude that we would consolidate the entity, which precludes us from recording an accounting sale in connection with the transfer of the financial assets. In the case of a consolidated VIE, we continue to report the underlying residential mortgage loans or servicing advances, and we record the securitized debt on our consolidated balance sheet.

In the case of transfers where either one or both of the power or economic criteria above are not met, we evaluate whether we achieve a sale for accounting purposes. In order to achieve a sale, the transferred assets must be legally isolated, not be constrained by restrictions from further transfer and be deemed to be beyond our control. If the transfer does not meet any of these three criteria, the accounting is consistent with a secured financing as described in the preceding paragraph. In certain situations, we may have continuing involvement in transferred loans through our retained servicing. Additionally, we may have the right, but not the obligation, to buy certain re-performing loans from the purchaser for which we have secured a commitment to re-pool those loans under a Ginnie Mae program. In both cases, transactions involving these situations typically would still be eligible for sale accounting, as we have ceded effective control of these loans to the purchaser. Subsequent to the determination that a transaction does not meet the accounting sale criteria, we may determine that we meet the criteria. In the event we subsequently meet the sale accounting criteria, we derecognize the transferred assets and related liabilities.

In the case of transfers of MSRs and Rights to MSRs where we retain the right to subservice, we defer the related gain or loss and amortize the balance over the life of the subservicing agreement.

Gains or losses on off-balance sheet securitizations take into consideration any retained interests, including servicing rights and representation and warranty obligations, both of which are initially recorded at fair value at the date of sale in Gain on loans held for sale, net, in our Consolidated Statements of Operations.

Goodwill

Goodwill represents the cost of acquired businesses in excess of the fair value of the net assets acquired, including any identifiable intangible assets.

For purposes of testing goodwill for impairment, we review our reportable segments periodically to determine if any reportable segment includes more than one operating segment, the performance of which is regularly reviewed by our chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. To the extent that multiple operating segments are identified within one or more reportable segments, we review those operating segments to determine if any of its components represent reporting units - that is, a business for which discrete financial information is available and the operating results of which are regularly reviewed by operating segment management. We aggregate two or more components of an operating segment and deem them a single reporting unit if the components have similar economic characteristics. However, we deem an operating segment to be a reporting unit if all of its components are similar, if none of its components is a reporting unit or if it comprises only a single component.

We determine the amount of goodwill assigned to a reporting unit in a manner similar to how we determine the amount of goodwill to recognize in a business combination. That is, we determine the fair value of the acquired business (or portion thereof) to be included in a reporting unit - the fair value of the individual assets acquired and liabilities assumed that are assigned to the reporting unit. Any excess of the fair value of the acquired business (or portion thereof) over the fair value of the individual assets acquired and liabilities assumed that are assigned to the reporting unit is the amount of goodwill assigned to that reporting unit. We assign any goodwill acquired in a business combination to one or more reporting units as of the acquisition date using a reasonable, supportable and consistent methodology and based upon a determination of which reporting units are expected to benefit from the synergies of the business combination, regardless of whether any other assets or liabilities of the acquired business are also assigned to those reporting units. The total amount of acquired goodwill may be divided among a number of reporting units.

We test goodwill for impairment annually or sooner if an event occurs or circumstances change that would more likely than not (defined as having a likelihood of more than 50 percent) reduce the fair value of a reporting unit below its net carrying value. We perform our annual impairment test of goodwill as of August 31^st of each year. Goodwill is reviewed for impairment utilizing a two-step process. We have the option of performing a qualitative assessment of impairment to determine whether any further quantitative testing for impairment is necessary. If no impairment is implied based upon the qualitative assessment, no further testing is required. Factors that we consider in the qualitative assessment include general economic conditions, conditions of the industry and market in which we operate, regulatory developments, cost factors and our overall financial performance.

If we perform the two-step quantitative assessment, we first compare the fair value of the reporting unit with its net carrying value, including goodwill. If the net carrying value of the reporting unit exceeds its fair value, we then perform the second step of the impairment test to measure the amount of impairment loss, if any. In the second step, we allocate the reporting unit’s fair value to all of its assets and liabilities in a manner similar to a purchase price allocation, with any residual fair value being allocated to goodwill (implied fair value of goodwill). If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, we recognize an impairment loss in an amount equal to that excess up to the carrying value of goodwill.

In performing the quantitative two-step impairment analysis for goodwill, we use a combination of generally accepted valuation approaches to determine the fair value of the reporting unit. Under the income approach, we use projections of future cash flows discounted at a risk-adjusted market rate. The determination of risk-adjusted market discount rates is subjective and could vary based on the nature of the underlying business, stage of development and revenue to date. The projections of future cash flows and assumptions concerning future operating performance and economic conditions may differ from actual results. Under the market approach, we utilize revenue and earnings multiples based on the market value of guideline publicly-traded companies in developing estimates of the fair value of the reporting unit.

Premises and Equipment

We report premises and equipment at cost and, except for land, depreciate them over their estimated useful lives on a straight-line basis as follows:



Computer hardware and software	2 – 3 years
Buildings	40 years
Leasehold improvements	Term of the lease not to exceed useful life
Furniture and fixtures	5 years
Office equipment	5 years

Representation, Warranty and Indemnification Obligations

We recognize the fair value of representation and warranty obligations in connection with originations upon the sale or securitization of the loan or upon the completion of an acquisition to the extent that we assume these obligations. Obligations recognized in connection with our loan sales and securitization activities are classified in Other liabilities on our Consolidated Balance Sheet and recognized in Gain on loans held for sale, net on our Consolidated Statements of Operations. The fair value of liabilities assumed as part of an MSR or servicing business acquisition are recognized on the closing date and are classified in Other liabilities on our Consolidated Balance Sheet. Thereafter, the estimation of the liability considers probable future obligations based primarily on actual historical activity for loans of similar type segregated by year of origination and estimated loss severity based on actual loss rates for similar loans, our historical rescission rates and the current pipeline of unresolved demands. Loss severity considers historical repurchase asset impairment levels and non-repurchase settlement amounts as well as current market conditions. We review each demand and monitor through resolution, primarily through rescission, loan repurchase or make-whole payment. We recognize subsequent changes in the liability when additional relevant information becomes available.

In addition to our representation and warranty obligations, we also recognize our obligation to pay compensatory fees, which represent servicer expenses assessed by Fannie Mae and Freddie Mac when foreclosure actions exceed designated contractual timelines. We use a model to estimate a range of compensatory fee losses when we determine those losses are probable. The model uses a compensatory fee database that includes demand and rebuttal history by GSE and portfolio for all foreclosed loans serviced and incorporates the following key assumptions: the contractual timelines by state; the population of loans that have surpassed the contractual timelines; the expected foreclosure timeline by loan; the GSE per diem charge; the expected indemnification from prior servicers for acquired portfolios; the ratio of claims that have been successfully rebutted because delays were outside our control; and the probability that loans will go to foreclosure.

Litigation

We monitor our legal matters, including advice from external legal counsel, and periodically perform assessments of these matters for potential loss accrual and disclosure. We establish a liability for settlements, judgments on appeal and filed and/or threatened claims for which we believe that it is probable that a loss has been or will be incurred and the amount can be reasonably estimated. We recognize legal costs associated with loss contingencies as they are incurred.

Derivative Financial Instruments

We recognize all derivatives on our consolidated balance sheet at fair value. On the date that we enter into a derivative contract, we designate and document each derivative contract as one of the following at the time the contract is executed: (a) a hedge of a recognized asset or liability (fair value hedge); (b) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge); (c) a hedge of a net investment in a foreign operation; or (d) a derivative instrument not designated as a hedging instrument. To qualify for hedge accounting, a derivative must be highly effective at reducing the risk associated with the exposure being hedged. In addition, the documentation must include the risk management objective and strategy. We assess and document quarterly the extent to which a derivative has been and is expected to continue to be effective in offsetting the changes in the fair value or the cash flows of the hedged item. To assess effectiveness, we use statistical methods, such as regression analysis, as well as non-statistical methods including dollar-offset analysis. For a fair value hedge, we record changes in the fair value of the derivative, to the extent that it is effective, and changes in the fair value of the hedged asset or liability attributable to the hedged risk in the same financial statement category as the hedged item on the face of the statement of operations. For a cash flow hedge, to the extent that it is effective, we record changes in the estimated fair value of the derivative in other comprehensive income. We subsequently reclassify these changes in estimated fair value to net income in the same period, or periods, that the hedged transaction affects earnings and in the same financial statement category as the hedged item. For derivative instruments not designated as a hedge for accounting purposes that were entered into as an economic hedge against changes in fair value of a recognized asset, we report changes in the fair value in the same financial statement category of the statement of operations as the changes in fair value of the related asset. For all other derivative instruments not designated as a hedging instrument, we report changes in their fair values in Other income (expense), net.

If a derivative instrument in a cash flow hedge is terminated or the hedge designation is removed, we reclassify related amounts in accumulated other comprehensive income into earnings in the same period or periods during which the cash flows that were hedged affect earnings. In a period where we determine that it is probable that a hedged forecasted transaction will not occur, such as variable-rate interest payments on debt that has been repaid in advance, any related amounts in accumulated other comprehensive income are reclassified into earnings in that period.

The cash collateral held by counterparties to our derivative agreements is included in Other assets.

Convertible Preferred Stock

We evaluate convertible preferred stock that we issue and determine if the preferred stock should be accounted for as equity or as debt. We also determine if the conversion feature of the preferred stock must be separated from the host contract. We evaluate the change of control provisions to determine if they could result in a redemption not solely under Ocwen’s control, in which case the preferred stock would be classified as “mezzanine” equity rather than permanent equity as part of Stockholders’ equity.

We also evaluate the conversion option of the preferred stock to determine if it represents a Beneficial Conversion Feature (BCF). If we determine that the conversion option is a BCF, we determine the intrinsic value of the BCF — the difference between the price of common stock on the issue date and the conversion price multiplied by the number of shares of common stock into which the Preferred Shares can be converted — and account for it as a discount on the preferred stock with an offsetting increase in additional paid in capital and we determine the period over which the discount is to be amortized.

Stock-Based Compensation

We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. For equity awards with a service condition, we recognize the cost as compensation expense ratably over the vesting period. For equity awards with a market condition, we recognize the cost as compensation expense ratably over the expected life of the option that is derived from a lattice (binomial) options pricing model. When equity awards with a market condition meet their vesting requirements, any unrecognized compensation at the vesting date is recognized ratably over the vesting period.

Income Taxes

We file consolidated federal income tax returns. We allocate consolidated income tax among all subsidiaries included in the consolidated return as if each subsidiary filed a separate return or, in certain cases, a consolidated return.

We account for income taxes using the asset and liability method which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Additionally, we adjust deferred taxes to reflect estimated tax rate changes. We conduct periodic evaluations to determine whether it is more likely than not that some or all of our deferred tax assets will not be realized. Among the factors considered in this evaluation are estimates of future earnings, the future reversal of temporary differences and the impact of tax planning strategies that we can implement if warranted. We provide a valuation allowance for any portion of our deferred tax assets that, more likely than not, will not be realized. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We recognize interest and penalties related to income tax matters in income tax expense.

Basic and Diluted Earnings per Share

We calculate basic earnings per share based upon the weighted average number of shares of common stock outstanding during the year. We calculate diluted earnings per share based upon the weighted average number of shares of common stock outstanding and all dilutive potential common shares outstanding during the year. The computation of diluted earnings per share includes the estimated impact of the exercise of the outstanding options to purchase common stock using the treasury stock method. The computation of diluted earnings per share also includes the potential shares of converted common stock associated with our previously outstanding Series A Perpetual Convertible Preferred Stock (the Preferred Shares) and 3.25% Contingent Convertible Senior Unsecured Notes (the 3.25% Convertible Notes) using the if-converted method.

Change in Accounting Estimate

For servicing assets or liabilities that we account for using the amortization method, we amortize the balances in proportion to, and over the period of, estimated net servicing income (if servicing revenues exceed servicing costs) or net servicing loss (if servicing costs exceed servicing revenues). We determine estimated net servicing income using the estimated future balance of the underlying mortgage loan portfolio, which, absent new purchases, declines over time from prepayments and scheduled loan amortization. We adjust MSR amortization prospectively in response to changes in estimated projections of future cash flows. As a result of the significant growth and change in composition of our servicing portfolio, we determined that the estimated net servicing income has increased, primarily as a result of lower actual prepayment speeds. We accounted for this change in MSR amortization as a change in an accounting estimate beginning January 1, 2014. This change had the effect of reducing amortization expense and increasing both net income and earnings per share in our Consolidated Statements of Operations for the year ended December 31, 2014 as follows:



Reduction in Amortization of mortgage servicing rights	$	(89,885	)

Increase in Net income attributable to Ocwen common stockholders	$	80,285

Increase in Earnings per share attributable to Ocwen common stockholders:
Basic	$	0.61
Diluted	$	0.61

Recently Adopted Accounting Standards

Liabilities – Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (ASU 2013-04)

This ASU requires an entity 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: (a) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors, and (b) any additional amount the reporting entity expects to pay on behalf of its co-obligors. Our adoption of ASU 2013-04 on January 1, 2014 did not have a material impact on our consolidated financial condition or results of operations.

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 (ASU 2013-05)

This ASU requires that a reporting entity that ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity release any related cumulative translation adjustment (CTA) into net income. The CTA should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity. For an equity method investment that is a foreign entity, a pro rata portion of the CTA should be released into net income upon a partial sale of such an investment. This ASU clarifies that the sale of an investment in a foreign entity includes both (1) events that result in the loss of a controlling financial interest in a foreign entity, irrespective of any retained investment, and (2) events that result in step acquisition under which an acquirer obtains control of an acquiree in which it held an equity interest immediately before the acquisition date. Under these circumstances, the CTA should be released into net income upon their occurrence. Our adoption of ASU 2013-05 on January 1, 2014 did not have a material impact on our consolidated financial condition or results of operations.

Income Taxes - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss or a Tax Credit Carryforward Exists (ASU 2013-11)

This ASU generally requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss (NOL) carryforward, a similar tax loss or a tax credit carryforward. The guidance further includes an exception that if a NOL carryforward, a similar tax loss, or a tax credit carryforward is not available to settle any additional income taxes that would result from the disallowance of a tax position at the reporting date, or the tax law of the applicable jurisdiction does not require the entity to use them and the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The amendment should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Our adoption of ASU 2013-11 on January 1, 2014 did not have a material impact on our consolidated financial condition or results of operations.

Business Combinations - Pushdown Accounting (ASU 2014-17)

This ASU provides guidance on whether and at what threshold an acquired entity can apply pushdown accounting in its separate financial statements by providing it with an option to do so upon occurrence of an event in which an acquirer obtains control of the acquired entity. If pushdown accounting is not applied in the reporting period in which the change-in-control event occurs, an acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period to the acquired entity’s most recent change-in-control event. An election to do so would be considered a change in accounting principle. If pushdown accounting is applied to an individual change-in-control event, that election is irrevocable. Our adoption of ASU 2014-17 on November 18, 2014 did not have a material impact on our consolidated financial condition or results of operations.

Recently Issued Accounting Standards

Investments—Equity Method and Joint Ventures: Accounting for Investments in Qualified Affordable Housing Projects (ASU 2014-01)

In January 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-01. The amendments in this ASU permit an entity to make an accounting policy election to account for investments in qualified affordable housing projects using the proportional amortization method, if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and while recognizing the net investment performance in the statement of operations as a component of income tax expense (benefit). Our adoption of ASU 2014-01 on January 1, 2015 did not have a material impact on our consolidated financial condition or results of operations.

Receivables—Troubled Debt Restructurings by Creditors: Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (ASU 2014-04)

In January 2014, the FASB issued ASU 2014-04. This ASU clarifies when an in substance repossession or foreclosure occurs such that the loan receivable should be derecognized and the real estate property recognized. An in substance repossession or foreclosure occurs upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement.

An entity can elect to adopt the amendments using either a modified retrospective transition method or a prospective transition method. Our adoption of ASU 2014-04 prospectively on January 1, 2015 did not have a material impact on our consolidated financial condition or results of operations.

Presentation of Financial Statements and Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08)

In April 2014, the FASB issued ASU 2014-08. ASU 2014-08 changes the criteria for reporting discontinued operations. Under this ASU, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The new standard no longer precludes presentation as a discontinued operation if (i) there are operations and cash flows of the component that have not been eliminated from the reporting entity’s ongoing operations, or (ii) there is significant continuing involvement with a component after its disposal.

The guidance applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date. Our adoption of ASU 2014-08 on January 1, 2015 did not have a material impact on our consolidated financial condition or results of operations.

Revenue from Contracts with Customers (ASU 2014-09)

In May 2014, the FASB issued ASU 2014-09 to clarify the principles for recognizing revenue and to develop a common revenue standard. Under this new standard, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should recognize revenue through the following five-step process:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

ASU 2014-09 will be effective for us on January 1, 2017. Early adoption is not permitted. An entity should apply the amendments in this ASU either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect recognized at the date of initial application.

The guidance in this standard does not apply to financial instruments and other contractual rights or obligations within the scope of ASC 860, Transfers and Servicing. We are currently evaluating the effect of adopting this standard.

Transfers and Servicing: Repurchase-to-Maturity Transactions, Repurchase Financings and Disclosures (ASU 2014-11)

In June 2014, the FASB issued ASU 2014-11. The amendments in this ASU require changes in the accounting for repurchase-to-maturity transactions and repurchase to financing arrangements. A repurchase-to-maturity transaction (repurchase agreement that matures at the same time as the transferred financial asset) will now be accounted for as a secured borrowing. For a repurchase financing arrangement (a type of repurchase agreement), a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty will be accounted for separately, which will result in secured borrowing accounting for the repurchase agreement. Transferors will no longer apply the “linked” accounting model.

Our adoption of ASU 2014-11 on January 1, 2015 did not have a material impact on our consolidated financial condition or results of operations. The disclosure requirements for certain transactions accounted for as a sale is required to be presented for interim and annual periods beginning January 1, 2015, and the disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning January 1, 2015, and for interim periods beginning after April 1, 2015.

Compensation—Stock Compensation: Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (ASU 2014-12)

In June 2014, the FASB issued ASU 2014-12 to codify a final consensus reached by the EITF at its March 2014 meeting that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition rather than a condition that affects the grant-date fair value.

We currently do not have any share-based payment awards outstanding that contain performance targets, and therefore, our adoption of ASU 2014-12 on January 1, 2015 did not have an impact on our consolidated financial condition or results of operations.

Consolidation: Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity (ASU 2014-13)

In August 2014, the FASB issued ASU 2014-13. When a reporting entity elects the measurement alternative included in this ASU for a consolidated collateralized financing entity, the reporting entity should measure both the financial assets and the financial liabilities of that collateralized financing entity in its consolidated financial statements using the more observable of the fair value of the financial assets and the fair value of the financial liabilities. A collateralized financing entity is a variable interest entity with no more than nominal equity that holds financial assets and issues beneficial interests in those financial assets; the beneficial interests have contractual recourse only to the related assets of the collateralized financing entity and are classified as financial liabilities.

ASU 2014-13 will be effective for us on January 1, 2016, with early adoption permitted at the beginning of an annual period. An entity can elect to adopt the amendments using either a modified retrospective approach or retrospectively to all relevant prior periods. We are currently evaluating the effect of adopting this standard.

Receivables—Troubled Debt Restructurings by Creditors: Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure (ASU 2014-14)

In August 2014, the FASB issued ASU 2014-14. The amendments in this ASU require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met:


1.	The loan has a government guarantee that is not separable from the loan before foreclosure.


2.	At the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim.


3.	At the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed.

Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor.

An entity can elect to adopt the amendments using either a prospective transition method or a modified retrospective transition method. Our adoption of ASU 2014-14 prospectively on January 1, 2015 did not have a material impact on our consolidated financial condition or results of operations.

Presentation of Financial Statements—Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15)

In August 2014, the FASB issued ASU 2014-15 to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes.

In connection with preparing financial statements for each reporting period, an organization’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the organization’s ability to continue as a going concern within one year after the date that the financial statements are issued (or are available to be issued, when applicable), based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or are available to be issued, when applicable).

ASU 2014-15 will be effective for the annual period ending on December 31, 2016 and for interim periods beginning in 2017. Early adoption is permitted for reporting periods for which the financial statements have not previously been issued. We are currently evaluating the effect of adopting this standard.

Derivatives and Hedging: Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (ASU 2014-16)

In November 2014, the FASB issued ASU 2014-16 to clarify how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. This ASU is intended to reduce existing diversity under GAAP which may result in different accounting outcomes for economically similar hybrid financial instruments.

For hybrid financial instruments issued in the form of a share, an entity will be required to determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of all relevant facts and circumstances. An entity should determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract. No single term or feature would necessarily determine the economic characteristics and risks of the host contract.

ASU 2014-16 will be effective for us on January 1, 2016, with early adoption permitted. An entity should adopt the amendments using a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted for all relevant prior periods. We are currently evaluating the effect of adopting this standard.

Income Statement—Extraordinary and Unusual Items: Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (ASU 2015-01)

In January 2015, the FASB issued ASU 2015-01 to eliminate the concept of extraordinary items from GAAP, as part of its simplification initiative to reduce complexity in accounting standards while maintaining or improving the usefulness of the information provided to the users of financial statements. Under ASU 2015-01, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring.

ASU 2015-01 will be effective for us on January 1, 2016, with early adoption permitted, provided that the guidance is applied from the beginning of the fiscal year of adoption. An entity may adopt the amendments either prospectively or retrospectively to all prior periods presented in the financial statements. We are currently evaluating the effect of adopting this standard.

Consolidation—Amendments to the Consolidation Analysis (ASU 2015-02)

In February 2015, the FASB issued ASU 2015-02 to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions).

ASU 2015-02 reduces the number of consolidation models from four to two by eliminating specialized guidance for limited partnerships and similar legal entities. It also places more emphasis on risk of loss when determining a controlling financial interest. A reporting organization may no longer have to consolidate a legal entity in certain circumstances based solely on its fee arrangement when certain criteria are met. Additionally, ASU 2015-02 reduces the frequency of the application of related-party guidance when determining a controlling financial interest in a VIE and changes consolidation conclusions for public and private companies that typically make use of limited partnerships or VIEs.

ASU 2015-02 will be effective for us on January 1, 2016, with early adoption permitted, including adoption in an interim period. We are currently evaluating the effect of adopting this standard.

Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03)

In April 2015, the FASB issued ASU 2015-03 to simplify presentation of debt issuance costs as part of its simplification initiative to reduce complexity in accounting standards while maintaining or improving the usefulness of the information provided to the users of financial statements. Under ASU 2015-03, debt issuance costs related to a recognized debt liability will be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability and amortization of debt issuance costs will be reported as interest expense, consistent with the accounting for debt discounts. Recognition and measurement guidance for debt issuance costs will not be affected.

ASU 2015-03 will be effective for us on January 1, 2016, with early adoption permitted for financial statements which have not been previously issued. An entity should adopt the amendments on a retrospective basis and will be required to comply with the applicable disclosures for a change in an accounting principle. We are currently evaluating the effect of adopting this standard.

Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (ASU 2015-05)

In April 2015, the FASB issued ASU 2015-05 to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement as part of its simplification initiative to reduce complexity in accounting standards while maintaining or improving the usefulness of the information provided to the users of financial statements. ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract.

ASU 2015-05 will be effective for us on January 1, 2016, with early adoption permitted. An entity may adopt the amendments either prospectively to all arrangements entered into or materially modified after the effective date or on a retrospective basis. We are currently evaluating the effect of adopting this standard.

Securitizations and Variable Interests Entities

12 Months Ended

Dec. 31, 2014

Transfers and Servicing [Abstract]

Securitizations and Variable Interest Entities

Note 2 — Securitizations and Variable Interest Entities

We securitize, sell and service forward and reverse 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.

We have determined that the special purpose entities (SPEs) created in connection with our match funded advance financing facilities are variable interest entities (VIEs) for which we are the primary beneficiary.

Securitizations of Residential Mortgage Loans

Currently, we securitize forward and reverse residential mortgage loans involving the GSEs and Ginnie Mae and loans insured by the FHA or VA. 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.

Transfers of Forward Loans

We sell or securitize forward loans that we originate or that we purchase from third parties, generally in the form of mortgage-backed securities guaranteed by the GSEs or Ginnie Mae. Securitization usually occurs within 30 days of loan closing or purchase. We retain the servicing rights associated with the transferred loans and receive a servicing fee for services provided. We act only as a fiduciary and do not have a variable interest in the securitization trusts. As a result, we account for these transactions as sales upon transfer.

We report the gain or loss on the transfer of the loans held for sale in Gain on loans held for sale, net in the Consolidated Statements of Operations along with the changes in fair value of the loans and the gain or loss on any related derivatives. We include all changes in loans held for sale and related derivative balances in operating activities in the Consolidated Statements of Cash Flows.

The following table presents a summary of cash flows received from and paid to securitization trusts related to transfers accounted for as sales that were outstanding during the years ended December 31:



	2014		2013
Proceeds received from securitizations	$	5,265,183	$	7,871,481
Servicing fees collected	25,438		20,333
Purchases of previously transferred assets, net of claims reimbursed	4,973		(358		)
	$	5,295,594	$	7,891,456

In connection with these transfers, we retained MSRs of $39.8 million and $74.8 million during 2014 and 2013, respectively. We initially record the MSRs at fair value and subsequently account for them at amortized cost.

Certain obligations arise from the agreements associated with our transfers of loans. Under these agreements, we may be obligated to repurchase the loans or otherwise indemnify or reimburse the investor or insurer for losses incurred due to material breach of contractual representations and warranties.

The following table presents the carrying amounts of our assets that relate to our continuing involvement with forward loans that we have transferred with servicing rights retained as well as our maximum exposure to loss, including the UPB of the transferred loans at December 31:



	2014		2013
Carrying value of assets:
Mortgage servicing rights, at amortized cost	$	82,542	$	44,615
Mortgage servicing rights, at fair value	2,840		3,075
Advances and match funded advances	1,236		15,888
Unpaid principal balance of loans transferred (1)	9,353,187		5,641,277
Maximum exposure to loss	$	9,439,805	$	5,704,855


(1)	The UPB of the loans transferred is the maximum exposure to loss under our standard representations and warranties obligations.

At December 31, 2014 and 2013, 5.1% and 2.6%, respectively, of the transferred residential loans that we service were 60 days or more past due. During 2014 and 2013, there were no charge-offs, net of recoveries, associated with these transferred loans.

Transfers of Reverse Mortgages

We are an approved issuer of Ginnie Mae Home Equity Conversion Mortgage-Backed Securities (HMBS) that are guaranteed by Ginnie Mae. We originate Home Equity Conversion Mortgages (HECMs, or reverse mortgages) that are insured by the FHA. We then pool the loans into HMBS that we sell into the secondary market with servicing rights retained. We have determined that loan transfers in the HMBS program do not meet the definition of a participating interest because of the servicing requirements in the product that require the issuer/servicer to absorb some level of interest rate risk, cash flow timing risk and incidental credit risk. As a result, the transfers of the HECMs do not qualify for sale accounting, and therefore, we account for these transfers as financings. Under this accounting treatment, the HECMs are classified as Loans held for investment - reverse mortgages, at fair value, on our Consolidated Balance Sheets. We record the proceeds from the transfer of assets as secured borrowings (HMBS-related borrowings) in Financing liabilities and recognize no gain or loss on the transfer. Holders of participating interests in the HMBS have no recourse against the assets of Ocwen, except for standard representations and warranties and our contractual obligation to service the HECMs and the HMBS.

We have elected to measure the HECMs and HMBS-related borrowings at fair value. The changes in fair value of the HECMs and HMBS-related borrowings are included in Other revenues in our Consolidated Statements of Operations. Included in net fair value gains on the HECMs and related HMBS borrowings are the interest income that we expect to be collected on the HECMs and the interest expense that we expect to be paid on the HMBS-related borrowings. We report originations and collections of HECMs in investing activities in the Consolidated Statements of Cash Flows. We report net fair value gains on HECMs and the related HMBS borrowings as an adjustment to the net cash provided by or used in operating activities in the Consolidated Statements of Cash Flows. Proceeds from securitizations of HECMs and payments on HMBS-related borrowings are included in financing activities in the Consolidated Statements of Cash Flows.

At December 31, 2014 and 2013, we had HMBS-related borrowings of $1.4 billion and $615.6 million, respectively. HECMs pledged as collateral to the pools were $1.5 billion and $618.0 million at December 31, 2014 and 2013, respectively.

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 we have determined that Ocwen is the primary beneficiary of the SPE. These SPEs issue debt supported by collections on the transferred advances.

We make the transfers to these SPEs under the terms of our advance financing facility agreements. We classify the transferred advances on our Consolidated Balance Sheets 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. However, Ocwen and OLS have guaranteed the payment of the obligations under the securitization documents of one of the entities. The maximum amount payable under the guarantee is limited to 10% of the notes outstanding at the end of the facility’s revolving period in December 2014. The entity to which this guarantee applies had $0.5 million of notes outstanding at December 31, 2014. We terminated this advance facility on January 30, 2015. 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 in our Consolidated Balance Sheets.

Business Acquisitions

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Business Acquisitions

Note 3 — Business Acquisitions

We completed the acquisitions of Ocwen Structured Investments, LLC (OSI), Liberty, Correspondent One S.A. (Correspondent One), Homeward and certain assets and operations of Residential Capital, LLC (ResCap) as part of our strategy to expand our residential origination and servicing businesses. We accounted for these transactions using the acquisition method which requires, among other things, that we recognize the assets acquired and liabilities assumed 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 purchase price allocations provided below for each business acquisition are based on an estimate of the fair value of the acquired loans, advances, MSRs and the assumed debt in a manner consistent with our existing methodology for estimating fair value of similar assets and liabilities. Premises and equipment were initially valued based on the “in-use” valuation premise, where the fair value of an asset is based on the highest and best use of the asset that would provide maximum value to market participants principally through its use with other assets as a group. Other assets and liabilities expected to have a short life were valued at the face value of the specific assets and liabilities purchased, including receivables, prepaid expenses, accounts payable and accrued expenses.

The pro forma consolidated results presented below for each business acquisition are not indicative of what Ocwen’s consolidated net earnings would have been had we completed the acquisition on the dates indicated because of differences in servicing practices and cost structure between Ocwen and each 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 each acquisition.

The acquisition of Homeward was treated as a stock purchase for U.S. tax purposes. The ResCap and Liberty acquisitions were treated as asset acquisitions for U.S. tax purposes. We expect the opening tax basis for the acquired assets and liabilities to be the fair values as shown in the purchase price allocation tables below. We expect 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 tax purposes.

Purchase Price Allocation

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



	ResCap				Homeward
Purchase Price Allocation		Final			Final
Cash		$	—		$	79,511
Loans held for sale		—			558,721
MSRs (1)		401,314			360,344
Advances and match funded advances (1)		1,786,409			2,266,882
Deferred tax assets		—			52,103
Premises and equipment		16,423			12,515
Debt service accounts		—			69,287
Investment in unconsolidated entities		—			5,485
Receivables and other assets		2,989			22,280
Match funded liabilities		—			(1,997,459		)
Other borrowings		—			(864,969		)
Other liabilities:
Liability for indemnification obligations		(49,500		)	(32,498		)
Liability for certain foreclosure matters		—			(13,430		)
Accrued bonuses		—			(35,201		)
Checks held for escheat		—			(16,453		)
Other		(25,125		)	(48,230		)
Total identifiable net assets		2,132,510			418,888
Goodwill		211,419			345,936
Total consideration		2,343,929			764,824

(1)

As of the acquisition date, the purchase of certain MSRs from ResCap was not complete pending the receipt of certain consents and court approvals. Subsequent to the acquisition, we obtained the required consents and approvals for a portion of these MSRs and paid an additional purchase price of $174.6 million to acquire the MSRs and related advances, including $54.2 million in 2014. The purchase price allocation has been revised to include the resulting adjustments to MSRs, advances and goodwill.

ResCap Acquisition

We completed the ResCap Acquisition on February 15, 2013. We acquired MSRs related to conventional, government-insured and non-Agency residential forward mortgage loans with a UPB of $111.2 billion and master servicing agreements with a UPB of $44.9 billion. The ResCap Acquisition included advances and elements of the servicing platform related to the acquired MSRs, as well as certain diversified fee-based business operations that included recovery, title and closing services. We also assumed subservicing contracts with a UPB of $27.0 billion. Under the terms of the ResCap Acquisition, we were obligated to acquire certain servicing rights and subservicing agreements that were not settled as part of the initial closing on February 15, 2013 as a result of objections raised in connection with the sale. We subsequently purchased these MSRs and assumed the subservicing contracts from ResCap when such consents and approvals were obtained. We completed subsequent settlements and purchased additional MSRs as objections were resolved.

To finance the ResCap Acquisition, we deployed $840.0 million from the proceeds of a new $1.3 billion SSTL facility and borrowed an additional $1.2 billion pursuant to two new servicing advance facilities and one existing facility. We settled the subsequent closings with cash. 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 for 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.

On April 12, 2013, in connection with the sale to Altisource Portfolio Solutions, S.A. (Altisource) of the diversified fee-based business acquired in connection with the ResCap Acquisition, we received cash consideration from Altisource of $128.8 million. At the time of the closing, we derecognized goodwill of $128.8 million associated with the diversified fee-based business sold to Altisource. There were no other significant assets or liabilities associated with this business.

Post-Acquisition Results of Operations

The following table presents the revenues and earnings of the ResCap operations that are included in our Consolidated Statements of Operations from the acquisition date of February 15, 2013 through December 31, 2013:



Revenues	$	684,935
Net income	$	16,424

Pro Forma Results of Operations

The following table presents supplemental pro forma information for Ocwen for the years ended December 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 as if they had been incurred in 2012 rather than 2013.



	2013		2012
	(Unaudited)		(Unaudited)
Revenues	$	2,086,010	$	1,263,692
Net income	$	285,302	$	87,262

Through December 31, 2013, we incurred approximately $3.2 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 $77.0 billion. We also acquired Homeward’s loan origination platform and its diversified fee-based businesses, including property valuation, REO management, title, closing and advisory services. On March 29, 2013, Ocwen sold the Homeward diversified fee-based businesses to Altisource Solutions S.à r.l. and Altisource Portfolio Solutions, Inc., wholly-owned subsidiaries of Altisource, for an aggregate purchase price of $87.0 million in cash ($82.0 million, net of cash transferred and other adjustments). As part of this transaction, Ocwen sold its investment in two subsidiaries of Homeward, Beltline Road Insurance Agency, Inc. and Power Default Services, Inc. Ocwen also agreed to sell to Altisource 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 were 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, including allocated goodwill, approximated the sales price. The assets sold consisted of receivables and other assets of $9.4 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 $81.6 million associated with the sold businesses. In connection with this transaction, Ocwen entered into amendments to certain of its services and intellectual property agreements with Altisource.

As consideration for the Homeward Acquisition, Ocwen paid an initial aggregate purchase price of $765.7 million. Of this amount, $603.7 million was settled with cash and $162.0 million was settled with Series A Perpetual Convertible Preferred Stock (Preferred Shares) issued to certain private equity funds managed by WL Ross & Co. LLC (the Funds), that paid a dividend of 3.75% per annum on a quarterly basis. Each Preferred Share, together with any accrued and unpaid dividends, could be converted at the option of the holder into shares of Ocwen common stock at a conversion price equal to $31.79. Mr. Ross 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 or manages the Funds. Mr. Ross became a director of Ocwen in March 2013 and resigned in November 2014. On September 23, 2013, the Funds exercised their right to convert 100,000 of the Preferred Shares into 3,145,640 of common stock. On the same date, Ocwen repurchased the shares of common stock from the Funds for $157.9 million. On July 14, 2014, the Funds elected to convert the remaining 62,000 shares into 1,950,296 shares of common stock. On the same date, Ocwen repurchased all of the converted shares of common stock for $72.3 million.

Payment of the cash consideration was financed, in part, by a $100.0 million incremental term loan from Barclays Bank PLC pursuant to the existing SSTL facility that we entered into on September 1, 2011 and $75.0 million from Altisource, pursuant to a senior unsecured loan agreement. We repaid both of these borrowings in February 2013.

In accordance with the terms of the Homeward merger agreement, we are entitled to indemnification for certain claims pursuant to indemnification provisions set forth in the merger agreement. The aggregate amount of the indemnification recovery is limited to a maximum of $75.0 million. We recorded receivables of $28.8 million and $13.6 million at December 31, 2014 and 2013, respectively, related to losses to be indemnified through such claims. On March 19, 2015, we settled all indemnification claims under the Homeward merger agreement and received $38.1 million in cash, which was in addition to $30.0 million that we received in 2014 in connection with the Ocwen National Mortgage Settlement.

Post-Acquisition Results of Operations

The following table presents the revenues and earnings of the Homeward that are included in our Consolidated Statements of Operations from the acquisition date of December 27, 2012 through December 31, 2012:



Revenues	$	5,881
Net income	$	44

Pro Forma Results of Operations

The following table presents supplemental pro forma information for Ocwen for the year ended December 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.



	(Unaudited)
Revenues	$	1,362,927
Net income	$	254,051

Through December 31, 2012, we incurred approximately $1.0 million of fees for professional services related to the Homeward Acquisition that are included in Operating expenses.

Other Acquisitions

Correspondent One

On March 31, 2013, we increased our ownership in Correspondent One, an entity formed with Altisource in March 2011, from 49% to 100%. Correspondent One facilitated the purchase of conventional and government-insured residential mortgages from approved mortgage originators and resold the mortgages to secondary market investors. 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 an 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 did not recognize goodwill in connection with this acquisition. Correspondent One is not material to our financial condition, results of operations or cash flows.

Liberty

On April 1, 2013, we completed the Liberty Acquisition for $22.0 million in cash. In addition, and as part of the closing, Ocwen repaid Liberty’s $9.1 million existing outstanding debt to the sellers. Liberty is engaged in the origination, purchase, sale and securitization of reverse mortgage loans, both retail and wholesale. We acquired Liberty’s reverse mortgage origination platform, including reverse mortgage loans with a UPB of $55.2 million. The acquired net assets were $31.1 million and consisted primarily of residential reverse mortgage loans ($60.0 million), receivables ($11.2 million), loans held for investment ($10.3 million) and cash ($4.6 million) less amounts due under warehouse facilities ($46.3 million) and HMBS-related borrowings ($10.2 million). We recognized $3.0 million of goodwill in connection with this acquisition. The acquisition of Liberty did not have a material impact on our financial condition, results of operations or cash flows.

OSI

On January 31, 2014, we increased our ownership in OSI from 26.00% to 87.35%. OSI invests primarily in residential MSRs and the related lower tranches and residuals of mortgage-backed securities. We acquired the additional interest in OSI for $11.0 million. We accounted for this transaction as an acquisition and recognized 100% of the assets acquired and liabilities assumed at their fair values as of the acquisition date. We recognized in equity a noncontrolling interest at its proportionate 12.65% share of the net assets acquired. The acquired net assets were $20.0 million and consisted primarily of MSRs ($9.0 million), mortgage-backed securities ($7.7 million) and cash ($3.2 million). The acquisition of OSI did not have a material impact on our financial condition, results of operations or cash flows.

Facility Closure Costs

We have incurred employee termination benefits, primarily consisting of severance and Worker Adjustment and Retraining Notification Act compensation, lease termination costs for the closure of leased facilities and other contract termination costs in connection with our business acquisitions. The following table provides a reconciliation of the beginning and ending liability balances for these termination costs for the years ended December 31, 2012, 2013 and 2014:



	Employee termination benefits			Lease and other contract termination costs			Total
Liability balance as at December 31, 2011	$	5,163		$	5,287		$	10,450
Additions charged to operations (1)	2,869			5,030			7,899
Amortization of discount	—			176			176
Payments	(8,032		)	(5,602		)	(13,634		)
Liability balance as at December 31, 2012	—			4,891			4,891
Additions charged to operations (1)	20,683			—			20,683
Amortization of discount	—			347			347
Payments	(15,867		)	(2,784		)	(18,651		)
Liability balance as at December 31, 2013	4,816			2,454			7,270
Additions charged to operations (1)	15,189			2,897			18,086
Amortization of discount	—			148			148
Payments	(18,337		)	(3,260		)	(21,597		)
Liability balance as at December 31, 2014 (2)	$	1,668		$	2,239		$	3,907

(1)

Additions charged to operations during 2012 were recorded in the Servicing segment. In 2013, $15.9 million of the charges were recorded in the Servicing segment, $0.7 million was recorded in the Lending segment and the remaining $4.1 million was recorded in Corporate Items and Other. In 2014, $14.7 million of the charges were recorded in the Servicing segment, $(0.1) million was recorded in the Lending segment and the remaining $3.5 million was recorded in Corporate Items and Other. Charges related to employee termination benefits, lease termination costs and other contract termination costs are reported in Compensation and benefits expense, Occupancy and equipment expense and Other operating expenses, respectively, in the Consolidated Statements of Operations. The liabilities are included in Other liabilities in the Consolidated Balance Sheets.


(2)	We expect the remaining liability for employee termination benefits at December 31, 2014 to be settled in early 2015.

Sales of Advances and MSRs

12 Months Ended

Dec. 31, 2014

Transfers and Servicing of Financial Assets [Abstract]

Sales of Advances and MSRs

Note 4 — Sales of Advances and MSRs

In order to efficiently finance our assets and operations and to create liquidity, we periodically sell MSRs, Rights to MSRs and servicing advances to market participants, including HLSS. We typically retain the right to subservice loans when we sell MSRs and we remain the servicer on the Rights to MSRs sold to HLSS. Counterparties may also acquire advance financing SPEs and the related match funded liabilities. In connection with sales of Rights to MSRs, we retain legal ownership of the MSRs and continue to service the related mortgage loans until such time as all necessary consents are received. We are obligated to transfer legal ownership of the MSRs to NRZ upon it obtaining all required third-party consents and licenses.

On April 6, 2015, HLSS MSR-EBO Acquisition, LLC, a subsidiary of NRZ, entered into a transaction to acquire substantially all of the assets of HLSS including HLSS Holdings, LLC, and Ocwen entered into a consent to this transfer and amendment of its agreements with NRZ. NRZ, through its subsidiaries, is now the owner of the Rights to MSRs and has assumed HLSS’ rights and obligations under the associated agreements.

Pursuant to our agreements, HLSS, and now NRZ, assumed the obligation to fund new servicing advances with respect to the Rights to MSRs. However, because we remain the servicer on the loans for which the Rights to MSRs have been sold to HLSS, in the event HLSS, and now NRZ, were to fail to fulfill its advance funding obligations, as the servicer under our servicing agreements, we would be contractually obligated to fund such advances. At December 31, 2014, HLSS had outstanding advances of approximately $6.1 billion in connection with the Rights to MSRs. On April 6, 2015, we entered into an amendment to the various purchase and sale supplement agreements with NRZ.

As it relates to the sale of Rights to MSRs to HLSS (together with the sale of the related servicing advances, the HLSS Transactions), if and when such transfer of legal ownership occurs, OLS will subservice the loans pursuant to a subservicing agreement, as amended, with NRZ. During the years ended December 31, 2013 and 2012, we completed HLSS Transactions relating to the Rights to MSRs for $119.7 billion and $82.7 billion of UPB, respectively. We did not complete any sales of Rights to MSRs to HLSS during 2014.

The following table provides a summary of the assets and liabilities sold in connection with the HLSS Transactions during the years ended December 31:



	2013		2012
Sale of MSRs accounted for as a financing	$	417,167	316,607

Sale of advances and match funded advances	3,839,954		2,827,227

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	4,257,121		3,220,168
Amount due from HLSS for post-closing adjustments at December 31	—		(1,410	)
Cash received on current year sales	4,257,121		3,218,758
Amount received from HLSS as settlement of post-closing adjustments outstanding at the end of the previous year	1,410		—
Total cash received	$	4,258,531	3,218,758

We have also, and in the future may, sell MSRs in transactions accounted for as sales. We may retain subservicing in connection with the transactions.

To the extent we retain legal title to the MSRs, the sales of Rights to MSRs are accounted for as financings. Upon receipt of third-party consents, we would derecognize the related MSRs. Upon derecognition, any resulting gain or loss is deferred and amortized over the expected life of the related subservicing agreement. Until derecognition, we continue to recognize the full amount of servicing revenue and amortization of the MSRs.

The sales of the related advance generally meet the requirements for sale accounting, and the advances are derecognized from our financial statements at the time of the sale. In the event a purchaser acquires an advance SPE from Ocwen in connection with the sale, we derecognize the assets and liabilities of the advance SPE at the time of the sale. We also evaluated our relationship with the financing SPEs to which HLSS, and now NRZ, transfer the servicing advances acquired from us and determined that we are not required to consolidate these SPEs.

In 2014, Ocwen sold advances related to certain FHA-insured mortgage loans to subsidiaries of HLSS. These advance sales did not qualify for sales treatment and were accounted for as a financing.

Fair Value

12 Months Ended

Dec. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value

Note 5 — Fair Value

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 financial instruments and certain nonfinancial assets measured at fair value on a recurring or non-recurring basis or disclosed, but not carried, at fair value are as follows at December 31:



		2014						2013
	Level	Carrying Value			Fair Value			Carrying Value		Fair Value
Financial assets:
Loans held for sale:
Loans held for sale, at fair value (a)	2	$	401,120		$	401,120		$	503,753	$	503,753
Loans held for sale, at lower of cost or fair value (b)	3	87,492			87,492			62,907		62,907
Total Loans held for sale		$	488,612		$	488,612		$	566,660	$	566,660
Loans held for investment - Reverse mortgages, at fair value (a)	3	$	1,550,141		$	1,550,141		$	618,018	$	618,018
Advances and match funded advances (c)	3	3,303,356			3,303,356			3,443,215		3,443,215
Receivables, net (c)	3	270,596			270,596			152,516		152,516
Mortgage-backed securities, at fair value (a)	3	7,335			7,335			—		—

Financial liabilities:
Match funded liabilities (c)	3	$	2,090,247		$	2,090,247		$	2,364,814	$	2,364,814
Financing liabilities:
HMBS-related borrowings, at fair value (a)	3	$	1,444,252		$	1,444,252		$	615,576	$	615,576
Financing liability - MSRs pledged (a)	3	614,441			614,441			633,804		633,804
Other (c)	3	199,948			189,648			17,593		17,593
Total Financing liabilities		$	2,258,641		$	2,248,341		$	1,266,973	$	1,266,973
Other secured borrowings:
Senior secured term loan (c)	2	$	1,273,219		$	1,198,227		$	1,284,901	$	1,270,108
Other (c)	3	460,472			460,472			492,768		492,768
Total Other secured borrowings		$	1,733,691		$	1,658,699		$	1,777,669	$	1,762,876

Senior unsecured notes (c)	2	$	350,000		$	321,563		$	—	$	—

Derivative financial instruments assets (liabilities) (a):
Interest Rate Lock Commitments (IRLCs)	2	$	6,065		$	6,065		$	8,433	$	8,433
Forward mortgage-backed securities (MBS) trades	1	(2,854		)	(2,854		)	6,905		6,905
Interest rate caps	3	567			567			442		442

MSRs:
MSRs, at fair value (a)	3	$	93,901		$	93,901		$	116,029	$	116,029
MSRs, at amortized cost (c)	3	1,820,091			2,237,703			1,953,352		2,441,719
Total MSRs		$	1,913,992		$	2,331,604		$	2,069,381	$	2,557,748


(a)	Measured at fair value on a recurring basis.


(b)	Measured at fair value on a non-recurring basis.


(c)	Disclosed, but not carried, at fair value.

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



Year Ended December 31, 2014	Loans Held for Investment - Reverse Mortgages			HMBS-Related Borrowings			Mortgage-Backed Securities			Financing Liability - MSRs Pledged			Derivatives			MSRs			Total
Beginning balance	$	618,018		$	(615,576	)	$	—		$	(633,804	)	$	442		$	116,029		$	(514,891	)
Purchases, issuances, sales and settlements:
Purchases	—			—			7,677			—			787			—			8,464
Issuances	816,881			(783,009		)	—			—			—			—			33,872
Transfer from Loans held for sale, at fair value	110,874			—			—			—			—						110,874
Sales	—			—			—			—			—			—			—
Settlements (1)	(99,923		)	47,077			—			19,363			—			—			(33,483		)
	827,832			(735,932		)	7,677			19,363			787			—			119,727
Total realized and unrealized gains and (losses) (2):
Included in earnings	104,291			(92,744		)	(342		)	—			(662		)	(22,128		)	(11,585		)
Included in Other comprehensive income	—			—			—			—			—			—			—
	104,291			(92,744		)	(342		)	—			(662		)	(22,128		)	(11,585		)
Transfers in and / or out of Level 3	—			—			—			—			—			—			—
Ending balance	$	1,550,141		$	(1,444,252	)	$	7,335		$	(614,441	)	$	567		$	93,901		$	(406,749	)



Year Ended December 31, 2013	Loans Held for Investment - Reverse Mortgages			HMBS-Related Borrowings			Financing Liability - MSRs Pledged			Derivatives, net			MSRs		Total
Beginning balance	$	—		$	—		$	(303,705	)	$	(10,668	)	$	85,213	$	(229,160	)
Purchases, issuances, sales and settlements:
Purchases	10,251			(10,179		)	—			498			—		570
Issuances	609,555			(604,991		)	(417,167		)	—			—		(412,603		)
Sales	—			—			—			24,156			—		24,156
Settlements	(5,886		)	5,440			87,068			(1,241		)	—		85,381
	613,920			(609,730		)	(330,099		)	23,413			—		(302,496		)
Total realized and unrealized gains and (losses):
Included in earnings	4,098			(5,846		)	—			60			30,816		29,128
Included in Other comprehensive income	—			—			—			(12,363		)	—		(12,363		)
	4,098			(5,846		)	—			(12,303		)	30,816		16,765
Transfers in and / or out of Level 3	—			—			—			—			—		—
Ending balance	$	618,018		$	(615,576	)	$	(633,804	)	$	442		$	116,029	$	(514,891	)



Year Ended December 31, 2012	Loans Held for Investment - Reverse Mortgages		HMBS-Related Borrowings		Financing Liability - MSRs Pledged			Derivatives, net			MSRs		Total
Beginning balance	$	—	$	—	$	—		$	(16,676	)	$	—	$	(16,676	)
Purchases, issuances, sales and settlements:
Purchases	—		—		—			4,946			85,183		90,129
Issuances	—		—		(316,607		)	—			—		(316,607		)
Sales	—		—		—			(405		)	—		(405		)
Settlements	—		—		12,902			2,451			—		15,353
	—		—		(303,705		)	6,992			85,183		(211,530		)
Total realized and unrealized gains and (losses) (2):
Included in earnings	—		—		—			7,331			30		7,361
Included in Other comprehensive income	—		—		—			(8,315		)	—		(8,315		)
	—		—		—			(984		)	30		(954		)
Transfers in and / or out of Level 3	—		—		—			—			—		—
Ending balance	$	—	$	—	$	(303,705	)	$	(10,668	)	$	85,213	$	(229,160	)


(1)	In the event of a transfer of servicing to another party related to Rights to MSRs, we are required to reimburse the owner of the Rights to MSRs at predetermined contractual rates for the loss of servicing revenues. Settlements for Financing liability - MSRs pledged for the year ended December 31, 2014 include $2.0 million of such reimbursements.


(2)	Total losses attributable to derivative financial instruments still held at December 31, 2014 and 2012 were $0.7 million and $1.2 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 and those disclosed, but not carried, at fair value are described below.

Loans Held for Sale

We originate and purchase residential mortgage loans that we intend to sell to the GSEs. We also own residential mortgage loans that are not eligible to be sold to the GSEs due to delinquency or other factors. Residential forward and reverse 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 because 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 conventional and government-insured mortgage loans are typically sold.

We repurchase certain loans from Ginnie Mae guaranteed securitizations in connection with loan modifications and loan resolution activity as part of our contractual obligations as the servicer of the loans. These loans are classified as loans held for sale at the lower of cost or fair value, in the case of modified loans, as we expect to redeliver (sell) the loans to new Ginnie Mae guaranteed securitizations. 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 FHA or VA, the fair value of these loans represents the net recovery value taking into consideration the insured or guaranteed claim.

For all other loans held for sale, which we report at the lower of cost or fair value, market illiquidity has reduced the availability of observable pricing data. 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.

Loans Held for Investment – Reverse Mortgages

We have elected to measure these loans at fair value. For transferred reverse mortgage loans that do not qualify as sales for accounting purposes, we base the fair value on the expected future cash flows discounted over the expected life of the loans at a rate commensurate with the risk of the estimated cash flows. Significant assumptions include expected prepayment and delinquency rates and cumulative loss curves. The discount rate assumption for these assets is primarily based on an assessment of current market yields on newly originated reverse mortgage loans, expected duration of the asset and current market interest rates.

The more significant assumptions used in the December 31, 2014 valuation include:


•	Life in years ranging from 6.58 to 10.66 (weighted average of 6.98);


•	Conditional repayment rate ranging from 4.82% to 53.75% (weighted average of 19.26%); and


•	Discount rate of 3.19%.

Significant increases or decreases in any of these assumptions in isolation could result in a significantly lower or higher fair value, respectively. The effects of changes in the assumptions used to value the loans held for investment are largely offset by the effects of changes in the assumptions used to value the HMBS-Related Borrowings that are associated with these loans.

Mortgage Servicing Rights

Amortized Cost MSRs

We estimate the fair value of MSRs carried at amortized cost using a process that involves the use of independent third-party valuation experts, supported by commercially available discounted cash flow models and analysis of current market data to arrive at an estimate of fair value.

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.

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, supported by 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.

We evaluate the reasonableness of our third party experts’ assumptions using historical experience adjusted for prevailing market conditions. The most significant assumptions used are the speed at which mortgages prepay and delinquency experience. Other assumptions used are:



•	Cost of servicing	•	Interest rate used for computing float earnings
•	Discount rate	•	Compensating interest expense
•	Interest rate used for computing the cost of financing servicing advances	•	Collection rate of other ancillary fees

The more significant assumptions used in the December 31, 2014 valuation of our MSRs carried at amortized cost include:


•	Prepayment speeds ranging from 10.97% to 17.54% (weighted average of 14.94%) depending on loan type;


•	Delinquency rates ranging from 6.89% to 31.94% (weighted average of 23.20%) depending on loan type;


•	Interest rate of 1-month LIBOR (1ML) plus a range of 0.00% to 3.50% (for non-Agency) or 5-year Swap (for Agency) for computing the cost of financing servicing advances;


•	Interest rate of 1ML (for non-Agency) or 5-year Swap (for Agency) for computing float earnings; and


•	Discount rates ranging from 9.25% to 15.18% (weighted average of 11.52%)

We perform an impairment analysis based on the difference between the carrying amount and fair value after grouping the underlying loans into the applicable strata. In response to the significant change in the composition of our MSR portfolio as a result of recent acquisitions, our strata are defined as conventional, government-insured and non-Agency (i.e. all private label primary and master serviced loans).

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 recorded at the mid-point of the range of prices provided by the valuation experts. A change in the valuation inputs utilized by the valuation experts might result in a significantly higher or lower fair value measurement. The 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.

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 December 31, 2014 valuation include a 9.77% weighted average constant prepayment rate and a discount rate of 9.01%.

Advances

We value advances at their net realizable value, which generally approximates fair value, because advances have no stated maturity, are generally 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.

Mortgage-Backed Securities

Our subordinate and residual securities are not actively traded, and therefore, we estimate the fair value of these securities based on the present value of expected future cash flows from the underlying mortgage pools. We use our best estimate of the key assumptions we believe are used by market participants. We calibrate our internally developed discounted cash flow models for trading activity when appropriate to do so in light of market liquidity levels. Key inputs include expected prepayment rates, delinquency and cumulative loss curves and discount rates commensurate with the risks. Where possible, we use observable inputs in the valuation of our securities. However, the subordinate and residual securities in which we have invested trade infrequently and therefore have few or no observable inputs and little price transparency. Additionally, during periods of market dislocation, the observability of inputs is further reduced.

Discount rates for the subordinate and residual securities are determined based upon an assessment of prevailing market conditions and prices for similar assets. We project the delinquency, loss and prepayment assumptions based on a comparison to actual historical performance curves adjusted for prevailing market conditions.

Match Funded Liabilities

For match funded liabilities that bear interest at a rate that is adjusted regularly based on a market index, the carrying value approximates fair value. For match funded liabilities 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 December 31, 2014 and 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.

Financing Liabilities

HMBS-Related Borrowings

We have elected to measure these borrowings at fair value. We recognize the proceeds from the transfer of reverse mortgages as a secured borrowing that we account for at fair value. These borrowings are not actively traded, and therefore, quoted market prices are not available. We determine fair value by discounting the future principal and interest repayments over the estimated life of the borrowing at a market rate commensurate with the risk of the estimated cash flows. Significant assumptions include prepayments, discount rate and borrower mortality rates for reverse mortgages. The discount rate assumption for these liabilities is based on an assessment of current market yields for newly issued HMBS, expected duration and current market interest rates.

The more significant assumptions used in the December 31, 2014 valuation include:


•	Life in years ranging from 4.94 to 10.66 (weighted average of 5.63);


•	Conditional repayment rate ranging from 4.82% to 53.75% (weighted average of 19.26%); and


•	Discount rate of 2.39%.

Significant increases or decreases in any of these assumptions in isolation would result in a significantly higher or lower fair value.

MSRs Pledged

We periodically sell to Rights to MSRs and the related servicing advances. Because we have retained legal title to the MSRs, the sales of Rights to MSRs are accounted for as financings. We initially establish the value of the Financing Liability - MSRs Pledged based on the price at which the Rights to MSRs are sold. Thereafter, the carrying value of the Financing Liability - MSRs pledged is adjusted to fair value at each reporting date. We determine fair value by applying the price of the underlying MSRs to the remaining principal balance related to the underlying MSRs. Significant assumptions used in determination of the price of the underlying MSRs include expected prepayment speeds of 13.5% to 24.8%, delinquency rates of 30.3% to 35.1% and a discount rate of 15.4%. Significant increases or decreases in these assumptions in isolation would result in a significantly higher or lower fair value.

Secured Notes

We issued Ocwen Asset Servicing Income Series (OASIS), Series 2014-1 Notes secured by Ocwen-owned MSRs relating to Freddie Mac mortgages. We accounted for this transaction as a financing. We determine the fair value based on bid prices provided by third parties involved in the issuance and placement of the notes.

Other Secured Borrowings

The carrying value of secured borrowings that bear interest at a rate that is adjusted regularly based on a market index approximates fair value. For other 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. For the SSTL, we based the fair value at December 31, 2014 on quoted prices in a market with limited trading activity.

Senior Unsecured Notes

We base the fair value on quoted prices in a market with limited trading activity.

Derivative Financial Instruments

IRLCs represent an agreement to purchase loans from a third-party originator or an agreement to extend credit to a mortgage applicant (locked pipeline), 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 forward MBS trades to provide an economic hedge against changes in fair value of residential forward and reverse mortgage loans held for sale that we carry at fair value. Forward MBS 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 and we obtained unadjusted market quotes for these derivatives, thus they are classified within Level 1 of the valuation hierarchy.

We previously entered into derivative contracts that included 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. 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. The fair value of interest rate swaps were based upon projected short-term interest rates and volatility based on published market based sources, a Level 3 valuation. Because futures and forward contracts are actively traded in the market, they are classified within Level 1 of the valuation hierarchy.

We may execute 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. We terminated our outstanding interest rate swaps on May 31, 2013.

In addition, we may 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.

- Definition

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.

+ References + Details

Loans Held for Sale

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Loans Held for Sale

Note 6 — Loans Held for Sale

Loans Held for Sale - Fair Value

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



	2014			2013			2012
Beginning balance	$	503,753		$	426,480		$	—
Originations and purchases (1)	4,967,767			8,106,742			670,147
Proceeds from sales	(5,015,235		)	(7,999,235		)	(241,960		)
Transfers to loans held for investment - reverse mortgages	(110,874		)	—			—
Gain (loss) on sale of loans	49,533			(26,981		)	3,889
Other	6,176			(3,253		)	(5,596		)
Ending balance	$	401,120		$	503,753		$	426,480


(1)	Purchases include $60.0 million of reverse mortgages acquired in the Liberty Acquisition in 2013 and $558.7 million of forward mortgages acquired in the Homeward Acquisition in 2012.

At December 31, 2014, loans held for sale, at fair value, with a UPB of $364.5 million were pledged to secure warehouse lines of credit in our Lending segment.

Loans Held for Sale - Lower of Cost or Fair Value

Loans held for sale, at lower of cost or fair value, include residential loans that we do not intend to hold to maturity. The following table summarizes the activity in the balance of Loans held for sale, at lower of cost or fair value, during the years ended December 31:



	2014			2013			2012
Beginning balance	$	62,907		$	82,866		$	20,633
Purchases	2,462,573			1,632,390			65,756
Proceeds from sales	(2,067,965		)	(1,036,316		)	—
Principal payments	(262,196		)	(432,423		)	(1,474		)
Transfers to accounts receivable	(114,675		)	(218,629		)	—
Transfers to real estate owned	(8,808		)	(4,775		)	(999		)
Gain on sale of loans	31,853			35,087			—
Decrease (increase) in valuation allowance	(18,965		)	(10,644		)	568
Other	2,768			15,351			(1,618		)
Ending balance (1) (2) (3)	$	87,492		$	62,907		$	82,866


(1)	The balances at December 31, 2014 and 2013 includes $42.0 million and $43.1 million, respectively, of loans that we were required to repurchase from Ginnie Mae guaranteed securitizations as part of our contractual obligations as the servicer of the loans. Repurchased loans are modified or otherwise remediated through loss mitigation activities or are reclassified to receivables.

(2)

The balances at December 31, 2014, 2013 and 2012 are net of valuation allowances of $49.7 million, $30.7 million and $14.7 million, respectively. The change in the valuation allowance for the years ended December 31, 2014 and 2013 includes adjustments of $20.4 million and $15.7 million, respectively, from the liability for indemnification obligations for the initial valuation adjustment that we recognized on certain loans that we repurchased from Fannie Mae and Freddie Mac guaranteed securitizations.


(3)	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.

At December 31, 2014, loans held for sale, at lower of cost or fair value, with a UPB of $30.5 million were pledged to secure a warehouse line of credit in our Servicing segment.

During 2014, we purchased delinquent FHA-insured loans with a total UPB of $1.3 billion out of Ginnie Mae guaranteed securitizations under the terms of a conditional repurchase option where as servicer we have the right, but not the obligation, to repurchase delinquent loans at par plus delinquent interest (the Ginnie Mae early buy-out (EBO) program). Contemporaneous with the purchase, we sold the loans (the Ginnie Mae EBO Loans) and related advances for $1.4 billion ($1.3 billion for the Ginnie Mae EBO Loans and $75.9 million for the related servicing advances) to other financial institutions, including HLSS. We recognized total gains of $10.0 million on the sales of the loans, including the values assigned to the retained MSRs. Proceeds received from HLSS include $556.6 million for Ginnie Mae EBO Loans sold to HLSS Mortgage, $55.7 million for related servicing advances sold to HLSS Mortgage and $20.2 million for servicing advances sold to HLSS SEZ LP. Following the initial transactions, we sold an additional $13.1 million of advances to HLSS. We had recorded these advances in connection with the subsequent servicing of the sold loans.

The sales of advances did not qualify for sales treatment and were accounted for as financings. We refer to the purchase and sale of the Ginnie Mae EBO Loans and the sale of the related advances as the Ginnie Mae EBO Transactions.

Gain on Loans Held for Sale, Net

The following table summarizes the activity in Gain on loans held for sale, net, during the years ended December 31:



	2014			2013			2012
Gain on sales of loans	$	168,449		$	82,518		$	6,797
Change in fair value of IRLCs	(25,822		)	523			2
Change in fair value of loans held for sale	10,489			(1,709		)	(5,462		)
Gain (loss) on economic hedge instruments	(17,214		)	42,732			(1,075		)
Other	(1,605		)	(2,370		)	(47		)
	$	134,297		$	121,694		$	215

Gain on loans held for sale, net include $39.8 million, $74.8 million and $2.9 million for 2014, 2013 and 2012, respectively, representing the value assigned to MSRs retained on transfers of forward loans.

Also included in Gains on loans held for sale, net are gains of $54.7 million and $35.1 million recorded during 2014 and 2013, respectively on sales of repurchased Ginnie Mae loans which are carried at the lower of cost or fair value.

Fair value gains recognized in connection with sales of reverse mortgages into Ginnie Mae guaranteed securitizations are also included in Gains on loans held for sale, net and amounted to $72.7 million and $41.7 million during 2014 and 2013, respectively.

Advances

12 Months Ended

Dec. 31, 2014

Advances [Abstract]

Advances

Note 7 — Advances

Advances, net, representing payments made on behalf of borrowers or on foreclosed properties, consisted of the following at December 31:



	2014		2013
Servicing:
Principal and interest	$	128,217	$	141,307
Taxes and insurance	467,891		477,039
Foreclosures, bankruptcy and other (1)	293,340		268,053
	889,448		886,399
Corporate Items and Other	4,466		4,433
	$	893,914	$	890,832


(1)	The balances at December 31, 2014 and 2013 are net of an allowance for losses of $70.0 million and $38.4 million, respectively.

The following table summarizes the activity in advances for the years ended December 31:



	2014			2013			2012
Beginning balance	$	890,832		$	184,463		$	103,591
Acquisitions (1)	99,319			733,438			118,360
Transfers to match funded advances	(10,156		)	(142,286		)	(74,317		)
Sales of advances to HLSS (2)	—			(200,749		)	—
New advances (collections of advances), net and other	(86,081		)	315,966			36,829
Ending balance	$	893,914		$	890,832		$	184,463


(1)	Servicing advances acquired through business acquisitions and asset acquisitions, primarily in connection with the acquisition of MSRs.


(2)	Advances sold in in connection with the sales of Rights to MSRs met the requirements for sale accounting and were derecognized from our financial statements at the time of the sale. Advances sold in connection with the Ginnie Mae EBO Transactions in 2014 did not qualify as sales for accounting purposes.

Match Funded Advances

12 Months Ended

Dec. 31, 2014

Transfers and Servicing [Abstract]

Match Funded Advances

Note 8 — Match Funded Advances

Match funded advances on residential loans we service for others are comprised of the following at December 31:



	2014		2013
Principal and interest	$	1,349,048	$	1,497,649
Taxes and insurance	847,064		830,113
Foreclosures, bankruptcy, real estate and other	213,330		224,621
	$	2,409,442	$	2,552,383

The following table summarizes the activity in match funded advances for the years ended December 31:



	2014			2013			2012
Beginning balance	$	2,552,383		$	3,049,244		$	3,629,911
Acquisitions (1)	85,521			3,589,773			4,068,959
Transfers from advances (2)	10,156			142,286			74,317
Sales of advances to HLSS	—			(3,639,205		)	(3,240,601		)
Collections of pledged advances, net of new advances and other	(238,618		)	(589,715		)	(1,483,342		)
Ending balance	$	2,409,442		$	2,552,383		$	3,049,244


(1)	Servicing advances acquired through business acquisitions and asset acquisitions, primarily in connection with the acquisition of MSRs, that were pledged to advance facilities at the date of acquisition.


(2)	New servicing advances initially classified as Advances at the date of payment and subsequently pledged to advance facilities.

Mortgage Servicing

12 Months Ended

Dec. 31, 2014

Transfers and Servicing [Abstract]

Mortgage Servicing

Note 9 — Mortgage Servicing

Mortgage Servicing Rights – Amortization Method

Servicing Assets. The following tables summarize the activity in the carrying value of amortization method servicing assets for the years ended December 31. Amortization of mortgage servicing rights is reported net of the amortization of any servicing liabilities and includes the amount of charges we recognized to increase servicing liability obligations, if any.



	2014			2013			2012
Beginning balance	$	1,953,352		$	678,937		$	293,152
Additions recognized in connection with business acquisitions :
OSI	9,008			—			—
ResCap Acquisition	11,370			389,944			—
Liberty Acquisition	—			2,840			—
Homeward Acquisition	—			—			278,069
Additions recognized in connection with asset acquisitions:
Ally MSR Transaction	—			683,787			—
OneWest MSR Transaction (1)	14,408			398,804			—
Greenpoint MSR Transaction (2)	3,690			33,647			—
Saxon	—			—			77,881
JPMorgan	—			—			23,445
Bank of America	—			—			64,569
Other	17,228			8,764			16,084
Additions recognized on the sale of mortgage loans	63,310			74,784			—
Sales (3)	(137		)	(28,403		)	—
Servicing transfers and adjustments	(1,763		)	(8,883		)	(4		)
Change in valuation allowance	—			2,375			(88		)
Amortization	(250,375		)	(283,244		)	(74,171		)
Ending balance	$	1,820,091		$	1,953,352		$	678,937

Estimated fair value at end of year	$	2,237,703		$	2,441,719		$	743,830

(1)

The OneWest MSR Transaction closed in stages, and the majority of loans were boarded onto our primary servicing platform as of December 31, 2013. MSRs acquired in the final closing of the OneWest MSR Transaction in 2014 relate to mortgage loans with a UPB of $1.1 billion and related servicing advances of $34.3 million. Total UPB and related servicing advances acquired in the OneWest MSR Transaction were $70.1 billion and $2.1 billion, respectively. No operations or other assets were purchased in the transaction. As part of the OneWest MSR Transaction, both the seller and OLS have agreed to indemnification provisions for the benefit of the other party.


(2)	The MSRs acquired in 2014 relate to mortgage loans with a UPB of $948.9 million and related servicing advances of $47.6 million. Total UPB and related servicing advances acquired were $7.3 billion and $469.7 million, respectively.


(3)	Cash proceeds from the 2013 sale were $34.8 million. These MSRs were sold with subservicing retained. The gain on the sale of $5.1 million has been deferred and will be recognized in earnings over the life of the subservicing contract.

On February 26, 2014, we issued $123.6 million of OASIS Series 2014-1 Notes secured by Ocwen-owned MSRs relating to Freddie Mac mortgages of $11.8 billion UPB. We account for these transactions as financings.

The estimated amortization expense for MSRs is projected as follows over the next five years:



	Amortization Method MSRs as of December 31, 2014 (1)		Less: MSRs to be Measured at Fair Value as of January 1, 2015 (2)		Estimated Amortization Expense
2015	$	222,006	$	86,112	$	135,894
2016	186,018		73,297		112,721
2017	174,097		65,527		108,570
2018	158,107		58,592		99,515
2019	138,495		52,402		86,093


(1)	Estimated amortization expense for all MSRs accounted for using the amortization method as of December 31, 2014, calculated based on assumptions used at December 31, 2014.


(2)	Estimated amortization expense attributed to non-Agency MSRs accounted for using the amortization method as of December 31, 2014 for which we subsequently elected to account for using the fair value measurement method effective January 1, 2015.

Servicing Liabilities. Servicing liabilities, if any, are included in Other liabilities.

Mortgage Servicing Rights—Fair Value Measurement Method

This portfolio comprises servicing rights for which we elected the fair value option and includes Agency forward residential mortgage loans for which we previously hedged the related market risks.

The following table summarizes the activity related to fair value servicing assets for the years ended December 31:



	2014			2013			2012
Beginning balance	$	116,029		$	85,213		$	—
Amount recognized in connection with the Homeward Acquisition	—			—			82,275
Additions recognized on the sale of residential mortgage loans	—			—			2,908
Changes in fair value (1):
Changes in assumptions	(15,028		)	44,199			30
Realization of cash flows and other changes	(7,100		)	(13,383		)	—
Ending balance	$	93,901		$	116,029		$	85,213


(1)	Changes in fair value are recognized in Servicing and origination expense in the Consolidated Statements of Operations.

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 value of the MSRs that we carry at fair value as of December 31, 2014 given hypothetical instantaneous parallel shifts in the yield curve:



	Adverse change in fair value
	10%			20%
Weighted average prepayment speeds	$	(8,101	)	$	(15,760	)
Discount rate (Option-adjusted spread)	$	(3,553	)	$	(6,860	)

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

Portfolio of Assets Serviced

The following table presents the composition of our primary 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. The UPB of assets serviced for others are not included on our Consolidated Balance Sheets.



	Residential		Commercial		Total
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
UPB at December 31, 2013
Servicing (1)	$	397,546,635	$	—	$	397,546,635
Subservicing	67,104,697		400,502		67,505,199
	$	464,651,332	$	400,502	$	465,051,834
UPB at December 31, 2014
Servicing (1)	$	361,288,281	$	—	$	361,288,281
Subservicing	37,439,446		149,737		37,589,183
	$	398,727,727	$	149,737	$	398,877,464


(1)	Includes primary servicing UPB of $160.8 billion, $175.1 billion and $79.4 billion at December 31, 2014, 2013 and 2012, respectively, for which the Rights to MSRs have been sold.

Residential assets serviced includes foreclosed real estate. Residential assets serviced also includes small-balance commercial assets with a UPB of $2.3 billion, $2.6 billion and $2.1 billion at December 31, 2014, 2013 and 2012, respectively, that are managed using the REALServicing^® platform. Commercial assets consist of large-balance foreclosed real estate.

A significant portion of the servicing agreements for our non-Agency servicing portfolio contain provisions where we could be terminated as servicer without compensation upon the failure of the serviced loans to meet certain portfolio delinquency or cumulative loss thresholds or in the event we fail to maintain required servicer ratings, among other provisions. As a result of the economic downturn of recent years, the portfolio delinquency and/or cumulative loss threshold provisions have been breached by many private-label securitizations in our non-Agency servicing portfolio. Terminations as servicer as a result of a breach of any of these provisions have been minimal. In the event we are terminated as servicer and the Rights to MSRs were sold to HLSS (now owned by NRZ), we are obligated to compensate NRZ. As a result of the transfer of servicing to another party in 2014 related to Rights to MSRs sold to HLSS, we were required to reimburse HLSS $2.0 million for the loss of servicing revenues.

At December 31, 2014, the geographic distribution of the UPB and count of residential loans and real estate we serviced was as follows:



	Amount		Count
California	$	96,727,239	382,859
Florida	31,922,669		212,623
New York	28,113,154		118,661
New Jersey	18,599,585		89,507
Texas	17,149,095		175,210
Other	206,215,985		1,507,178
	$	398,727,727	2,486,038

Servicing Revenue

The following table presents the components of servicing and subservicing fees for the years ended December 31:



	2014		2013		2012
Loan servicing and subservicing fees:
Servicing	$	1,363,800	$	1,246,882	$	535,415
Subservicing	128,797		146,605		45,713
	1,492,597		1,393,487		581,128
Home Affordable Modification Program (HAMP) fees	141,121		152,812		76,764
Late charges	121,618		115,826		69,281
Loan collection fees	33,983		31,022		15,960
Custodial accounts (float earnings)	6,693		5,332		3,749
Other	98,163		125,080		57,525
	$	1,894,175	$	1,823,559	$	804,407

Float balances amounted to $3.4 billion, $3.2 billion and $1.3 billion at December 31, 2014, 2013 and 2012, respectively.

- Definition

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.

+ References + Details

Receivables

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Receivables

Note 10 — Receivables

Receivables consisted of the following at December 31:



	2014			2013
Servicing:
Government-insured loan claims (1)	$	52,955		$	54,012
Due from custodial accounts	11,627			2,933
Reimbursable expenses	32,387			35,933
Other servicing receivables	29,516			31,659
	126,485			124,537
Income taxes receivable	68,322			6,369
Due from related parties	58,892			14,553
Other receivables (2)	43,690			24,579
	297,389			170,038
Allowance for losses (1)	(26,793		)	(17,522		)
	$	270,596		$	152,516

(1)

The total allowance for losses at December 31, 2014 and 2013 includes $26.8 million and $17.4 million, respectively, related to receivables of the Servicing business. The allowance for losses related to defaulted FHA or VA insured loans repurchased from Ginnie Mae guaranteed securitizations (government-insured loan claims) was $10.0 million and $14.0 million at December 31, 2014 and 2013, respectively.


(2)	The balance at December 31, 2014 and 2013 includes $28.8 million and $13.6 million, respectively, related to losses to be indemnified under the terms of the Homeward merger agreement.

- Definition

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.

+ References + Details

Premises and Equipment

12 Months Ended

Dec. 31, 2014

Property, Plant and Equipment [Abstract]

Premises and Equipment

Note 11 — Premises and Equipment

Premises and equipment are summarized as follows at December 31:



	2014			2013
Computer hardware and software	$	55,132		$	51,060
Leasehold improvements	28,549			25,467
Office equipment and other	13,268			12,506
Buildings	13,049			12,926
Furniture and fixtures	12,308			13,174
	122,306			115,133
Less accumulated depreciation and amortization	(78,996		)	(61,347		)
	$	43,310		$	53,786

Goodwill

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Note 12 — Goodwill

The following table summarizes the activity in the carrying amount of goodwill for year ended December 31, 2014.



	Servicing Segment												Lending Segment
	ResCap			Homeward			Litton			HomEq			Homeward			Liberty			Total
Balance at December 31, 2013
Goodwill	$	82,669		$	218,170		$	57,430		$	12,810		$	46,159		$	2,963		$	420,201
Accumulated impairment losses	—			—			—			—			—			—			—
Net	82,669			218,170			57,430			12,810			46,159			2,963			420,201

Impairment losses	(82,669		)	(218,170		)	(57,430		)	(12,810		)	(46,159		)	(2,963		)	(420,201		)

Balance at December 31, 2014
Goodwill	82,669			218,170			57,430			12,810			46,159			2,963			420,201
Accumulated impairment losses	(82,669		)	(218,170		)	(57,430		)	(12,810		)	(46,159		)	(2,963		)	(420,201		)
Net	$	—		$	—		$	—		$	—		$	—		$	—		$	—

We perform an annual impairment test of goodwill as of August 31^st of each year. Based on our August 31, 2014 annual assessment, we determined that goodwill was not impaired. During the fourth quarter of 2014, we determined that sufficient indicators of potential impairment existed to require an interim goodwill impairment analysis as of December 31, 2014. These indicators included significant declines in the market price of our common stock during the fourth quarter of 2014, including declines in reaction to the New York Department of Financial Services (NY DFS) settlement announced in December 2014, which included the resignation of our former Executive Chairman, and the California Department of Business Oversight (CA DBO) settlement announced in January 2015 related to an administrative action dated October 3, 2014. This reassessment resulted in the recognition of an impairment charge of $420.2 million, representing the entire balance of goodwill in our Servicing and Lending segments.

In performing the two-step quantitative assessment, we first compared the fair value of each reporting unit with its net carrying value, including goodwill. Because the fair value of the reporting units exceeded their carrying value, it was necessary to perform the second step of the impairment test to measure the amount of impairment loss. In the second step, we compared the implied fair value of the reporting unit’s goodwill with the carrying value. Because the carrying amount of the goodwill exceeded the implied fair value for the reporting units, we recognized an impairment loss in an amount equal to that excess (up to the carrying value of goodwill). We determined the fair value of the reporting units based a combination of the income approach (discounted cash flow valuation methodology) and the market approach, and with the assistance of a third-party valuation firm.

Other Assets

12 Months Ended

Dec. 31, 2014

Other Assets [Abstract]

Other Assets

Note 13 — Other Assets

Other assets consisted of the following at December 31:



	2014		2013
Contingent loan repurchase asset (1)	$	274,265	$	—
Debt service accounts (2)	91,974		129,897
Prepaid lender fees and debt issuance costs, net (3)	31,337		31,481
Prepaid expenses	17,957		16,132
Real estate	16,720		9,667
Prepaid income taxes (4)	16,450		20,585
Mortgage-backed securities, at fair value (6)	7,335		—
Derivatives, at fair value	6,065		15,494
Contingent assets - ResCap Acquisition (5)	—		51,932
Investment in unconsolidated entities (6)	—		11,771
Purchase price deposit (7)	—		10,000
Other	28,708		12,184
	$	490,811	$	309,143

(1)

In connection with the Ginnie Mae EBO Transactions, our agreements provide either that: (a) we have the right, but not the obligation, to repurchase previously transferred mortgage loans under certain conditions, including the mortgage loans becoming eligible for pooling under a program sponsored by Ginnie Mae; or (b) we have the obligation to repurchase previously transferred mortgage loans that have been subject to a successful trial modification before any permanent modification is made. Once these conditions are met, we have effectively regained control over the mortgage loan(s), and under GAAP, must re-recognize the loans on our consolidated balance sheets and establish a corresponding repurchase liability. With respect to those loans that we have the right, but not the obligation, to repurchase under the applicable agreement, this requirement applies regardless of whether we have any intention to repurchase the loan. We re-recognized mortgage loans in Other assets and a corresponding liability in Other liabilities.

(2)

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 and certain of our warehouse facilities to provide for possible shortfalls in the funds available to pay certain expenses and interest. The funds related to match funded facilities are held in interest earning accounts in the name of the SPE created in connection with the facility.


(3)	We amortize these costs to the earlier of the scheduled amortization date, contractual maturity date or prepayment date of the debt.


(4)	During 2012, 2013 and 2014, we completed intra-entity transfers of certain MSRs. The deferred tax effects of these transactions have been recognized as prepaid income tax assets and are being amortized to Income tax expense over a 7-year period.


(5)	The purchase of certain MSRs and related advances from ResCap was not complete on the date of acquisition pending the receipt of certain consents and court approvals. We recorded a contingent asset effective on the date of the acquisition until we subsequently obtained the required consents and approvals for the MSRs and paid the additional purchase price.

(6)

The balance at December 31, 2013 includes an investment of $5.1 million in OSI and an investment of $6.6 million in PowerLink Settlement Services, LP and related entities. We increased our ownership in OSI from 26.00% to 87.35% on January 31, 2014. Effective on that date, we began including the accounts of OSI in our consolidated financial statements and eliminated our current investment in consolidation. Assets acquired from OSI included residential mortgage-backed securities. In June 2014, we received proceeds from the dissolution of PowerLink Settlement Services, LP equal to our investment.


(7)	The balance at December 31, 2013 represents an initial cash deposit that we made in connection with the agreement we entered into to acquire MSRs and related advances from Wells Fargo Bank, N.A. This deposit along with an additional deposit of $15.0 million that we made in January 2014 were returned to us following a mutual termination of the agreement on November 13, 2014.

Borrowings

12 Months Ended

Dec. 31, 2014

Debt Disclosure [Abstract]

Borrowings

Note 14 — Borrowings

Match Funded Liabilities

Match funded liabilities are comprised of the following at December 31:



Borrowing Type	Interest Rate	Maturity (1)	Amortization Date (1)	Available Borrowing Capacity (2)		2014			2013
Advance Receivable Backed Notes Series 2012-ADV1 (3)	1-Month LIBOR (1ML) (4) + 175 bps	Jun. 2017	Jun. 2015	$	76,920	$	373,080		$	417,388
Advance Receivable Backed Note (5)	1ML + 300 bps	Dec. 2015	Dec. 2014	49,506		494			33,211
2012-Homeward Agency Advance Funding Trust 2012-1 (6)	Cost of Funds + 300 bps	Apr. 2014	Apr. 2014	—		—			21,019
Advance Receivables Backed Notes, Series 2013-VF1, Class A (7)	1ML + 175 bps (7)	Oct. 2044	Oct. 2014	—		—			1,494,628
Advance Receivables Backed Notes, Series 2013-VF2, Class A (8)	1ML + 167 bps (8)	Oct. 2045	Oct. 2015	44,366		519,634			385,645
Advance Receivables Backed Notes, Series 2013-VF2, Class B (9)	1ML + 300 bps (9)	Oct. 2045	Oct. 2015	3,081		32,919			12,923
Advance Receivables Backed Notes, Series 2014-VF3, Class A (10)	1ML + 175 bps (10)	Oct. 2045	Oct. 2015	47,447		552,553			—
Advance Receivables Backed Notes, Series 2014-VF4 (11)	1ML + 175 bps (11)	Oct. 2045	Oct. 2015	47,447		552,553			—
Advance Receivables Backed Notes, Series 2014-VF1, Class A (12)	Cost of Funds + 275 bps	Dec. 2045	Dec. 2015	65,986		21,192			—
Advance Receivables Backed Notes, Series 2014-VF1, Class B (12)	Cost of Funds + 325 bps	Dec. 2045	Dec. 2015	—		13,598			—
Advance Receivables Backed Notes, Series 2014-VF1, Class C (12)	Cost of Funds + 375 bps	Dec. 2045	Dec. 2015	—		10,224			—
Advance Receivables Backed Notes, Series 2014-VF1, Class D (12)	Cost of Funds + 470 bps	Dec. 2045	Dec. 2015	—		14,000			—
				$	334,753	$	2,090,247		$	2,364,814

Weighted average interest rate						1.97		%	2.08		%

(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 December 31, 2014, none of the available borrowing capacity could be used based on the amount of eligible collateral that had been pledged.


(3)	On February 1, 2015, the borrowing capacity under this facility was reduced to $400.0 million.


(4)	1-Month LIBOR was 0.17% and 0.17% at December 31, 2014 and 2013, respectively.


(5)	We voluntarily terminated this advance facility on January 30, 2015.


(6)	Advance facility assumed as part of the acquisition of Homeward. This facility was terminated on April 16, 2014, and the advances pledged to the facility were transferred to another facility.


(7)	These notes were issued in connection with the OneWest MSR Transaction. On March 17, 2014, the maximum borrowing capacity under the 2013-VF1 note declined by $500.0 million to a total of $1.0 billion. On October 1, 2014, the 2013-VF1 note was fully repaid.


(8)	On October 1, 2014, the maximum borrowing capacity of the VF2, Class A notes was increased to $564.0 million. The interest margin on these notes was set at 167 bps and is scheduled to increase to 191 bps on July 15, 2015, to 215 bps on August 15, 2015 and 239 bps on September 15, 2015.


(9)	On October 1, 2014, the maximum borrowing capacity of the VF2, Class B notes was increased to $36.0 million. The interest margin on these notes was set at 300 bps and is scheduled to increase to 343 bps on July 15, 2015, to 386 bps on August 15, 2015 and 429 bps on September 15, 2015.


(10)	On October 1, 2014, the maximum borrowing capacity of the note was increased to $600.0 million. The interest margin was set at 175 bps and is scheduled to increase to 200 bps on July 15, 2015, to 225 bps on August 15, 2015 and to 250 bps on September 15, 2015.


(11)	The 2014-VF4 note was issued on October 1, 2014 with a maximum borrowing capacity of $600.0 million. The interest margin on this new series of notes was set at 175 bps and is scheduled to increase to 200 bps on July 15, 2015, to 212 bps on August 15, 2015 and to 250 bps on September 15, 2015.

(12)

The 2014-VF1 notes were issued on December 23, 2014. Maximum borrowing under the facility is $125.0 million. The maximum note balance for the Class A Note is $125.0 million less the actual borrowings under the Class B, C and D Notes. The maximum note balance for the Class B Note is $32.0 million, for the Class C Note $24.5 million and for the Class D note $32.5 million. Beginning April 23, 2015, the maximum borrowing under the facility will decrease by $6.3 million per month until it is reduced to $75.0 million.

Financing Liabilities

Financing liabilities are comprised of the following at December 31:



Borrowings	Collateral	Interest Rate	Maturity	2014		2013
Servicing:
Financing liability – MSRs pledged	MSRs	(1)	(1)	$	614,441	$	633,804
Secured Notes, Ocwen Asset Servicing Income Series, Series 2014-1 (2)	MSRs	(2)	Feb. 2028	111,459		—
Financing liability – Advances pledged (3)	MSRs	(3)	(3)	88,489		—
				814,389		633,804

Lending:
Financing liability - MSRs pledged (4)	MSRs	(4)	(4)	—		17,593
HMBS-related borrowings (5)	Loans held for investment	1ML + 243 bps	(5)	1,444,252		615,576
				1,444,252		633,169

				$	2,258,641	$	1,266,973


(1)	This financing liability arose in connection with the HLSS Transactions and has no contractual maturity. The balance of the liability is adjusted each reporting period to its fair value based on the present value of the estimated future cash flows underlying the related MSRs.

(2)

OASIS noteholders are entitled to receive a monthly payment amount equal to the sum of: (a) the designated servicing fee amount (21 basis points of the UPB of the reference pool of Freddie Mac mortgages); (b) any termination payment amounts; (c) any excess refinance amounts; and (d) the note redemption amounts, each as defined in the indenture supplement for the notes. The notes have a final stated maturity of February 2028. We accounted for this transaction as a financing. Monthly amortization of the liability is estimated using the proportion of monthly projected service fees on the underlying MSRs as a percentage of lifetime projected fees, adjusted for the term of the security.


(3)	Certain advances were sold to HLSS Mortgage and HLSS SEZ LP on March 4, 2014 and May 2, 2014, respectively. These sales of advances did not qualify for sales accounting treatment and were accounted for as a financing.

(4)

Represents sales of MSRs to a third party that were being accounted for as a financing. The financing liability was being amortized using the interest method with the servicing income that was remitted to the purchaser representing payments of principal and interest. In April 2014, we derecognized the remaining liability related to this MSR sale. During 2014, we recognized a gain of $2.6 million on the extinguishment of the financing liability.


(5)	Represents amounts due to the holders of beneficial interests in Ginnie Mae guaranteed HMBS. The beneficial interests have no maturity dates, and the borrowings mature as the related loans are repaid.

Other Secured Borrowings

Other secured borrowings are comprised of the following at December 31:



Borrowings	Collateral	Interest Rate	Maturity	Available Committed Borrowing Capacity		2014			2013
Servicing:
SSTL (1)	(1)	1-Month Euro-dollar rate + 375 bps with a Eurodollar floor of 125 bps (1)	Feb. 2018	$	—	$	1,277,250		$	1,290,250
Promissory note (2)	MSRs	1ML + 350 bps	May 2017	—		—			15,529
Repurchase agreement (3)	Loans held for sale (LHFS)	1ML + 200 - 345 bps	Jun. 2015	17,982		32,018			17,507
				17,982		1,309,268			1,323,286

Lending:
Master repurchase agreement (4)	LHFS	1ML + 175 bps	Jun. 2015	—		208,010			105,659
Participation agreement (5)	LHFS	N/A	Apr. 2016	—		41,646			81,268
Participation agreement (6)	LHFS	N/A	Apr. 2016	—		196			—
Master repurchase agreement (7)	LHFS	1ML + 175 - 275 bps	Jul. 2015	—		102,073			91,990
Master repurchase agreement (8)	LHFS	1ML + 175 - 200 bps	Nov. 2014	—		—			89,836
Master repurchase agreement (9)	LHFS	1ML + 275bps	Jul. 2015	—		52,678			51,975
Mortgage warehouse agreement (10)	LHFS	1ML + 275 bps; floor of 350 bps	May 2015	—		23,851			34,292
				—		428,454			455,020

Corporate Items and Other:
Securities sold under an agreement to repurchase (11)	Ocwen Real Estate Asset Liquidating Trust 2007-1 Notes	Class A-2 notes: 1ML + 200 bps; Class A-3 notes: 1ML + 300 bps	Monthly	—		—			4,712
				17,982		1,737,722			1,783,018
Discount (1)				—		(4,031		)	(5,349		)
				$	17,982	$	1,733,691		$	1,777,669

Weighted average interest rate						4.33		%	4.86		%

(1)

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 generally 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, and 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. However, for asset sales that are part of an HLSS Transaction, we have the option, within 180 days, either to invest the net cash proceeds in MSRs or related assets, such as advances, or to repay loan principal. 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% and a one month Eurodollar floor of 1.25%. To date we have elected option (b) to determine the interest rate.

On September 23, 2013, we entered into Amendment No. 1 to the Senior Secured Term Loan Facility Agreement and Amendment No. 1 to the related Pledge and Security Agreement. These amendments:


•	permit repurchases of all of the Preferred Shares, which may be converted to common stock prior to repurchase, and up to $1.5 billion of common stock, subject, in each case, to pro forma financial covenant compliance;


•	eliminate the dollar cap on Junior Indebtedness (as defined in the SSTL) but retain the requirement for any such issuance to be subject to pro forma covenant compliance;


•	include a value for whole loans (i.e., loans held for sale) in collateral value for purposes of calculating the loan-to-value ratio and include specified deferred servicing fees and the fair value of specified mortgage servicing rights in net worth for purposes of calculating the ratio of consolidated total debt to consolidated tangible net worth; and


•	modify the applicable quarterly covenant levels for the corporate leverage ratio, ratio of consolidated total debt to consolidated tangible net worth and loan-to-value ratio.

On March 2, 2015 and April 17, 2015, respectively, we entered into Amendments No. 2 and No. 3 to the Senior Secured Term Loan Facility Agreement. See Note 30 — Subsequent Events for additional information regarding these amendments.


(2)	This note was repaid in full on February 28, 2014.


(3)	Under this repurchase agreement, the lender provides financing on a committed basis for $50.0 million and, at the discretion of the lender, on an uncommitted basis for an additional $50.0 million. On June 30, 2014, the maturity date of this facility was extended to June 29, 2015.


(4)	Under this repurchase agreement, the lender provides financing on a committed basis for $150.0 million and, at the discretion of the lender, on an uncommitted basis for an additional $150.0 million. On April 17, 2014, the maturity date of this facility was extended to April 16, 2015. On March 24, 2015, the maturity date of this facility was further extended to June 10, 2015.

(5)

Under this participation agreement, the lender provides financing on an uncommitted basis for $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 sale accounting treatment and is accounted for as a secured borrowing. The lender earns the stated interest rate of the underlying mortgage loans while the loans are financed under the participation agreement. On May 31, 2014, the maturity date of this facility was extended to May 31, 2015. On March 10, 2015, the maturity date of this agreement was further extended to April 30, 2016, and the maximum borrowing was reduced to $50.0 million. On April 16, 2015, the maximum borrowing capacity was increased to $100.0 million.

(6)

On November 12, 2014, we entered into this participation agreement under which the lender provides financing on an uncommitted basis 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 sale accounting treatment and is accounted for as a secured borrowing. The lender earns the stated interest rate of the underlying mortgage loans while the loans are financed under the participation agreement. On March 10, 2015, the maturity date of this agreement was extended to April 30, 2016, and the maximum borrowing was increased to $150.0 million.

(7)

Under this repurchase agreement, the lender provides financing on a committed basis for $75.0 million and, at the discretion of the lender, on an uncommitted basis for an additional $75.0 million. On September 2, 2014, the maturity date of this facility was extended to October 2, 2014. On October 2, 2014, the maturity date was further extended to September 1, 2015. On March 31, 2015, the maturity date was revised to July 31, 2015, and the committed lending capacity was to decline to zero on May 29, 2015. On April 16, 2015, this facility was terminated.


(8)	On October 24, 2014, this facility was repaid in full and terminated.

(9)

On September 2, 2014, the maximum borrowing capacity under this facility was reduced to $37.5 million on a committed basis plus an additional $37.5 million on an uncommitted basis at the discretion of the lender. On December 31, 2014, the termination date of this facility was extended to January 16, 2015. On January 16, 2015, the termination date was further extended to April 16, 2015. On March 31, 2015, the maturity date was further extended to July 31, 2015; however, the committed lending capacity declines to zero on May 29, 2015. On April 16, 2015, the maximum borrowing capacity under this agreement was reduced to $37.5 million, all of which is committed.


(10)	Borrowing capacity under this facility of $60.0 million is available on an uncommitted basis at the discretion of the lender. In August 2014, the maturity date of this facility was extended to May 28, 2015.


(11)	This agreement was terminated December 12, 2014.

Senior Unsecured Notes

On May 12, 2014, Ocwen completed the issuance and sale of $350.0 million of its 6.625% Senior Notes due 2019 (the Senior Unsecured Notes) in a private offering. We received net proceeds of $343.3 million from the sale of the Senior Unsecured Notes after deducting underwriting fees and offering expenses. The Senior Unsecured Notes are general senior unsecured obligations of Ocwen and will mature on May 15, 2019. Interest is payable semi-annually on May 15^th and November 15^th. The Senior Unsecured Notes are not guaranteed by any of Ocwen’s subsidiaries.

At any time prior to May 15, 2016, Ocwen may redeem all or a part of the Senior Unsecured Notes, upon not less than 30 nor more than 60 days’ notice, at a redemption price equal to 100.0% of the principal amount of the Senior Unsecured Notes redeemed, plus the Applicable Premium as defined in the related indenture agreement (the Indenture), plus accrued and unpaid interest and Additional Interest as defined in the Indenture, if any, on the Senior Unsecured Notes redeemed. The Applicable Premium on a Note is the greater of 1% of the principal amount of the Note or the redemption price at May 15, 2016 plus all interest due from the redemption date through May 15, 2016, less the principal amount of the Note. As discussed below, additional interest is earned by the Senior Unsecured Notes if the deadline for exchange or registration of the Senior Unsecured Notes is not met and ranges from an initial 0.25% to a maximum 1.0%.

On or after May 15, 2016, Ocwen may redeem all or a part of the Senior Unsecured Notes, upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) specified in the Indenture plus accrued and unpaid interest and Additional Interest, if any. The redemption prices during the twelve-month periods beginning on May 15^th of each year are as follows:



Year		Redemption Price
2016		104.969%
2017		103.313%
2018 and thereafter		100.000%

At any time prior to May 15, 2016, Ocwen may, at its option, use the net cash proceeds of one or more Equity Offerings as defined in the Indenture to redeem up to 35% of the principal amount of all Senior Unsecured Notes issued at a redemption price equal to 106.625% of the principal amount of the Senior Unsecured Notes redeemed plus accrued and unpaid interest and Additional Interest, if any, provided that: (i) at least 65% of the principal amount of all Senior Unsecured Notes issued under the Indenture remains outstanding immediately after any such redemption; and (ii) Ocwen makes such redemption not more than 120 days after the consummation of any such Equity Offering.

Upon the occurrence of a change of control as defined in the Indenture, Ocwen is required to make an offer to the holders of the Senior Unsecured Notes to repurchase the Senior Unsecured Notes at a purchase price equal to 101.0% of the principal amount of the Senior Unsecured Notes purchased plus accrued and unpaid interest and Additional Interest, if any. Each holder will have the right to require that the Ocwen purchase all or a portion of the holder’s Senior Unsecured Notes pursuant to the offer.

The Indenture contains various covenants that could, unless certain conditions are met, limit or restrict the ability of Ocwen and its subsidiaries to engage in specified types of transactions. Among other things, these covenants could potentially limit or restrict the ability of Ocwen and its subsidiaries to:


•	incur additional debt or issue preferred stock;


•	pay dividends or make distributions on or purchase equity interests of Ocwen;


•	repurchase or redeem debt that is subordinate to the Senior Unsecured Notes prior to maturity;


•	make investments or other restricted payments;


•	create liens on assets to secure debt of Ocwen or any guarantor of the Senior Unsecured Notes;


•	sell or transfer assets;


•	enter into transactions with “affiliates” (any entity that controls, is controlled by or is under common control with Ocwen or certain of its subsidiaries); and


•	enter into mergers, consolidations, or sales of all or substantially all of Ocwen’s assets.

Many of the restrictive covenants will be suspended if the Senior Unsecured Notes achieve an investment grade rating from both Moody’s Investors Service, Inc. (Moody’s) and Standard & Poor’s Ratings Services (S&P) and no default or event of default, as specified in the Indenture, has occurred and is continuing. However, covenants that are suspended as a result of achieving these ratings will again apply if Moody’s or S&P withdraws its investment grade rating or downgrades the rating assigned to the Senior Unsecured Notes below an investment grade rating.

Ocwen contemporaneously entered into a Registration Rights Agreement under which it agreed for the benefit of the initial purchasers of the Senior Unsecured Notes to use commercially reasonable efforts to file a registration statement and to have the registration statement become effective on or prior to 270 days after the closing of the offering. The registration statement would relate to a registered offer to exchange the Senior Unsecured Notes for other notes (referred to as the exchange notes) that would be issued by Ocwen, would be registered with the SEC and would have substantially identical terms as the Senior Unsecured Notes. If Ocwen were unable to effect the exchange offer, it would instead be required to use commercially reasonable efforts to file and cause to become effective a shelf registration statement relating to resales of the Senior Unsecured Notes. If the exchange offer were not completed (or, if required under certain circumstances, the shelf registration statement were not declared effective) on or before 270 days after the closing of the offering, then additional interest would accrue on the principal amount of the notes at a rate of 0.25% per annum (which rate will be increased by an additional 0.25% per annum for each subsequent 90-day period that such additional interest continues to accrue; provided that the rate at which such additional interest accrues may in no event exceed 1.0% per annum) until the exchange offer is completed or the shelf registration statement, if required, is declared effective. Ocwen was unable to complete the exchange offer or to cause the shelf registration statement to become effective by February 6, 2015, the 270^th day following the closing of the offering. As a result, the interest rate on the notes has increased in accordance with the terms of the Registration Rights Agreement.

In connection with our issuance of the Senior Unsecured Notes, we incurred certain costs that we capitalized and are amortizing over the period from the date of issuance to May 15, 2019. The unamortized balance of these issuance costs was $5.8 million at December 31, 2014.

Covenants

Under the terms of our existing debt agreements, we are subject to various qualitative and quantitative covenants. These covenants include:


•	Financial covenants;


•	Covenants to operate in material compliance with applicable laws;


•	Restrictions on our ability to engage in various activities, including but not limited to incurring additional debt, paying dividends, repurchasing or redeeming capital stock, transferring assets or making loans, investments or acquisitions; and


•	Monitoring and reporting of various specified transactions or events, including specific reporting on defined events affecting collateral underlying certain debt agreements.

Financial covenants in our debt agreements require that we maintain, among other things:


•	a specified interest coverage ratio, which is defined under our SSTL as the ratio of trailing four quarter adjusted EBITDA to trailing four quarter interest expense (each as defined therein);


•	a specified corporate leverage ratio, which is defined under our SSTL as consolidated debt to trailing four quarter adjusted EBITDA (each as defined therein);


•	a specified consolidated total debt to consolidated tangible net worth ratio;


•	a specified loan to value ratio, as defined under our SSTL; and


•	specified levels of consolidated tangible net worth, liquidity and, at the OLS level, net operating income.

As of December 31, 2014, the most restrictive consolidated tangible net worth requirement was $630.0 million plus 65% of quarterly net income, without adjustment for quarterly net losses, beginning with the three months ended December 31, 2012. The required consolidated tangible net worth in connection with this agreement was $957.1 million at December 31, 2014.

Under one of its advance financing agreements, OLS must maintain certain minimum servicer ratings assigned by S&P, Moody’s and Fitch. If any of these rating agencies withdraws its rating or if the assigned ratings falls below the minimum ratings established in the lending agreement, an early amortization event occurs under the lending agreement if the lender’s agent notifies the indenture trustee that an early amortization event has occurred. As a result of downgrades in our servicer ratings, the lender has the right to deliver such notice at any time. The lender has agreed not to deliver such a notice to the indenture trustee subject to its ongoing monthly review. If an early amortization event occurs and is not waived by the lender, no new advances can be funded under the facility, all collections on advances funded through the facility must be used to pay interest and principal on currently outstanding borrowings under the facility, minimum facility balance repayments would be instituted, and the interest rate margin on 1-month LIBOR would increase. At December 31, 2014, we had $373.1 million of borrowings outstanding under this facility out of a maximum borrowing capacity of $450.0 million. The scheduled date to begin amortization of this facility is June 2015. We have entered into a commitment letter providing for replacement financing should the existing lender seek not to renew or extend the revolving period upon its completion in June 2015. Our lender’s obligation to fund under this commitment letter is subject to conditions precedent, some of which are outside our control.

We believe that we are in compliance with, or have received waivers of, all of the qualitative and quantitative covenants in our debt agreements as of the date of these financial statements.

Maturities of Borrowings

Aggregate long-term borrowings by maturity date at December 31, 2014 are as follows:



	Expected Maturity Date (1) (2)
	2015		2016		2017		2018		2019		There- after		Total Balance		Fair Value
Match funded liabilities	$	2,090,247	$	—	$	—	$	—	$	—	$	—	$	2,090,247	$	2,090,247
Other secured borrowings	472,160		11,701		11,714		1,238,116		—		—		1,733,691		1,658,699
Senior unsecured notes	—		—		—		—		350,000		—		350,000		321,563
	$	2,562,407	$	11,701	$	11,714	$	1,238,116	$	350,000	$	—	$	4,173,938	$	4,070,509


(1)	For match funded liabilities, the expected maturity date is the date on which the revolving period ends for each advance financing facility note and repayment of the outstanding balance must begin if the note is not renewed or extended.

(2)

Excludes financing liabilities, which we recognized in connection with the sales transactions that we accounted for as financings. Financing liabilities include $614.4 million recorded in connection with sales of MSRs and Rights to MSRs and $1.4 billion recorded in connection with the securitizations of HMBS. The MSR-related financing liabilities have no contractual maturity and are amortized over the life of the transferred Rights to MSRs. The HMBS-related financing liabilities have no contractual maturity and are amortized as the related loans are repaid.

Other Liabilities

12 Months Ended

Dec. 31, 2014

Other Liabilities Disclosure [Abstract]

Other Liabilities

Note 15 — Other Liabilities

Other liabilities were comprised of the following at December 31:



	2014		2013
Contingent loan repurchase liability (1)	$	274,265	$	—
Accrued expenses	142,592		108,870
Liability for indemnification obligations	132,918		192,716
Payable to servicing and subservicing investors (2)	67,722		33,501
Due to related parties	55,585		77,901
Liability for selected tax items	28,436		27,273
Checks held for escheat	18,513		24,392
Liability for certain foreclosure matters (3)	—		66,948
Additional purchase price due seller - ResCap Acquisition	—		54,220
Other	73,503		58,774
	$	793,534	$	644,595


(1)	In connection with the Ginnie Mae EBO Transactions, we have re-recognized certain loans on our consolidated balance sheets and establish a corresponding repurchase liability regardless of our intention to repurchase the loan.


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

(3)

This liability was settled in May 2014. We recognized $53.5 million of expense in Professional services during 2013 to establish the liability. We recognized the remaining $13.4 million of the liability as an adjustment to the initial purchase price allocation related to the Homeward Acquisition. We applied this measurement period adjustment retrospectively to our Consolidated Balance Sheet at December 31, 2012 with an offsetting increase in goodwill.

Mezzanine Equity

12 Months Ended

Dec. 31, 2014

Temporary Equity [Abstract]

Mezzanine Equity

Note 16 — Mezzanine Equity

Preferred Stock

On December 27, 2012, Ocwen issued 162,000 shares of Series A Perpetual Convertible Preferred Stock, having a par value of $0.01 per share as part of the consideration paid in the Homeward Acquisition. Holders of the Preferred Shares were entitled to receive mandatory and cumulative dividends payable quarterly at the rate per share equal to the greater of (i) 3.75% per annum multiplied by $1,000 per share and (ii) in the event Ocwen pays a regular quarterly dividend on its common stock in such quarter, the rate per share payable in respect of such quarterly dividend on an as-converted basis. Each Preferred Share, together with any accrued and unpaid dividends, was convertible to common stock at the option of the holder at a conversion price equal to $31.79.

On September 23, 2013, holders elected to convert 100,000 of the Preferred Shares into 3,145,640 shares of common stock. On July 14, 2014, holders elected to convert the remaining 62,000 shares into 1,950,296 shares of common stock.

The following table summarizes the activity in mezzanine equity since issuance of the 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
Conversion of 100,000 Preferred Shares	(100,000		)
Accretion of BCF discount (Deemed dividend) (1)	6,989
Carrying value at December 31, 2013	60,361
Conversion of 62,000 Preferred Shares	(62,000		)
Accretion of BCF discount (Deemed dividend) (1)	1,639
Carrying value at December 31, 2014	$	—


(1)	Accretion includes $0.8 million and $3.5 million accelerated write-off of the unamortized discount related to the conversion of Preferred Shares during 2014 and 2013, respectively.

Equity

12 Months Ended

Dec. 31, 2014

Equity [Abstract]

Equity

Note 17 — Equity

Common Stock

On March 28, 2012, we converted $56.4 million of the outstanding principal balance of the 3.25% Convertible Notes to 4,635,159 shares of Ocwen common stock and redeemed the remaining balance for cash.

On September 23, 2013, Ocwen paid $157.9 million to repurchase from the holders of our Preferred Shares all 3,145,640 shares of Ocwen common stock that were issued upon their election to convert 100,000 of the Preferred Shares into shares of common stock. On July 14, 2014, Ocwen paid $72.3 million to repurchase all 1,950,296 shares of common stock that were issued upon conversion of the remaining 62,000 Preferred Shares.

On October 31, 2013, we announced that Ocwen’s Board of Directors had authorized a share repurchase program for an aggregate of up to $500.0 million of Ocwen’s issued and outstanding shares of common stock. Repurchases may be made in open market transactions at prevailing market prices or in privately negotiated transactions. Unless we amend the share repurchase program or repurchase the full $500.0 million amount by an earlier date, the share repurchase program will continue through July 2016. No assurances can be given as to the amount of shares, if any, that we may repurchase in any given period. The repurchase of shares issued in connection with the conversion of Preferred Shares is not considered to be part of this repurchase program and, therefore, does not count against the $500.0 million aggregate value limit. During 2014, we completed the repurchase of 10,420,396 shares of common stock in the open market under this program for a total purchase price of $310.2 million. From inception of the program through December 31, 2014, we have completed the repurchase of 11,546,103 shares for an aggregate purchase price of $370.3 million.

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss (AOCL), net of income taxes, were as follows at December 31:



	2014		2013
Unrealized losses on cash flow hedges	$	8,291	$	10,026
Other	122		125
	$	8,413	$	10,151

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
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-Publisher FASB
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Reference 10: http://www.xbrl.org/2003/role/presentationRef
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-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644

Reference 11: http://www.xbrl.org/2003/role/presentationRef
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Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
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+ Details

Derivative Financial Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2014

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 balances of our holdings of derivatives during the year ended December 31, 2014:



	IRLCs			Forward MBS Trades			Interest Rate Caps
Beginning balance	$	751,436		$	950,648		$	1,868,000
Additions	4,710,504			8,657,112			1,100,000
Amortization	94,571			—			(1,239,000		)
Maturities	(4,280,676		)	(3,366,349		)	—
Terminations	(1,036,429		)	(5,537,686		)	—
Ending balance	$	239,406		$	703,725		$	1,729,000

Fair value of derivative assets (liabilities) at:
December 31, 2014	$	6,065		$	(2,854	)	$	567
December 31, 2013	$	8,433		$	6,905		$	442

Maturity	Feb. 2015 - Mar. 2015			Feb. 2015 - Mar. 2015 (1)			Nov. 2016 - Oct. 2017


(1)	As loans are originated and sold or as loan commitments expire, our forward MBS trade positions mature and are replaced by new positions based upon new loan commitments and originations and expected time to sell.

Foreign Currency Exchange Rate Risk Management

We periodically enter into foreign exchange forward contracts to hedge against the effect of changes in the value of the India Rupee on amounts payable to our India subsidiaries. Our operations in the Philippines also expose us to foreign currency exchange rate risk, but we currently consider this risk to be insignificant.

Interest Rate Management

Match Funded Liabilities

We terminated our interest rate swaps on May 31, 2013 primarily because the custodial account float balances, which earn a variable rate of interest, are well in excess of variable rate borrowings under advance facilities. The earnings on these deposits reduce our exposure to changes in interest rates. As required by certain of our advance financing arrangements, we have purchased interest rate caps to minimize future interest rate exposure from increases in one-month LIBOR interest rates.

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 MBS trades to provide an economic hedge against those changes in fair value on mortgage loans held for sale. Forward MBS trades are primarily used to fix the forward sales price that will be realized upon the sale of mortgage loans into the secondary market.

Interest Rate Lock Commitments

A 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 freestanding derivatives such as forward contracts. We enter into forward contracts with respect to fixed and variable rate loan commitments.

MSRs, at Fair Value

Effective April 1, 2013, we terminated our hedging program for MSRs which we measure at fair value. 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.

The following summarizes our open derivative positions at December 31, 2014 and the losses on all derivatives used in each of the identified hedging programs for the year then ended. None of the derivatives was designated as a hedge for accounting purposes at December 31, 2014:



Purpose	Expiration Date	Notional Amount		Asset / (Liability) at Fair Value (1)			Losses		Consolidated Statement of Operations Caption
Hedge the effect of changes in interest rates on interest expense on borrowings
Interest rate caps
Hedge the effect of changes in 1ML on advance funding facilities	Nov. 2016 - Oct. 2017	$	1,729,000	$	567		$	661	Other, net

Interest rate risk of mortgage loans held for sale and of IRLCs
Forward MBS trades	Feb 2015 - Mar 2015	703,725		(2,854		)	17,214		Gain on loans held for sale, net

IRLCs	Feb 2015 - Mar 2015	239,406		6,065			25,822		Gain on loans held for sale, net
Total derivatives				$	3,778		$	43,697


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

Included in AOCL at December 31, 2014 and 2013, respectively, were $8.8 million and $10.8 million of deferred unrealized losses, before taxes of $0.5 million and $0.7 million, respectively, on interest rate swaps that we had designated as cash flow hedges. Changes in AOCL during the years ended December 31 were as follows:



	2014			2013			2012
Beginning balance	$	10,151		$	6,441		$	7,896

Additional net losses on cash flow hedges	—			12,363			8,315
Ineffectiveness of cash flow hedges reclassified to earnings	—			(657		)	41
Losses on terminated hedging relationships amortized to earnings	(1,982		)	(10,816		)	(10,592		)
Net increase (decrease) in accumulated losses on cash flow hedges	(1,982		)	890			(2,236		)
Decrease in deferred taxes on accumulated losses on cash flow hedges	248			2,825			786
Increase (decrease) in accumulated losses on cash flow hedges, net of taxes	(1,734		)	3,715			(1,450		)

Other	(4		)	(5		)	(5		)

Ending balance	$	8,413		$	10,151		$	6,441

As of December 31, 2014, amortization of accumulated losses on cash flow hedges from AOCL to Other income (expense), net is projected to be $1.8 million during 2015. To the extent we sell the MSRs to which the accumulated losses on cash flow hedges applied, a proportionate amount of the remaining unamortized accumulated losses associated with the MSRs sold will be recognized in earnings at that time.

Other income (expense), net, includes the following related to derivative financial instruments for the years ended December 31:



	2014			2013			2012
Gains (losses) on economic hedges	(661		)	(2,861		)	7,331
Ineffectiveness of cash flow hedges	—			(657		)	41
Write-off of losses in AOCL for a discontinued hedge relationship (1)	(1,982		)	(10,816		)	(4,633		)
Write-off of losses in AOCL for hedge of a financing facility assumed by HLSS (2)	—			—			(5,958		)
	$	(2,643	)	$	(14,334	)	$	(3,219	)


(1)	Includes the write off in 2012 and 2013 of the remaining unamortized losses when a borrowing under the related advance financing facility was repaid in full, and the facility was terminated.

- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
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Reference 2: http://www.xbrl.org/2003/role/presentationRef
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 10: http://www.xbrl.org/2003/role/presentationRef
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Reference 11: http://www.xbrl.org/2003/role/presentationRef
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Reference 16: http://www.xbrl.org/2003/role/presentationRef
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+ Details

Interest Income

12 Months Ended

Dec. 31, 2014

Other Income and Expenses [Abstract]

Interest Income

Note 19 — Interest Income

The following table presents the components of interest income for the years ended December 31:



	2014		2013		2012
Loans held for sale	$	20,299	$	18,563	$	2,946
Other	2,692		3,792		5,383
	$	22,991	$	22,355	$	8,329

Interest income that we expect to be collected on Loans Held for Investment - Reverse Mortgages, or HECMs, is included with net fair value gains in Other revenues.

Interest Expense

12 Months Ended

Dec. 31, 2014

Other Income and Expenses [Abstract]

Interest Expense

Note 20 — Interest Expense

The following table presents the components of interest expense for the years ended December 31:



	2014		2013		2012
Match funded liabilities	$	61,576	$	75,979	$	122,292
Financing liabilities (1) (2)	371,852		228,985		54,710
Other secured borrowings	82,837		81,851		41,510
6.625% Senior Unsecured Notes	15,595		—		—
3.25% Convertible Notes (3)	—		—		153
10.875% Capital Securities (4)	—		—		1,894
Other	9,897		8,771		2,896
	$	541,757	$	395,586	$	223,455


(1)	Includes interest expense related to financing liabilities recorded in connection with the HLSS Transactions as indicated in the table below:



	2014		2013		2012
Servicing fees collected on behalf of HLSS	$	736,122	$	633,377	$	117,789
Less: Servicing fee retained by Ocwen	358,053		317,723		50,162
Net servicing fees remitted to HLSS	378,069		315,654		67,627
Less: Reduction in financing liability	17,374		87,068		12,917
Interest expense on HLSS financing liability	$	360,695	$	228,586	$	54,710

The reduction in financing liability for 2014 does not include $2.0 million in reimbursements to HLSS for the loss of servicing revenues when we were terminated as servicer and the related Rights to MSRs had been sold to HLSS.


(2)	Interest expense that we expect to be paid on the HMBS-related borrowings is included with net fair value gains in Other revenues.


(3)	We redeemed the remaining 3.25% Convertible Notes outstanding on March 28, 2012.


(4)	We redeemed the remaining 10.875% Capital Securities outstanding on August 31, 2012.

Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Note 21 — Income Taxes

For income tax purposes, the components of income (loss) before taxes were as follows for the years ended December 31:



	2014			2013		2012
Domestic	$	(401,741	)	$	76,957	$	176,075
Foreign	(41,418		)	275,522		81,433
	$	(443,159	)	$	352,479	$	257,508

The components of income tax expense (benefit) were as follows for the years ended December 31:



	2014			2013			2012
Current:
Federal	$	(20,824	)	$	58,507		$	10,621
State	(403		)	14,691			(759		)
Foreign	9,195			15,545			2,968
	(12,032		)	88,743			12,830
Deferred:
Federal	41,986			(53,711		)	62,704
State	(997		)	(4,325		)	(431		)
Foreign	(6,162		)	(4,410		)	1,482
Provision for valuation allowance on deferred tax assets	3,601			15,764			—
	38,428			(46,682		)	63,755
Total	$	26,396		$	42,061		$	76,585

Income tax expense differs from the amounts computed by applying the U.S. Federal corporate income tax rate of 35% as follows for the years ended December 31:



	2014			2013			2012
Expected income tax expense at statutory rate	$	(155,106	)	$	123,368		$	90,127
Differences between expected and actual income tax expense:
Impairment of goodwill	92,034			—			—
State tax, after Federal tax benefit	(1,084		)	5,639			(1,184		)
Provision for liability for selected tax items	6,084			12,218			5,558
Non-deductible regulatory settlements	53,375			—			—
Other permanent differences	(254		)	(636		)	15
Foreign tax differential	27,799			(112,997		)	(17,816		)
Provision for valuation allowance on deferred tax assets	3,601			15,764			—
Other	(53		)	(1,295		)	(115		)
Actual income tax expense	$	26,396		$	42,061		$	76,585

Net deferred tax assets were comprised of the following at December 31:



	2014			2013
Deferred tax assets:
Net operating loss carryforward	$	35,433		$	35,370
Bad debt and allowance for loan losses	10,727			6,397
Partnership losses	10,663			11,085
Intangible asset amortization	10,741			4,728
Accrued legal settlements	7,403			27,320
Reserve for servicing exposure	7,093			20,446
Accrued other liabilities	6,271			7,452
Accrued incentive compensation	5,029			10,037
Tax residuals and deferred income on tax residuals	4,021			3,963
Delinquent servicing fees	3,591			36,480
Stock-based compensation expense	3,431			2,956
Foreign deferred assets	2,568			2,802
Accrued lease termination costs	1,831			1,085
Capital losses	1,464			843
Valuation allowance on real estate	1,007			767
Interest rate swaps	494			743
Other	5,606			10,560
	117,373			183,034
Deferred tax liabilities:
Mortgage servicing rights amortization	14,696			51,619
Foreign undistributed earnings	6,249			—
Other	76			80
	21,021			51,699
	96,352			131,335
Valuation allowance	(19,365		)	(15,764		)
Deferred tax assets, net	$	76,987		$	115,571

We conduct periodic evaluations of positive and negative evidence to determine whether it is more likely than not that the deferred tax asset can be realized in future periods. Among the factors considered in this evaluation are estimates of future taxable income, future reversals of temporary differences, tax character and the impact of tax planning strategies that may be implemented, if warranted. As a result of this evaluation, we concluded that a valuation allowance of $19.4 million and $15.8 million was necessary at December 31, 2014 and 2013, respectively.

We recognized total interest and penalties of $2.3 million, $2.0 million and $(0.1) million in 2014, 2013 and 2012, respectively. At December 31, 2014 and 2013, accruals for interest and penalties were $5.9 million and $3.6 million, respectively. As of December 31, 2014 and 2013, we had a liability for selected tax items of $22.5 million and $23.7 million, respectively, all of which if recognized would affect the effective tax rate.

It is reasonably possible that there could be a change in the amount of our unrecognized tax benefits within the next 12 months due to activities of the Internal Revenue Service or other taxing authorities, including proposed assessments of additional tax, possible settlement of audit issues, or the expiration of applicable statutes of limitations. The range of the possible change in unrecognized tax benefits within the next 12 months cannot be reasonably estimated at December 31, 2014. However, we do not expect that change to have a material impact on our financial position or results of operations.

Our major jurisdiction tax years that remain subject to examination are our U.S. federal tax return for the years ended December 31, 2008 through the present, our USVI corporate tax return for the years ended December 31, 2012 through the present and our India corporate tax returns for the years ended March 31, 2005 through the present. Our U.S. federal tax return for the years ended December 31, 2008, 2009, 2010 and 2012 are currently under examination. In addition, the U.S. federal tax return filed by our USVI subsidiary for the year ended December 31, 2012 is currently under examination. A reconciliation of the beginning and ending amount of the total liability for selected tax items is as follows for the years ended December 31:



	2014			2013
Beginning balance	$	27,273		$	22,702
Additions for tax positions of prior years	1,392			4,944
Reductions for tax positions of prior years	(6,010		)	—
Lapses in statute of limitations	(132		)	(373		)
Ending balance	$	22,523		$	27,273

At December 31, 2014, we had U.S. NOL carryforwards of $100.4 million. These carryforwards will expire beginning 2019 through 2034. We believe that it is more likely than not that the benefit from certain federal NOL carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $19.1 million on the deferred tax assets relating to these federal NOL carryforwards. If our assumptions change and we determine we will be able to realize these NOLs, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets as of December 31, 2014 will be accounted for as a reduction of income tax expense. We have capital loss carryforwards of $23.0 million at December 31, 2014.

As of December 31, 2014, we have recognized a deferred tax liability of $6.2 million for India, Mauritius and Luxembourg subsidiary undistributed earnings of $31.9 million. We anticipate repatriating the $31.9 million of earnings in 2015. With the exception of the planned repatriation of India, Mauritius, and Luxembourg subsidiary earnings, we consider the remainder of our foreign subsidiary undistributed earnings to be indefinitely invested outside the U.S. based on our specific plans for reinvestment. As of December 31, 2014, our foreign subsidiaries have approximately $327.0 million of undistributed earnings and $112.9 million of cash and short term investments. Should we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability is not practicable.

OMS is headquartered in Frederiksted, St. Croix, USVI and is located in a federally recognized economic development zone where qualified entities are eligible for certain benefits. We refer to these benefits as “EDC benefits” as they are granted by the USVI Economic Development Commission. We were approved as a Category IIA service business, and are therefore entitled to receive benefits that have a favorable impact on our effective tax rate. These benefits, among others, enable us to avail ourselves of a credit of 90% of income taxes on certain qualified income related to our servicing business. The exemption was granted as of October 1, 2012 and is available for a period of 30 years until expiration on September 30, 2042. The impact of these EDC benefits decreased foreign taxes by $61.2 million and $109.1 million for 2014 and 2013, respectively. The benefit of these EDC benefits on diluted earnings per share was $0.47 and $0.78 for 2014 and 2013, respectively.

Basic and Diluted Earnings (Loss) per Share

12 Months Ended

Dec. 31, 2014

Earnings Per Share [Abstract]

Basic and Diluted Earnings (Loss) per Share

Note 22 — Basic and Diluted Earnings (Loss) per Share

Basic earnings per share 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 earnings per share by dividing net income attributable to Ocwen, as adjusted to add back preferred stock dividends and interest expense on convertible notes, net of income tax, 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 stock and convertible notes. The following is a reconciliation of the calculation of basic earnings per share to diluted earnings per share for the years ended December 31:



	2014			2013		2012
Basic earnings (loss) per share:
Net income (loss) attributable to Ocwen common stockholders	$	(472,602	)	$	298,398	$	180,778

Weighted average shares of common stock	131,362,284			135,678,088		133,912,643

Basic earnings (loss) per share	$	(3.60	)	$	2.20	$	1.35

Diluted earnings (loss) per share (1):
Net income (loss) attributable to Ocwen common stockholders	$	(472,602	)	$	298,398	$	180,778
Preferred stock dividends (1) (2)	—			—		—
Interest expense on 3.25% Convertible Notes, net of income tax (3)	—			—		107
Adjusted net income (loss) attributable to Ocwen	$	(472,602	)	$	298,398	$	180,885

Weighted average shares of common stock	131,362,284			135,678,088		133,912,643
Effect of dilutive elements (1):
Preferred Shares (1) (2)	—			—		—
3.25% Convertible Notes (2)	—			—		1,008,891
Stock options	—			4,110,355		3,593,419
Common stock awards	—			12,063		6,326
Dilutive weighted average shares of common stock	131,362,284			139,800,506		138,521,279

Diluted earnings (loss) per share	$	(3.60	)	$	2.13	$	1.31

Stock options excluded from the computation of diluted earnings per share:
Anti-dilutive (3)	314,688			—		143,125
Market-based (4)	295,000			547,500		1,535,000


(1)	For 2014, we have excluded the effect of the Preferred Shares, stock options and common stock awards from the computation of diluted earnings per share because of the anti-dilutive effect of our reported net loss.

(2)

Prior to the conversion of the remaining Preferred Shares into common stock in July 2014 and the redemption of the remaining 3.25% Convertible Notes into common stock in March 2012, we computed their effect on diluted earnings per share using the if-converted method. For purposes of computing diluted earnings per share, we assumed the conversion of the Preferred Shares and the 3.25% Convertible Notes into shares of common stock unless the effect was anti-dilutive. Conversion of the Preferred Shares was not assumed for 2013 and 2012 because the effect would have been antidilutive.


(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 Ocwen’s stock price and an annualized rate of return to investors.

Employee Compensation and Benefit Plans

12 Months Ended

Dec. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Employee Compensation and Benefit Plans

Note 23 — Employee Compensation and Benefit Plans

We maintain a defined contribution plan to provide post-retirement benefits to our eligible employees. We also maintain additional compensation plans for certain employees. We designed these plans to facilitate a pay-for-performance policy, further align the interests of our officers and key employees with the interests of our shareholders and assist in attracting and retaining employees vital to our long-term success. These plans are summarized below.

Retirement Plan

We maintain a defined contribution 401(k) plan. Generally, we match 50% of each employee’s contributions, limited to 2% of the employee’s compensation. However, for a 12-month period following the acquisition of Liberty and for employees who were participants in the Genworth Financial, Inc. Retirement & Savings Plan, the 401(k) plan was amended to allow Ocwen to contribute, for the first 6% of each participant’s compensation that is contributed to the 401(k) plan, 100% of that amount to the participant’s account. In addition, for a 12-month period following the acquisition, Ocwen contributed a profit-sharing component to the 401(k) plan equal to from 1% to 6% of the participant’s compensation.

Our contributions to the 401(k) plan were $3.8 million, $4.2 million and $0.4 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Annual Incentive Plan

The Ocwen Financial Corporation Amended 1998 Annual Incentive Plan and the 2007 Equity Incentive Plan (the 2007 Equity Plan) are our primary incentive compensation plans for executives and other key employees. Under the terms of these plans, participants can earn cash and equity-based awards as determined by the Compensation Committee of the Board of Directors (the Committee). The awards are generally based on objective performance criteria established by the Committee. The Committee may at its discretion adjust performance measurements to reflect significant unforeseen events. We recognized $13.5 million, $28.4 million and $7.2 million of compensation expense during 2014, 2013 and 2012, respectively, related to annual incentive compensation awarded in cash.

The 2007 Equity Plan authorizes the grant of stock options, restricted stock or other equity-based awards to employees. At December 31, 2014, there were 9,316,758 shares of common stock remaining available for future issuance under the 2007 Equity Plan. Beginning in 2008, Ocwen has awarded stock options to certain members of senior management under the 2007 Equity Plan. These awards had the following characteristics in common:



Type of Award	Percent of Options Awarded	Vesting Period
Service Condition:
Time-Based	25%	Ratably over four years (¼ on each of the four anniversaries of the grant date)
Market Condition:
Performance-Based	50	Over three years beginning with ¼ vesting on the date that the stock price has at least doubled over the exercise price and the compounded annual gain over the exercise price is at least 20% and then ratably over three years (¼ on the next three anniversaries of the achievement of the market condition)
Extraordinary Performance-Based	25	Over three years beginning with ¼ vesting on the date that the stock price has at least tripled over the exercise price and the compounded annual gain over the exercise price is at least 25% and then ratably over three years (¼ on the next three anniversaries of the achievement of the market condition)
Total award	100%

The contractual term of all options granted is ten years from the grant date, except where employment terminates by reason of retirement, in which case the time-based options will terminate no later than three years after such retirement or the end of the option term, whichever is earlier. The terms of the market-based options do not include a retirement provision.

Stock option activity for the years ended December 31:



	2014				2013				2012
	Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
Outstanding at beginning of year	8,182,611		$	10.62	8,938,179		$	9.93	7,894,728		$	5.48
Granted (1)	330,000		$	34.48	50,000		$	51.70	2,160,000		$	23.92
Exercised (2)(3)	(683,750	)	$	8.30	(790,568	)	$	5.35	(1,116,549	)	$	3.56
Forfeited (1)	(1,000,000	)	$	24.38	(15,000	)	$	15.27	—		$	—
Outstanding at end of year (4)(5)	6,828,861		$	9.99	8,182,611		$	10.62	8,938,179		$	9.93

Exercisable at end of year (4)(5)(6)	5,750,739		$	6.84	5,733,864		$	6.53	5,569,432		$	5.04

(1)

Stock options granted in 2012 include 2,000,000 options granted to Ocwen’s former Executive Chairman, William C. Erbey at an exercise price of $24.38 equal to the closing price of the stock on the day of the Committee’s approval. On April 22, 2014, Mr. Erbey surrendered 1,000,000 of these options. We recognized the remaining $5.7 million of previously unrecognized compensation expense associated with these options as of the date of surrender.


(2)	The total intrinsic value of stock options exercised, which is defined as the amount by which the market value of the stock on the date of exercise exceeds the exercise price, was $13.7 million, $35.3 million and $23.9 million for 2014, 2013 and 2012, respectively.

(3)

In connection with the exercise of stock options during 2014, 2013 and 2012, employees delivered 249,696, 138,553 and 33,605 shares, respectively, of common stock to Ocwen as payment for the exercise price and the income tax withholdings on the compensation. As a result, a total of 434,054, 652,015 and 1,082,944 net shares of stock were issued in 2014, 2013 and 2012, respectively, related to the exercise of stock options.


(4)	Excluding 295,000 market-based options that have not met their performance criteria, the net aggregate intrinsic value of stock options outstanding and stock options exercisable at December 31, 2014 was $41.1 million and $47.5 million, respectively. A total of 4,677,814 market-based options were outstanding at December 31, 2014, of which 3,986,878 were exercisable.


(5)	At December 31, 2014, the weighted average remaining contractual term of options outstanding and options exercisable was 4.47 years and 3.80 years, respectively.


(6)	The total fair value of the stock options that vested and became exercisable during 2014, 2013 and 2012, based on grant-date fair value, was $2.6 million, $4.7 million and $2.2 million, respectively.

Compensation expense related to options is measured based on the grant-date fair value of the options using an appropriate valuation model based on the vesting condition of the award. The fair value of the time-based options was determined using the Black-Scholes options pricing model, while a lattice (binomial) model was used to determine the fair value of the market-based options. Lattice (binomial) models incorporate ranges of assumptions for inputs.

The following assumptions were used to value stock option awards granted during the years ended December 31:



	2014		2013		2012
	Black-Scholes	Binomial	Black-Scholes	Binomial	Black-Scholes	Binomial
Risk-free interest rate	1.98% – 2.60%	0 - 3.05%	2.32%	0.24% - 3.56%	1.20% – 1.60%	0.70% – 3.06%
Expected stock price volatility (1)	42%	41% - 42%	44%	33% - 44%	40% – 42%	7% – 42%
Expected dividend yield	—%	—%	—%	—%	—%	—%
Expected option life (in years) (2)	6.50	4.35 - 5.64	6.50	4.50 - 5.75	6.50	4.50 – 6.50
Contractual life (in years)	—	10	—	10	—	10
Fair value	$11.93 - $17.01	$8.99 - $13.82	$24.32	$18.04 - $21.38	$6.49 – $10.48	$3.41 – $8.87


(1)	We estimate volatility based on the historical volatility of Ocwen’s common stock over the most recent period that corresponds with the estimated expected life of the option.

(2)

For the options valued using the Black-Scholes model we determined the expected life based on historical experience with similar awards, giving consideration to the contractual term, exercise patterns and post vesting forfeitures. The expected term of the options valued using the lattice (binomial) model is derived from the output of the model. The lattice (binomial) model incorporates exercise assumptions based on analysis of historical data. For all options, the expected life represents the period of time that options granted were expected to be outstanding at the date of the award.

The following table sets forth equity-based compensation related to stock options and stock awards and the related excess tax benefit for the years ended December 31:



	2014		2013		2012
Equity-based compensation expense:
Stock option awards	$	9,983	$	5,388	$	2,776
Stock awards	746		260		158
Excess tax benefit related to share-based awards	6,374		21,244		11,031

As of December 31, 2014, unrecognized compensation costs related to non-vested stock options amounted to $9.0 million, which will be recognized over a weighted-average remaining requisite service period of 1.82 years.

Business Segment Reporting

12 Months Ended

Dec. 31, 2014

Segment Reporting [Abstract]

Business Segment Reporting

Note 24 — 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 entered into a subservicing or special servicing agreement with the entity that owns the MSR. Our residential servicing portfolio includes conventional, government-insured and non-Agency loans. Non-Agency loans include subprime loans which represent residential loans that generally did not qualify under GSE guidelines or have subsequently become delinquent. Conventional loans include prime loans, which represent residential loans that exceeded the GSE limits at origination.

Lending. The Lending segment is focused on originating and purchasing conventional and government-insured residential forward and reverse mortgage loans mainly through our correspondent lending arrangements, broker relationships and directly with mortgage customers. The loans are typically sold shortly after origination into a liquid market on a servicing retained basis.

Corporate Items and Other. Corporate Items and Other includes revenues and expenses that are not directly related to other reportable segments, business activities that are individually insignificant, interest income on short-term investments of cash, interest expense on corporate debt and certain corporate expenses. Business activities not currently considered to be of continuing significance include subprime non-Agency loans held for sale (at lower of cost or fair value) investments in mortgage-backed securities, affordable housing investment activities and investments in unconsolidated entities. Corporate Items and Other also included the diversified fee-based businesses that we acquired as part of the Homeward and ResCap Acquisitions and subsequently sold to Altisource on March 29, 2013 and April 12, 2013, respectively.

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

Financial information for our segments is as follows:



	Servicing			Lending			Corporate Items and Other			Corporate Eliminations			Business Segments Consolidated
Results of Operations
For the year ended December 31, 2014
Revenue (1)	$	1,985,436		$	119,220		$	6,825		$	(156	)	$	2,111,325
Operating expenses (1) (2)	1,643,323			156,272			235,769			(156		)	2,035,208
Income (loss) from operations	342,113			(37,052		)	(228,944		)	—			76,117
Other income (expense):
Interest income	2,981			16,459			3,551			—			22,991
Interest expense	(515,141		)	(10,725		)	(15,891		)	—			(541,757		)
Other (1)	(4,043		)	4,476			(943		)	—			(510		)
Other income (expense), net	(516,203		)	10,210			(13,283		)	—			(519,276		)
Loss before income taxes	$	(174,090	)	$	(26,842	)	$	(242,227	)	$	—		$	(443,159	)

For the year ended December 31, 2013
Revenue (1)	$	1,895,921		$	120,899		$	22,092		$	(639	)	$	2,038,273
Operating expenses (1) (2)	1,096,084			98,194			107,188			(172		)	1,301,294
Income (loss) from operations	799,837			22,705			(85,096		)	(467		)	736,979
Other income (expense):
Interest income	1,599			16,295			4,461			—			22,355
Interest expense	(381,477		)	(13,508		)	(601		)	—			(395,586		)
Other (1)	(28,292		)	10,132			6,424			467			(11,269		)
Other income (expense), net	(408,170		)	12,919			10,284			467			(384,500		)
Income (loss) before income taxes	$	391,667		$	35,624		$	(74,812	)	$	—		$	352,479

For the year ended December 31, 2012
Revenue (1)	$	840,630		$	356		$	5,122		$	(905	)	$	845,203
Operating expenses (1) (2)	344,315			409			19,667			(484		)	363,907
Income (loss) from operations	496,315			(53		)	(14,545		)	(421		)	481,296
Other income (expense):
Interest income	9			309			8,011			—			8,329
Interest expense	(221,948		)	(514		)	(993		)	—			(223,455		)
Other (1)	(13		)	—			(9,070		)	421			(8,662		)
Other income (expense), net	(221,952		)	(205		)	(2,052		)	421			(223,788		)
Income (loss) before income taxes	$	274,363		$	(258	)	$	(16,597	)	$	—		$	257,508



	Servicing		Lending		Corporate Items and Other		Corporate Eliminations		Business Segments Consolidated
Total Assets
December 31, 2014	$	5,881,862	$	1,963,729	$	421,687	$	—	$	8,267,278

December 31, 2013	$	6,295,976	$	1,195,812	$	435,215	$	—	$	7,927,003

December 31, 2012	$	4,575,489	$	476,434	$	634,039	$	—	$	5,685,962


(1)	Intersegment billings for services rendered to other segments are recorded as revenues, as contra-expense or as other income, depending on the type of service that is rendered.

(2)Depreciation and amortization expense are as follows:



	Servicing		Lending		Corporate Items and Other		Business Segments Consolidated
For the year ended December 31, 2014:
Depreciation expense	$	9,955	$	332	$	11,623	$	21,910
Amortization of MSRs	249,471		705		199		250,375
Amortization of debt discount	1,318		—		—		1,318
Amortization of debt issuance costs	4,294		—		845		5,139

For the year ended December 31, 2013:
Depreciation expense	$	13,525	$	320	$	10,400	$	24,245
Amortization of MSRs	282,526		255		—		282,781
Amortization of debt discount	1,412		—		—		1,412
Amortization of debt issuance costs	4,395		—		—		4,395

For the year ended December 31, 2012:
Depreciation expense	$	1,469	$	8	$	4,243	$	5,720
Amortization of MSRs	72,897		—		—		72,897
Amortization of debt discount	3,259		—		—		3,259
Amortization of debt issuance costs	3,718		—		—		3,718

- Definition

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.

+ References

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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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+ Details

Related Party Transactions

12 Months Ended

Dec. 31, 2014

Related Party Transactions

Note 25 — Related Party Transactions

Relationship with Former Executive Chairman

Ocwen’s former Executive Chairman, William C. Erbey, also formerly served as Chairman of the Board of Altisource, HLSS, Altisource Residential Corporation (Residential) and Altisource Asset Management Corporation (AAMC). As a result, he had obligations to Ocwen as well as to Altisource, HLSS, Residential and AAMC. Effective January 16, 2015, Mr. Erbey resigned as an officer and director of Ocwen. Effective on that same date, Mr. Erbey also resigned from the boards of Altisource, HLSS, Altisource Residential and AAMC. As of December 31, 2014, Mr. Erbey owned or controlled approximately 14% of the common stock of Ocwen, approximately 29% of the common stock of Altisource, approximately 1% of the common stock of HLSS, approximately 28% of the common stock of AAMC and approximately 4% of the common stock of Residential. At December 31, 2014, Mr. Erbey also held 3,620,498 options to purchase Ocwen common stock, of which 3,120,498 were exercisable. Mr. Erbey exercised 47,872 of those options in January 2015. On April 22, 2014, Mr. Erbey surrendered 1,000,000 of his options to purchase Ocwen common stock. At December 31, 2014, Mr. Erbey held 873,501 options to purchase Altisource common stock and 85,755 options to purchase AAMC common stock, all of which were exercisable.

Mr. Erbey’s decision to resign as a director was not due to any disagreements with Ocwen on any matter relating to its operations, policies or practices. On January 16, 2015, the Compensation Committee of the Board approved, and the Board ratified, a Retirement Agreement by and between Ocwen Financial Corporation, OMS and Mr. Erbey (the Retirement Agreement). The Compensation Committee of the Board retained an independent compensation consultant to provide advice in connection with the Retirement Agreement.

The Retirement Agreement provides for Mr. Erbey’s separation from Ocwen and its affiliates. The Retirement Agreement contains certain provisions in favor of Ocwen such as releases in our favor and covenants regarding confidentiality, non-competition and non-solicitation of our employees, customers, vendors, suppliers, licensors, lessors, joint venturers, associates, consultants, agents and partners. The Retirement Agreement also contains certain provisions in Mr. Erbey’s favor such as retirement payment provisions, continued medical coverage for Mr. Erbey and his spouse, provisions addressing Mr. Erbey’s options and registration rights for Mr. Erbey in certain circumstances.

During 2012, Mr. Erbey relocated to St. Croix, USVI to serve as Chairman and CEO of OMS. On August 21, 2012, the Ocwen Board of Directors approved Ocwen’s purchase of Mr. Erbey’s residence in Atlanta, Georgia, for his cost basis in the home of $6.5 million as part of his relocation. We classified our investment in this property as real estate held for sale, a component of Other assets. We account for the excess of cost over fair value (less costs to sell) as a valuation allowance and include changes in the valuation allowance in Loss on loans held for sale, net.

Relationship with Altisource

On August 10, 2009, Ocwen completed the distribution of its Ocwen Solutions (OS) line of business (the Separation) via the spin-off of Altisource, a separate publicly traded company. OS consisted primarily of Ocwen’s former unsecured collections business, residential fee-based loan processing businesses and technology platforms. Since the spin-off, our relationship has been governed by a number of agreements that set forth the terms of our business with Altisource.

Ocwen and OMS are parties to a Services Agreement, a Technology Products Services Agreement, an Intellectual Property Agreement and a Data Center and Disaster Recovery Services Agreement with Altisource. Under the Services Agreements, Altisource provides various business process outsourcing services, such as valuation services and property preservation and inspection services, among other things. Altisource provides certain technology products and support services under the Technology Products Services Agreements and the Data Center and Disaster Recovery Services Agreements. These agreements expire August 31, 2025. Ocwen and Altisource have also entered into a master services agreement pursuant to which Altisource provides certain loan origination services to Homeward and Liberty. In addition, under a Data Access and Services Agreement, we agreed to make available to Altisource certain data from Ocwen’s servicing portfolio in exchange for a per asset fee. Altisource provided us a notice of termination with respect to this Data Access and Services Agreement, and the agreement terminated on March 31, 2015.

Our business is currently dependent on many of the services and products provided by Altisource under long-term agreements, many of which include renewal provisions. Our servicing platform runs on an information technology system that we license from Altisource. If Altisource were to fail to fulfill its contractual obligations to us, including through a failure to provide services at the required level to maintain and support our systems, or if Altisource were to become unable to fulfill such obligations (for example, because it entered bankruptcy), our business and operations would suffer. In addition, if Altisource fails to develop and maintain its technology so as to provide us with a competitive platform, our business could suffer.

Certain services provided by Altisource under these agreements are charged to the borrower and/or mortgage 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.

In connection with our March 29, 2013 and April 12, 2013 sales of the Homeward and ResCap diversified fee-based businesses to Altisource, we agreed to expand the terms of our business with Altisource to apply to the services Altisource provides as they relate to the Homeward and ResCap servicing businesses and further (i) to establish Altisource as the exclusive provider, except as prohibited by law, of such services as they relate to the Homeward and ResCap servicing businesses and (ii) 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 and ResCap businesses. In addition, we agreed that Ocwen and all of its subsidiaries and affiliates will market and promote the utilization of Altisource’s services to their various third-party relationships. Finally, Altisource and Ocwen 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 (REALServicing). The cash consideration paid by Altisource to Ocwen in connection with the sales of the Homeward and ResCap diversified fee-based businesses totaled $87.0 million and $128.8 million, respectively.

Ocwen and OMS have also each entered into a Support Services Agreement with Altisource setting forth certain services that Altisource and Ocwen may provide to each other in such areas as human resources, corporate services, Six Sigma, quality assurance, quantitative analytics, treasury, accounting, tax matters and strategic planning. These Support Services Agreements run through October 2017 and September 2018, respectively, with automatic one-year renewals thereafter. During the course of 2014 and early 2015, we reduced the services Altisource and Ocwen provide to each other under the Support Services Agreements. Beginning April 1, 2015, we anticipate that the only services that will regularly be provided are corporate services such as facilities management and mailroom support services and vendor procurement for information technology and facilities.

We sublease 2,155 square feet of space from Altisource on a month-to-month basis as our principal executive office in Atlanta, Georgia.

On December 27, 2012, we entered into a senior unsecured term loan facility agreement (the Unsecured Loan 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 bore 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. We recognized interest expense of $0.8 million and $0.1 million on this loan in 2013 and 2012, respectively. In February 2013, we repaid this loan in full.

Relationship with HLSS

Prior to the sale of substantially all of its assets on April 6, 2015, HLSS acquired Rights to MSRs and related servicing advances from us and assumed the obligation to fund new servicing advances in respect of the Rights to MSRs. The servicing fees payable under the servicing agreements underlying the Rights to MSRs were apportioned between us and HLSS as provided in our agreements with HLSS. HLSS retained a fee based on the UPB of the loans serviced, and OLS received certain fees, including a performance fee based on servicing fees actually paid less an amount calculated based on the amount of servicing advances and cost of financing those advances. After the earlier of April 30, 2020 or eight years after the closing date of the initial sale of each tranche of Rights to MSRs, the apportionment of these fees with respect to such tranche was subject to re-negotiation. On April 6, 2015, a subsidiary of NRZ entered into a transaction to acquire substantially all of the assets of HLSS, including HLSS Holdings, LLC, and Ocwen entered into a consent to this transfer and an amendment of its agreements with HLSS. Following the sale, NRZ, through its subsidiaries, is the owner of the Rights to MSRs and has assumed HLSS’ rights and obligations under all of the above referenced agreements.

Beginning April 7, 2017, NRZ, as successor to HLSS, has a general right to direct us to transfer servicing of the servicing agreements underlying the Rights to MSRs that we have previously sold provided that the transfer is subject to our continued right to be paid the servicing fees and other amounts payable under our agreements. An exception to the requirement that the transfer is subject to our continued right to payment under the transferred servicing agreement exists in circumstances where a termination event (as defined in our agreements with NRZ, as successor to HLSS) occurs. In these circumstances, NRZ may direct us to use commercially reasonable efforts to transfer servicing under the affected servicing agreement and, following the transfer, we would no longer be entitled to receive future servicing fee revenue with respect to the transferred servicing agreement. Regarding NRZ’s rights upon a termination event resulting from an uncured servicer rating downgrade, NRZ has agreed to a standstill until April 7, 2017 unless they determine in good faith that a trustee intends to terminate servicing under an affected servicing agreement. In these circumstances, NRZ may direct us to use commercially reasonable efforts to transfer servicing under the affected servicing agreement and, following the transfer, we would no longer be entitled to receive future servicing fee revenue. All required third party consents would need to be obtained in connection with any servicing transfer.

To the extent that servicing agreements underlying Rights to MSRs are terminated as a result of a termination event, NRZ is entitled to payment of an amount equal to a percentage of the purchase price for the related Rights to MSRs.

Prior to the sale of substantially all of its assets to NRZ, pursuant to our agreements with HLSS, HLSS had assumed the obligation to fund new servicing advances with respect to the Rights to MSRs. We were dependent upon HLSS for financing of the servicing advance obligations for MSRs where we were the servicer. HLSS, in turn, was dependent upon its advance financing facilities in order to fund a substantial portion of the servicing advances that it was contractually obligated to make pursuant to our agreements with HLSS. As of December 31, 2014, we were the servicer on Rights to MSRs pertaining to approximately $160.8 billion in UPB and the associated outstanding servicing advances as of such date were approximately $6.1 billion.

HLSS’ advance funding facilities had a 364-day term and the revolving periods for a significant portion of their advance funding facilities were scheduled to end in 2015. In the event of a default, HLSS’ advance facilities revolving periods would have terminated and the facilities would have begun amortization. There were no provisions under which Ocwen would have been obligated to repay the HLSS advance facilities upon an event of default by HLSS. Instead, Ocwen, as servicer, would have been immediately responsible for all new advances. Thus, as of December 31, 2014 and through the date of the asset sale, we were subject to liquidity risk in the event that HLSS’ advance financing facilities failed to perform as envisaged or HLSS was otherwise unable to meet its advance financing obligations.

Although we were not an obligor or guarantor under NRZ’s advance financing facilities (which have been assumed by NRZ from HLSS pursuant to the asset sale), we are a party to certain of the facility documents as the servicer of the underlying loans on which advances are being financed. A purported owner of notes issued by one of the advance financing facilities recently asserted that events of default have occurred under the indenture governing those notes based on alleged failures by us to comply with applicable laws and regulations and the terms of the servicing agreement to which the applicable servicing advances relate. While we have vigorously defended ourselves against these allegations, we have consented to an arrangement between NRZ, as successor to HLSS, and the indenture trustee for those notes that provides for a standstill for the indenture trustee to investigate the allegations of default during which the indenture trustee will not initiate a court proceeding. If the eventual outcome of this matter were to involve an event of default being declared under this advance financing facility, NRZ may not be able to perform under its agreements with us. As a result, our liquidity, financial condition and business could be materially and adversely affected. In addition, it is possible that NRZ might seek to take actions against us alleging that we bear responsibility for such outcomes, which could also materially and adversely affect us.

The supplements pertaining to NRZ’s variable funding notes under this advance facility have been amended to extend the revolving periods and increase the aggregate commitments thereunder and to clarify, among other things, that the variable noteholders will not consider a violation of law or relevant servicing agreements to constitute an event of default with respect to those notes unless they result in a material adverse effect on the collectability, timing of collection or value of the advance receivables. The amendments also provide that the variable noteholders will not consider the allegations made by the purported owner of the notes to constitute a violation of funding conditions, and have agreed to continue to fund draws on the facility including, if necessary, to refinance the outstanding term notes under the facility. In addition, if the outstanding term notes are refinanced the variable noteholders have agreed that they shall not consider the allegations made by the purported owner of the notes to constitute an event of default.

Ocwen and HLSS were parties to a Professional Services Agreement under which they provided each other certain professional services including valuation analysis of potential MSR acquisitions, treasury management services and other similar services, licensing and regulatory compliance support services and risk management services. No services are currently provided under this agreement.

On March 3, 2014, in the first Ginnie Mae EBO Transaction, Ocwen sold Ginnie Mae EBO Loans and transferred the related servicing advances to HLSS Mortgage for $612.3 million. On May 2, 2014, in connection with the second Ginnie Mae EBO Transaction, we transferred $20.2 million of advances to HLSS SEZ LP. At December 31, 2014, Ocwen serviced EBO Loans with a UPB of approximately $447.5 million for HLSS.

On June 26, 2014, we entered into a mortgage loan servicing agreement with HLSS Mortgage LP, which had acquired mortgage loans from a third party unrelated to Ocwen. Additional mortgage loans subsequently acquired by HLSS Mortgage LP were added under this agreement. At December 31, 2014, Ocwen serviced loans with a UPB of approximately $434.2 million under this agreement.

Relationship with Residential

On December 21, 2012, we 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. At December 31, 2014, we serviced loans with a UPB of approximately $3.7 billion under this agreement.

On February 14, 2013, we 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 and the gain recognized by Ocwen on the sale was not significant. We did not sell any assets to Residential in 2014.

Relationship with AAMC

On December 31, 2013, we entered into a support services agreement with AAMC pursuant to which we will provide business development, analytical and consulting and administrative services to AAMC. The support services agreement may be terminated by either party with a month’s prior notice.

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. At December 31, 2014, 39,441 of these shares were unvested. 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. At December 31, 2014, 21,912 of these shares were unvested.

The following table summarizes revenues and expenses related to our agreements with Altisource, HLSS (prior to the sale of its assets to NRZ), AAMC and Residential (and, as applicable, their subsidiaries) for the years ended December 31 and net amounts receivable or payable at December 31:



	2014		2013		2012
Revenues and Expenses:
Altisource:
Revenues	$	43,075	$	22,739	$	16,532
Expenses	101,520		55,119		28,987
HLSS:
Revenues	$	1,315	$	631	$	195
Expenses	1,729		2,018		2,432
AAMC
Revenues	$	1,160	$	1,238	$	—
Residential
Revenues	$	15,658	$	2,436	$	—



	December 31, 2014			December 31, 2013
Net Receivable (Payable)
Altisource	$	(4,909	)	$	(3,843	)
HLSS	7,884			(59,505		)
AAMC	232			943
Residential	100			50
	$	3,307		$	(62,355	)

- Definition

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.

+ References + Details

Regulatory Requirements	12 Months Ended
Regulatory Requirements	Dec. 31, 2014
Brokers and Dealers [Abstract]
Regulatory Requirements	Note 26 — Regulatory Requirements Our business is subject to extensive regulation by federal, state and local governmental authorities, including the Consumer Financial Protection Bureau (CFPB), the Department of Housing and Urban Development (HUD), the Securities and Exchange Commission (SEC) and various state agencies that license, audit and conduct examinations of our mortgage servicing, origination and collection activities. In addition, we operate under a number of regulatory settlements that subject us to ongoing monitoring or reporting. From time to time, we also receive requests from federal, state and local agencies for records, documents and information relating to the policies, procedures and practices of our mortgage servicing, origination and collection activities. The GSEs and their conservator, the Federal Housing Finance Authority (FHFA), Ginnie Mae, the United States Treasury Department, various investors, non-Agency securitization trustees and others also subject us to periodic reviews and audits. As a result of the current regulatory environment, we have faced and expect to continue to face increased regulatory and public scrutiny as well as stricter and more comprehensive regulation of our business. We continue to work diligently to assess and understand the implications of the regulatory environment in which we operate and to meet the requirements of the changing environment in which we operate. We devote substantial resources to regulatory compliance, while, at the same time, striving to meet the needs and expectations of our customers, clients and other stakeholders. Our failure to comply with applicable federal, state and local laws, regulations and licensing requirements could lead to any of the following: (i) loss of our licenses and approvals to engage in our servicing and lending businesses, (ii) governmental investigations and enforcement actions, (iii) administrative fines and penalties and litigation, (iv) civil and criminal liability, including class action lawsuits, (v) breaches of covenants and representations under our servicing, debt or other agreements, (vi) inability to raise capital or (vii) inability to execute on our business strategy. We must comply with a large 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, the Homeowners Protection Act, the Federal Trade Commission Act, the Equal Credit Opportunity Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and state foreclosure laws. These statutes apply to loan origination, 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, amended, interpreted and enforced. The recent trend among federal, state and local lawmakers and regulators has been toward increasing laws, regulations and investigative proceedings with regard to residential real estate lenders and servicers. The CFPB directly affects the regulation of residential mortgage servicing in a number of ways. First, the CFPB has rule making authority with respect to many of the federal consumer protection laws applicable to mortgage servicers, including TILA and RESPA, as reflected in the new rules for servicing and origination that went into effect in 2014. Second, the CFPB has supervision, examination and enforcement authority over consumer financial products and services offered by certain non-depository institutions and large insured depository institutions. The CFPB’s jurisdiction includes those persons originating, brokering or servicing residential mortgage loans and those persons performing loan modification or foreclosure relief services in connection with such loans. Accordingly, we are subject to supervision, examination and enforcement by the CFPB. We expect to continue to invest significantly in our operational platform and risk and compliance management systems in order to comply with these laws and regulations. Furthermore, there may be additional federal or state laws enacted that place additional obligations on servicers and originators of residential mortgage loans. Our OLS, Homeward and Liberty subsidiaries are licensed to originate and/or service forward and reverse mortgage loans in the jurisdictions in which they operate. Our licensed entities are required to renew their licenses, typically on an annual basis, and to do so they must satisfy the license renewal requirements of each jurisdiction, which in some cases include the requirement to provide audited financial statements as well as other financial and non-financial requirements. Our licensed entities are also subject to minimum net worth requirements in connection with these licenses. These minimum net worth requirements are unique to each state and type of license. Failure to meet these minimum capital requirements or to satisfy any of the other requirements to which our licensed subsidiaries are subject could result in a variety of regulatory actions ranging from a fine, a directive requiring a certain step to be taken, a suspension or ultimately a revocation of a license, any of which could have an adverse impact on our results of operations and financial condition. The most restrictive of these requirements is based on the outstanding UPB of our owned and subserviced portfolio and was $827.6 million at December 31, 2014. We believe our licensed subsidiaries are currently in compliance with all of their capital requirements. OLS, Homeward and Liberty are also parties to seller/servicer agreements and/or subject to guidelines and regulations (collectively, seller/servicer obligations) with one or more of the GSEs, HUD, FHA, VA and Ginnie Mae. These seller/servicer agreements contain financial covenants that include capital requirements related to tangible net worth, as defined by the applicable agency, an obligation to provide audited consolidated financial statements within 90 days of the applicable entity’s fiscal year end as well as extensive requirements regarding servicing, selling and other matters. To the extent that these requirements are not met or waived, the applicable agency may, at its option, utilize a variety of remedies including, requirements to deposit funds as security for our obligations, sanctions, suspension or even termination of approved seller/servicer status, which would prohibit future originations or securitizations of forward or reverse mortgage loans or servicing for the applicable agency. As noted previously, we were unable to provide audited financial statements for OLS, Homeward and Liberty within the required timeframes. To date, none of these counterparties has communicated any material sanction, suspension or prohibition in connection with our seller/servicer obligations. We believe we were in compliance with the related net worth requirements at December 31, 2014. Our non-Agency servicing agreements also contain requirements regarding servicing practices and other matters, and a failure to comply with these requirements could have an adverse impact on our business. Transfers of mortgage servicing are subject to regulation under federal consumer finance laws, including CFPB rules implementing RESPA that require servicers to, among other things, maintain policies and procedures that are reasonably designed to facilitate the transfer of accurate information and documents during mortgage servicing transfers and properly evaluate loss mitigation applications that are in process at the time of transfer. The CFPB has advised mortgage servicers that its examiners will be carefully reviewing servicers’ compliance with these and other regulations applicable to servicing transfers, and state mortgage regulators have supervisory power over any licensed institutions involved in a transaction. Accordingly, we will be required to devote time and resources to ensuring compliance and engaging with such regulators in connection with any future transfers of mortgage servicing, including in connection with our announced asset sales. There are a number of foreign laws and regulations that are applicable to our operations in India, the Philippines 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 shareholders, our corporate entities, the public and the government in these countries. Non-compliance with the laws and regulations of India or the Philippines could result in (i) restrictions on our operations in these counties, (ii) fines, penalties or sanctions or (iii) reputational damage.

Commitments

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments

Note 27 — Commitments

Unfunded Commitments

We have originated floating-rate reverse mortgage loans under which the borrowers have additional borrowing capacity of $597.5 million at December 31, 2014. This additional borrowing capacity is available on a scheduled or unscheduled payment basis. We also had short-term commitments to lend $228.8 million and $10.6 million in connection with our forward and reverse mortgage loan interest rate lock commitments, respectively, outstanding at December 31, 2014.

Lease Commitments

We lease certain of our premises and equipment under non-cancelable operating leases with terms expiring through 2019 exclusive of renewal option periods. Our annual aggregate minimum rental commitments under these leases are summarized as follows:



2015	$	20,423
2016	19,637
2017	12,599
2018	5,822
2019	1,359
Thereafter	—
	59,840
Less: Sublease income	(8,863		)
Total minimum lease payments, net	$	50,977

In connection with business acquisitions we completed in recent years, we assumed the obligation for the lease agreements associated with certain facilities. The rental commitments in the table above for operating leases include the remaining amounts due through the earlier of the lease expiration date or the early termination date.

We sublease 2,155 square feet of space from Altisource on a month-to-month basis as our principal executive office in Atlanta, Georgia.

We converted rental commitments for our facilities outside the U.S. to U.S. dollars using exchange rates in effect at December 31, 2014. Rent expense for 2014, 2013 and 2012 was $19.0 million, $27.4 million and $14.7 million, respectively.

Contingencies

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Note 28 — Contingencies

When we become aware of a matter involving uncertainty for which we may incur a loss, we assess the likelihood of any loss. If a loss contingency is probable and the amount of the loss can be reasonably estimated, we record an accrual for the loss. In such cases, there may be an exposure to potential loss in excess of the amount accrued. Where a loss is not probable but is reasonably possible or where a loss in excess of the amount accrued is reasonably possible, we disclose an estimate of the amount of the loss or range of possible losses for the claim if a reasonable estimate can be made, unless the amount of such reasonably possible loss is not material to our financial position, results of operations or cash flows. If a reasonable estimate of loss cannot be made, we do not accrue for any loss or disclose any estimate of exposure to potential loss. An assessment regarding the ultimate outcome of any such matter involves judgments about future events, actions and circumstances that are inherently uncertain. The actual outcome could differ materially. Where we have retained external legal counsel or other professional advisors, such advisors assist us in making such assessments.

Litigation

In the ordinary course of business, we are routinely a defendant in, or a party or potential party to, many threatened and pending legal proceedings, including proceedings brought on behalf of various classes of claimants and those brought derivatively on behalf of Ocwen against certain current or former officers and directors.

These proceedings are generally based on alleged violations of federal, state and local laws and regulations governing our mortgage servicing and lending activities, including wrongful foreclosure and eviction actions, allegations of wrongdoing in connection with lender-placed insurance arrangements, claims relating to our pre-foreclosure property preservation activities and claims related to our payment and other processing operations. In some of these proceedings, claims for substantial monetary damages are asserted against us. To address the claims in those handful of proceedings brought derivatively by purported shareholders, the independent directors of the Board have established a Special Litigation Committee to investigate the shareholders’ allegations. In our opinion, the resolution of the vast majority of these proceedings will not have a material effect on our financial condition, results of operations or cash flows.

In view of the inherent difficulty of predicting the outcome of any threatened or pending legal proceedings, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, we generally cannot predict what the eventual outcome of such proceedings will be, what the timing of the ultimate resolution will be, or what the eventual loss, if any, will be.

Where we determine that a loss contingency is probable in connection with a pending or threatened legal proceeding and the amount of our losses can be reasonably estimated, we record an accrual for the losses. Excluding expenses of internal or external legal counsel, we have accrued $16.1 million as of December 31, 2014 for losses relating to threatened and pending litigation pertaining to our mortgage servicing practices that we believe are probable and reasonably estimable based on current information regarding these matters. Where we determine that a loss is not probable but is reasonably possible or where a loss in excess of the amount accrued is reasonably possible, we disclose an estimate of the amount of the loss or range of possible losses for the claim if a reasonable estimate can be made, unless the amount of such reasonably possible loss is not material to our financial position, results of operations or cash flows. It is possible that we will incur losses relating to threatened and pending litigation pertaining to our mortgage servicing practices that materially exceed the amount accrued. We cannot currently estimate the amount, if any, of reasonably possible losses above amounts that have been recorded at December 31, 2014.

Following our announcement on August 12, 2014 that we intended to restate our financial statements for the fiscal year ended December 31, 2013 and the quarter ended March 31, 2014, and amend our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, putative securities fraud class action lawsuits have been filed against Ocwen and certain of its officers and directors regarding such restatements and amendments. Those lawsuits have been consolidated and are pending in federal court in Florida. After Ocwen signed a Consent Order with the NYDFS on December 22, 2014, the consolidated class action complaint was amended to include allegations relating to that Consent Order and other matters. In January 2015, Ocwen was named as a defendant in a separate consolidated securities fraud class action that has been brought on behalf of a putative class of Altisource Portfolio Solutions, S.A. shareholders. Ocwen and the other defendants intend to vigorously defend against these lawsuits. Additional lawsuits may be filed and, at this time, Ocwen is unable to predict the outcome of these lawsuits, the possible loss or range of loss, if any, associated with the resolution of these lawsuits or any potential impact they may have on us or our operations. If our efforts to defend these lawsuits are not successful, our business, financial condition and results of operations could be adversely affected.

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. We have entered into tolling agreements with respect to our role as servicer for a very small number of securitizations and may enter into additional tolling agreements in the future. Other court actions have been filed against certain RMBS trustees alleging that the trustees breached their contractual and statutory duties by, among other things, failing to require the loan servicers to abide by the servicers’ obligations and failing to declare that certain alleged servicing events of default under the applicable contracts occurred.

Ocwen is a third-party defendant in one of these actions, is the servicer for certain securitizations involved in other such actions and is the servicer for other securitizations as to which actions have been threatened by certificate holders. We intend to vigorously defend ourselves in the lawsuit to which we have been named a party. Should Ocwen be made a party to other similar actions or should Ocwen be asked to indemnify any parties to such 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 or otherwise diminished the value of the trust collateral. We believe that any such allegations would be without merit and, if necessary, would vigorously defend against them. At this time, we are unable to predict the ultimate outcome of these lawsuits, the possible loss or range of loss, if any, associated with the resolution of these lawsuits or any potential impact they may have on us or our operations. If, however, we were required to compensate claimants for losses related to the alleged loan servicing breaches, then our business, financial condition and results of operations could be adversely affected.

In addition, a number of RMBS trustees have received notices of default alleging material failures by servicers to comply with applicable servicing agreements. For example, certain investors claiming to hold at least 25% ownership interest in 119 RMBS trusts serviced by Ocwen have submitted to the respective trustees of those trusts a Notice of Non-Performance, alleging that we have materially breached our obligations under the servicing agreements in those trusts. The Notice further alleged that our conduct, if not timely cured, would give rise to events of default under the applicable servicing agreements, on the basis of which we could potentially be terminated as servicer for the 119 Trusts. Ocwen denies the allegations in the Notice and intends to vigorously rebut them. Since the Notice was issued, Ocwen has been directed by the trustee for two of the trusts to transfer its servicing to another loan servicing company based on ratings downgrades. There is a risk that Ocwen could be replaced as servicer on the remaining trusts at issue in the Notice, that the Trustees could take legal action on behalf of the trust certificateholders, or, under certain circumstances, that the investors who issued the Notice could seek to press their allegations against Ocwen, independent of the trustees. We are unable at this time to predict what, if any, actions the trustees will take in response to the Notice, nor can we predict at this time the potential loss or range of loss, if any, associated with the resolution of the Notice or the potential impact on our operations. If Ocwen were to be terminated as servicer, or other related legal actions were pursued against Ocwen, it could have an adverse effect on Ocwen’s business, financing activities, financial condition and results of operations.

Regulatory

We are subject to a number of pending federal and state regulatory investigations, examinations, inquiries, requests for information and other actions, including those discussed below.

New York Department of Financial Services

In December 2012, we entered into a consent order with the NY DFS in which we agreed to the appointment of a Monitor to oversee our compliance with an Agreement on Servicing Practices. The Monitor began work in 2013. We devote substantial resources to regulatory compliance, and we incur, and expect to continue to incur, significant ongoing costs with respect to compliance in connection with the Agreement on Servicing Practices and the work of the Monitor, as well as in connection with the consent order discussed below.

Effective December 19, 2014, Ocwen reached a settlement with the NY DFS related to these matters and entered into a consent order (the NY Consent Order) with the NY DFS to reflect such settlement. A summary of the terms of the settlement reflected in the NY Consent Order follows.

Settlement Summary of Monetary Provisions


•	Ocwen paid a civil monetary penalty of $100.0 million to the NY DFS on December 31, 2014, which will be used by the State of New York for housing, foreclosure relief and community redevelopment programs.

•

Ocwen also paid $50.0 million on December 31, 2014 as restitution to current and former New York borrowers in the form of $10,000 (in dollars) to each borrower whose home was foreclosed upon by Ocwen between January 2009 and December 19, 2014, with the balance distributed equally among borrowers who had foreclosure actions filed, but not completed, by Ocwen between January 2009 and December 19, 2014.

Settlement Summary of Non-Monetary Provisions

Borrower Assistance

Beginning February 20, 2015, and for two years, Ocwen will:


•	provide upon request by a New York borrower a complete loan file at no cost to the borrower;


•	provide every New York borrower who is denied a loan modification, short sale or deed-in-lieu of foreclosure with a detailed explanation of how this determination was reached; and


•	provide one free credit report per year, at Ocwen’s expense, to any New York borrower on request if Ocwen made a negative report to any credit agency from January 1, 2010, and Ocwen will make staff available for borrowers to inquire about their credit reporting, dedicating resources necessary to investigate such inquiries and correct any errors.

Operations Monitor


•	The NY DFS will appoint an independent Operations Monitor to review and assess the adequacy and effectiveness of Ocwen’s operations. The Operations Monitor’s term will extend for two years from its engagement, and the NY DFS may extend the engagement another 12 months at its sole discretion.


•	The Operations Monitor will recommend and oversee implementation of corrections, and establish progress benchmarks when it identifies weaknesses.


•	The Operations Monitor will report periodically on its findings and progress. The currently existing Monitor will remain in place for at least three months and then for a short transitional period to facilitate an effective transition to the Operations Monitor.

Related Companies


•	The Operations Monitor will review and approve Ocwen’s benchmark pricing and performance studies semi-annually with respect to all fees or expenses charged to New York borrowers by any related party.


•	Ocwen will not share any common officers or employees with any related party and will not share risk, internal audit or vendor oversight functions with any related party.

•

Any Ocwen employee, officer or director owning more than $200,000 (in dollars) equity ownership in any related party will be recused from negotiating or voting to approve a transaction with the related party in which the employee, officer or director has such equity ownership, or any transaction that indirectly benefits such related party, if the transaction involves $120,000 (in dollars) or more in revenue or expense.

Corporate Governance


•	Ocwen agreed to add two independent directors (after consultation with the Monitor) who do not own equity in any related party. These two independent directors were appointed to the Board of Directors on January 20, 2015.


•	As of January 16, 2015, William C. Erbey stepped down as an officer and director of Ocwen, as well as from the boards of Altisource, HLSS, Residential and AAMC. Mr. Barry Wish, a current member of the Board, assumed the role of non-executive Chairman.

•

The Operations Monitor will review Ocwen’s current committees of the Board of Directors and will consult with the Board relating to the committees. This will include determining which decisions should be committed to independent directors’ oversight, such as approval of transactions with related parties, transactions to acquire mortgage servicing rights, sub-servicing rights or otherwise to increase the number of serviced loans, and new relationships with third-party vendors.


•	The Board will work closely with the Operations Monitor to identify operations issues and ensure that they are addressed. The Board will consult with the Operations Monitor to determine whether any member of senior management should be terminated or whether additional officers should be retained to achieve the goals of complying with this NY Consent Order.

MSR Purchases


•	Ocwen may acquire MSRs upon (a) meeting benchmarks specified by the Operations Monitor relating to Ocwen’s boarding process for newly acquired MSRs and its ability to adequately service newly acquired MSRs and its existing loan portfolio, and (b) the NY DFS’s approval, not to be unreasonably withheld.


•	These benchmarks will address the compliance plan, a plan to resolve record keeping and borrower communication issues, the reasonableness of fees and expenses in the servicing operations, development of risk controls for the boarding process, and development of a written boarding plan assessing potential risks and deficiencies in the boarding process.

National Mortgage Settlement

In December 2013, we entered into the Ocwen National Mortgage Settlement, which was subject to court approval, involving the CFPB and various state attorneys general and other state agencies that regulate the mortgage servicing industry (NMS Regulators). In February 2014, the United States District Court for the District of Columbia entered a consent order memorializing the settlement. The settlement has four key elements:

•

A commitment by Ocwen to service loans in accordance with specified servicing guidelines and to be subject to oversight by an independent national monitor for three years. Ocwen was previously subject to substantially the same guidelines and oversight with respect to the portion of its servicing portfolio acquired from ResCap in early 2013, and these loans will also be subject to these provisions.

•

A payment of $127.3 million to a consumer relief fund to be disbursed by an independent administrator to eligible borrowers. In May 2014, Ocwen satisfied this obligation with regard to the consumer relief fund. Pursuant to indemnification and loss sharing provisions of applicable acquisition documents, the former owners of certain servicing portfolios previously acquired by Ocwen are responsible for approximately $60.4 million of that sum, of which $49.0 million has been paid to Ocwen as of December 31, 2014.

•

A commitment by Ocwen to continue its principal forgiveness modification programs to delinquent and underwater borrowers, including underwater borrowers at imminent risk of default, in an aggregate amount of at least $2.0 billion over three years, when permitted by the applicable servicing agreements. These and all of Ocwen’s other loan modifications are designed to be sustainable for homeowners while providing a net present value for loan investors that is superior to that of foreclosure.


•	Ocwen and the former owners of certain of the acquired servicing portfolios received from the NMS Regulators comprehensive releases, subject to certain exceptions, from liability with respect to residential mortgage servicing, modification and foreclosure practices.

In a similar manner to large banks that have entered into similar settlements, Ocwen is tested on a quarterly basis on various metrics to ensure compliance with the Ocwen National Mortgage Settlement. These metrics relate to various aspects of our servicing business, and each has a proscribed error threshold. These metrics are tested by a dedicated group of Ocwen employees who do not report to the servicing business and are referred to as the Internal Review Group (IRG). The IRG tests these metrics, and reports their findings to the professional firms employed by the Office of Mortgage Settlement Oversight (OMSO). OMSO has ultimate authority to accept or reject the IRG’s findings, and OMSO reports its findings to the District Court.

Exceeding the metric error rate threshold for the first time does not result in a violation of the settlement, but rather it is deemed a “potential violation” which then is subject to a cure period. Any potential violation requires us to submit a corrective action plan (CAP) to OMSO for approval and review, and all testing for that metric is suspended until the CAP is completed. Following the completion of the CAP, testing on that metric resumes by the IRG and any further fails in the cure period or the quarter following that cure period would subject us to financial penalties. These penalties start at an amount of not more than $1.0 million for the first uncured violation and increase to an amount of not more than $5.0 million for the second uncured violation. It is also possible that if we are found to have caused borrower harm, we would be subject to costs to remediate that harm. In addition, in the event that there were widespread metric failures, it is possible that OMSO and/or the District Court could determine that we were generally violating the settlement and seek to impose a broader range of financial or injunctive penalties on us.

In December 2014, OMSO identified two issues involving Ocwen’s compliance with the Ocwen National Mortgage Settlement. The first concerned the adequacy and independence of our IRG, which is responsible for reporting on Ocwen’s compliance with the settlement. The second issue concerned the letter dating issues raised by the NY DFS. OMSO’s report identified the steps that Ocwen had taken to remediate these issues, and acknowledged Ocwen’s cooperation.

In May 2015, OMSO issued another compliance report following up on that of December 2014. This report detailed additional changes that Ocwen had made to its IRG and described the work performed by OMSO to retest certain metrics previously tested by the Ocwen IRG for the first quarter of 2014. OMSO’s report indicated that the various steps taken by Ocwen in connection with its IRG demonstrated “measurable improvement” since the December 2014 report. OMSO further reported that its retesting of metrics for the first quarter of 2014 revealed that it only disagreed with the Ocwen IRG’s assessment for one out of the nine metrics subject to retesting. Ocwen has not objected to the determination on that one metric and will develop a corrective action plan for that potential violation.

We continue to work cooperatively with OMSO on resolving these issues, and the letter dating issues are currently under a CAP. While, to date, these issues have not resulted in financial penalties, if we do not comply with the Ocwen National Mortgage Settlement, we could become subject to financial penalties or other regulatory action could be taken against us. As announced in the fourth quarter of 2014, we have established a remediation plan to address the letter dating issues raised by the NY DFS. As part of that remediation plan, we anticipate offering monetary compensation to our borrowers that may have received misdated correspondence and who may have suffered pecuniary harm. We accrued $15.0 million as of December 31, 2014 for losses that we believe are probable and reasonably estimable to cover costs associated with our remediation plan.

Securities and Exchange Commission

On April 28, 2014, we received a letter from the staff of the New York Regional Office of the SEC (the Staff) informing us that it was conducting an investigation relating to Ocwen and making a request for voluntary production of documents and information relating to the April 22, 2014 surrender of certain options to purchase our common stock by Mr. Erbey, our former Executive Chairman, including the 2007 Equity Incentive Plan and the related option grant and surrender documents. On June 12, 2014, we received a subpoena from the SEC requesting production of various documents relating to our business dealings with Altisource, HLSS, AAMC and Residential and the interests of our directors and executive officers in these companies. Following the above-described announcement on August 12, 2014 that we intended to amend our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, we received an additional subpoena on September 11, 2014 in relation to such amendments. In addition, we received a further subpoena on November 20, 2014 requesting certain documents related to Ocwen’s agreement with Southwest Business Corporation, and related to Mr. Erbey’s approvals for specifically enumerated board actions. On February 10, 2015, we received a letter from the Staff informing us that it was conducting an investigation relating to mortgage loan servicer use of collection agents, and it made a request for the voluntary production of documents and information. We believe that the February 10, 2015 letter was also sent to other companies in the industry. We are cooperating with the Staff on these matters.

California Department of Business Oversight

Effective January 23, 2015, OLS reached an agreement with the CA DBO relating to Ocwen’s failure to produce certain information and documents during a routine licensing examination, which resulted in the CA DBO withdrawing its notice of hearing to suspend OLS’ license in California. OLS and the CA DBO entered into a Consent Order pursuant to the California Residential Mortgage Lending Act (the CA Consent Order) with the CA DBO to reflect such settlement. The CA Consent Order addresses and resolves the examination disputes between the CA DBO and OLS, and does not involve any accusation or admission of wrongdoing with regard to OLS’ servicing practices.

Under the terms of the CA Consent Order, OLS paid the CA DBO a penalty of $2.5 million plus costs associated with the examination. We accrued the $2.5 million penalty as of December 31, 2014. OLS also agreed to cease acquiring any additional MSRs for loans secured in California until the CA DBO is satisfied that OLS can satisfactorily respond to the requests for information and documentation made in the course of a regulatory exam.

In addition, the CA DBO will select an independent third-party auditor (the CA Auditor) to assess OLS’s compliance with laws and regulations impacting California borrowers for an initial term of two years, extendable at the discretion of the CA DBO. OLS will pay all reasonable and necessary costs of the CA Auditor. The CA Auditor will report periodically on its findings and progress and OLS will submit to the CA DBO a written plan to address and implement corrective measures and address any deficiencies identified by the CA Auditor.

General

In addition to the above matters, our mortgage origination and servicing businesses require one or more licenses in the various jurisdictions where properties secured by mortgages are located. Our licensed entities are required to renew their licenses, typically on an annual basis, and to do so they must satisfy the license renewal requirements of each jurisdiction, which in some cases include the requirement to provide audited financial statements. The same agencies that issue licenses to us engage in regular supervisory examinations of the licensable activities. For example, during 2014 state regulators commenced 47 examinations of one or more of our areas of operation, and we closed 26 exams involving 18 states (some of which had started in prior years). As of December 31, 2014, we were aware of 21 pending examinations in 15 states. In addition, we are subject to supervision by the CFPB at the federal level, and it similarly has the authority to conduct regulatory examinations, in addition to its enforcement and investigatory powers. These examinations are part of our ordinary course business activities, and the mere existence of an examination is not typically indicative of anything unusual or material as to that business. In addition, we also receive information requests and other inquiries, both formal and informal in nature, from these agencies as part of their general regulatory oversight of our origination and servicing businesses.

We also have regular engagements with not only our state financial regulators, but also the attorneys general in the various states and the CFPB to address individual borrower complaints that they bring to our attention, or to respond to information requests and other inquiries. Many of these matters are brought to our attention as a complaint that the entity is investigating, although some are formal investigations or proceedings.

To the extent that an examination or other regulatory engagement reveals a failure by us to comply with applicable law, regulation or licensing requirement, or if we fail to comply with the commitments we have made with respect to the foregoing regulatory actions or if other regulatory actions of a similar or different nature are taken in the future against us, this could lead to (i) loss of our licenses and approvals to engage in our servicing and lending businesses, (ii) governmental investigations and enforcement actions, (iii) administrative fines and penalties and litigation, (iv) civil and criminal liability, including class action lawsuits, (v) breaches of covenants and representations under our servicing, debt or other agreements, (vi) inability to raise capital and (vii) inability to execute on our business strategy. Any of these occurrences could increase our operating expenses and reduce our revenues, hamper our ability to grow or otherwise materially and adversely affect our business, reputation, financial condition and results of operations.

Loan Put-Back and Related Contingencies

Ocwen has been a party to loan sales and securitizations dating back to the 1990s. The majority of securities issued in these transactions has been retired and is not subject to put-back risk. There is one remaining securitization with an original UPB of approximately $200.0 million where Ocwen provided representations and warranties, and the loans were originated in the last decade. Ocwen performed due diligence on each of the loans included in this securitization. The outstanding UPB of this securitization was $33.4 million at December 31, 2014, and the outstanding balance of the notes was $33.3 million. Ocwen is not aware of any inquiries or claims regarding loan put-backs for any transaction where we made representations and warranties. We do not expect loan put-backs, if any, in these transactions to result in any material change to our financial position, operating results or liquidity.

Homeward’s contracts with purchasers of originated loans contain provisions that require indemnification or repurchase of the related loans under certain circumstances. Additionally, in one of the servicing contracts that Homeward acquired in 2008 from Freddie Mac, Homeward assumed the origination representations and warranties even though it did not originate the loans. While the language in the purchase contracts varies, they contain provisions that require Homeward to indemnify purchasers of related loans or repurchase such loans if:


•	representations and warranties concerning loan quality, contents of the loan file or loan underwriting circumstances are inaccurate;


•	adequate mortgage insurance is not secured within a certain period after closing;


•	a mortgage insurance provider denies coverage; or


•	there is a failure to comply, at the individual loan level or otherwise, with regulatory requirements.

We believe that, as a result of the current market environment, many purchasers of residential mortgage loans are particularly aware of the conditions under which originators must indemnify or repurchase loans and under which such purchasers would benefit from enforcing any indemnification rights and repurchase remedies they may have.

As our lending business grows, we expect that our exposure to indemnification risks and repurchase requests is likely to increase. If home values were to decrease, our realized loan losses from loan repurchases and indemnifications may increase as well. As a result, our liability for repurchases may increase beyond our current expectations. If we are required to indemnify or repurchase loans that we originate and sell, or where we have assumed this risk on loans that we service, as discussed above, in either case resulting in losses that exceed our related liability, our business, financial condition and results of operations could be adversely affected.

We have exposure to origination representation, warranty and indemnification obligations because of our lending, sales and securitization activities and our acquisitions to the extent we assume one or more of these obligations and in connection with our servicing practices. At December 31, 2014, we had provided or assumed representation and warranty obligations in connection with $82.8 billion of UPB, covering both forward and reverse mortgage loans. At December 31, 2014, we had outstanding representation and warranty repurchase demands of $96.6 million UPB (511 loans). We review each demand and monitor through resolution, primarily through rescission, loan repurchase or make-whole payment.

The following table presents the changes in our liability for representation and warranty obligations, compensatory fees for foreclosures that may ultimately exceed investor timelines and related indemnification obligations for the following years ended December 31:



	2014			2013
Beginning balance	$	192,716		$	38,140
Provision for representation and warranty obligations	(1,947		)	18,154
New production reserves	1,605			1,325
Obligations assumed in connection with MSR and servicing business acquisitions	—			190,658
Charge-offs and other (1)	(59,456		)	(55,561		)
Ending balance	$	132,918		$	192,716


(1)	Includes principal and interest losses realized in connection with repurchased loans, make-whole, indemnification and fee payments and settlements net of recoveries, if any.

We believe that it is reasonably possible that losses beyond amounts currently recorded for potential representation and warranty obligations and other claims described above could occur, and such losses could have an adverse impact on our results of operations, financial condition or cash flows. However, based on currently available information, we are unable to estimate a range of reasonably possible losses above amounts that have been recorded at December 31, 2014.

Quarterly Results of Operations (Unaudited)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Quarterly Results of Operations (Unaudited)

Note 29 — Quarterly Results of Operations (Unaudited)



	Quarters Ended
	December 31, 2014			September 30, 2014			June 30, 2014			March 31, 2014
Revenue	$	493,292		$	513,698		$	553,074		$	551,261
Operating expenses (1) (2)	885,512			455,039			345,463			349,194
Income (loss) from operations	(392,220		)	58,659			207,611			202,067
Other expense	(127,553		)	(130,925		)	(130,434		)	(130,364		)
Income (loss) before income taxes	(519,773		)	(72,266		)	77,177			71,703
Income tax expense	2,022			2,992			10,165			11,217
Net income (loss)	(521,795		)	(75,258		)	67,012			60,486
Net (income) loss attributable to non-controlling interests	(80		)	(123		)	(57		)	15
Net income (loss) attributable to Ocwen stockholders	(521,875		)	(75,381		)	66,955			60,501
Preferred stock dividends	—			—			(582		)	(581		)
Deemed dividend related to beneficial conversion feature of preferred stock	—			(808		)	(415		)	(416		)
Net income (loss) attributable to Ocwen common stockholders	$	(521,875	)	$	(76,189	)	$	65,958		$	59,504

Earnings (loss) per share attributable to Ocwen common stockholders
Basic	$	(4.16	)	$	(0.58	)	$	0.49		$	0.44
Diluted	$	(4.16	)	$	(0.58	)	$	0.48		$	0.43



	Quarters Ended
	December 31, 2013			September 30, 2013			June 30, 2013			March 31, 2013
Revenue	$	555,955		$	531,240		$	544,812		$	406,266
Operating expenses (3)	340,876			346,260			371,508			242,650
Income from operations	215,079			184,980			173,304			163,616
Other expense	(61,495		)	(115,535		)	(99,146		)	(108,324		)
Income before income taxes	153,584			69,445			74,158			55,292
Income tax expense	18,309			8,873			8,496			6,383
Net income	135,275			60,572			65,662			48,909
Preferred stock dividends	(581		)	(1,446		)	(1,519		)	(1,485		)
Deemed dividend related to beneficial conversion feature of preferred stock	(416		)	(4,401		)	(1,086		)	(1,086		)
Net income attributable to Ocwen common stockholders	$	134,278		$	54,725		$	63,057		$	46,338

Earnings per share attributable to Ocwen common stockholders
Basic	$	0.99		$	0.40		$	0.46		$	0.34
Diluted	$	0.95		$	0.39		$	0.45		$	0.33


(1)	Operating expenses for the third and fourth quarter of 2014 include charges of $100.0 million and $50.0 million, respectively, for losses related to a regulatory settlement with the NY DFS. These charges are included in Professional services on the Consolidated Statement of Operations and were recorded in the Corporate Items and Other segment.


(2)	Operating expenses for the fourth quarter of 2014 include the recognition of a goodwill impairment loss of $420.2 million.


(3)	Operating expenses for the second quarter of 2013 include a $52.8 million charge recorded in connection with the Ocwen National Mortgage Settlement. This charge is included in Professional services on the Consolidated Statement of Operations and is recorded in the Corporate Items and Other segment.

Subsequent Events

12 Months Ended

Dec. 31, 2014

Subsequent Events [Abstract]

Subsequent Events

Note 30 — Subsequent Events

Effective January 1, 2015, we elected fair value accounting for a newly-created class of non-Agency MSRs which were previously accounted for using the amortization method. This irrevocable election will apply to all subsequently acquired or originated servicing assets and liabilities that have characteristics consistent with this class. We recorded a cumulative-effect adjustment of $52.0 million (before income taxes) to retained earnings as of January 1, 2015 to reflect the excess of the fair value of these MSRs over their carrying amount. We will subsequently measure these MSRs at fair value at each reporting date and report changes in fair value in earnings in the period in which the changes occur. At December 31, 2014, the UPB and carrying value of the non-Agency MSRs for which the fair value election was made was $195.3 billion and $787.1 million, respectively.

Effective January 16, 2015, William C. Erbey resigned as the Executive Chairman and as a member of the Board of Directors of Ocwen. Also on January 16, 2015, Mr. Erbey resigned as a director, officer and employee of OMS and from any other position he held with Ocwen and its affiliates.

The Retirement Agreement, as approved and ratified by the Board on January 16, 2015, includes certain provisions in favor of Ocwen and certain provisions in favor of Mr. Erbey. Provisions in favor of Ocwen include releases regarding employment-related claims and covenants regarding confidentiality, non-competition (24-month term) and non-solicitation (24-month term) of our employees, customers, vendors, suppliers, licensors, lessors, joint venturers, associates, consultants, agents and partners. Provisions in favor of Mr. Erbey include retirement payments, continued medical coverage for Mr. Erbey and his spouse, continued ability to exercise outstanding Ocwen stock options for the balance of their original term and registration rights for Mr. Erbey in certain circumstances. Retirement payments consist of $725,000 (in dollars) cash severance, $475,000 (in dollars) in lieu of certain relocation benefits, $725,000 (in dollars) dividend on his shares of OMS Class A Preferred Stock and consideration for an annual bonus for 2014.

On March 2, 2015, we entered into an amendment to the SSTL facility agreement. Among other things, the amendment:


•	extends the time period for Ocwen to deliver to the lenders the required consolidated financial statements, reports and information for the fiscal year ended December 31, 2014 to 35 days from the due date of its Form 10-K, after giving effect to any extension period permitted under Rule 12b-25 of the Securities Exchange Act of 1934, as amended;

•

eliminates the dollar cap on the general asset sale basket and requires Ocwen to use 75% of the net cash proceeds from permitted asset sales under such general asset basket to prepay the loans under the SSTL and, subject to certain conditions, permits Ocwen to use up to 25% of such net cash proceeds to reinvest in assets used in the business of OLS and its subsidiaries within 120 days of receipt thereof (subject to an extension of up to 90 days if a binding agreement is entered into within such 120 days);


•	increases the quarterly covenant levels of the corporate leverage ratio to 3-to-1 for the fiscal quarter ended December 31, 2014, and to 3.5-to-1 for the fiscal quarter ended March 31, 2015 and thereafter; and


•	makes certain modifications to the cross default and definition sections.

On March 2, 2015, we signed a letter of intent with a buyer for the sale of MSRs on a portfolio consisting of approximately 277,000 performing Agency loans owned by Fannie Mae with a total UPB of approximately $45.0 billion. This transaction remains subject to approvals by FHFA and Fannie Mae and other customary conditions and is expected to close on June 1, 2015. In connection with this transaction, on April 17, 2015, we entered into a letter agreement with Fannie Mae pursuant to which we will designate a portion of the expected proceeds as pre-payments to secure against certain future obligations. These future obligations include repurchases, indemnifications and various fees. The total cash prepayments are $15.4 million, including $3.2 million paid on April 27, 2015 with the remainder to be paid on June 1, 2015. Another $37.5 million of escrowed collateral will be set aside on June 1, 2015 to secure potential future obligations not covered by the prepaid amount.

On March 18, 2015, we announced that OLS and Green Tree Loan Servicing LLC, an indirectly held, wholly-owned, subsidiary of Walter Investment Management Corp. have signed an agreement in principle for the sale by OLS of residential MSRs on a portfolio consisting of approximately 55,000 largely performing loans owned by Freddie Mac with a total UPB of approximately $9.6 billion. We executed a definitive agreement on April 29, 2015 and initial funding occurred on April 30, 2015. We expect that servicing will begin to transfer on or around June 16, 2015.

On March 24, 2015, we announced that OLS and Nationstar have agreed in principle to the sale by OLS of residential mortgage servicing rights on a portfolio consisting of approximately 142,000 loans owned by Freddie Mac and Fannie Mae with a total UPB of approximately $25.0 billion. We closed on the sale of a portion of these MSRs, with a total UPB of approximately $2.8 billion, on April 30, 2015. The sale of the remaining MSRs, subject to a definitive agreement, approvals by Freddie Mac, Fannie Mae and FHFA and other customary conditions, is expected to close around mid-year.

On March 27, 2015 and March 31, 2015, we completed sales of non-performing and reperforming residential loans held for sale with a total UPB of $42.7 million to an unrelated third party.

On March 31, 2015, OLS closed on a sale agreement with Nationstar for the sale of residential MSRs on a portfolio consisting of 76,000 performing loans owned by Freddie Mac with a UPB of $9.1 billion. We prepaid $73.8 million of our SSTL on the date of closing. Servicing was successfully transferred on April 16, 2015.

On April 6, 2015, OLS entered into Amendment No. 2 to Master Servicing Rights Purchase Agreement and Sale Supplements (the Amendment) with HLSS Holdings, LLC (Holdings), HLSS and MSR-EBO Acquisition LLC (Buyer), which Amendment became effective upon the consummation and closing of the purchase by the Buyer, directly and through HLSS Advances Acquisition Corp., of substantially all of the assets of HLSS. The Amendment revised terms of (i) the Master Servicing Rights Purchase Agreement, dated as of October 1, 2012, as amended by Amendment No. 1 to Master Servicing Rights Purchase Agreement and Sale Supplements, dated as of December 26, 2012 (as so amended, the MSR Purchase Agreement) and (ii) certain sale supplements to the MSR Purchase Agreement (as heretofore amended, supplemented and modified from time to time, the Sale Supplements and, together with the MSR Purchase Agreement, the Original Agreements). In consideration of OLS’ consent to the assignment by HLSS to the Buyer of all HLSS’ right, title and interest in, to and under the Original Agreements, the Amendment, among other things:

•

extended the term during which OLS is, subject to the provisions of the amended Original Agreements, entitled to be the named servicer on loans for which Rights to MSRs have been sold to NRZ (along with the associated economic benefits) for two additional years or until April 30, 2020, whichever is earlier, which would depend on the sale date for the applicable Rights to MSRs (existing terms ranged from February 2018 through October 2019 prior to the Amendment);


•	provided that such extension will not apply with respect to any servicing agreement that, as of the date that it was scheduled to terminate under the Original Agreements, is affected by an uncured Termination Event (as defined in the Sale Supplements) due to a downgrade of OLS’ servicer rating to “Below Average” or lower by S&P or to “SQ4” or lower by Moody’s;


•	provided that the parties will commence negotiating in good faith for an extension of the contract term and the servicing fees payable to OLS no later than six months prior to the end of the applicable term as extended pursuant to the Amendment; and


•	imposed a two year standstill (until April 6, 2017 and subject to certain conditions) on the rights of NRZ to replace OLS as named servicer.

The Amendment also provided that OLS will sell to NRZ, on an exclusive and “as is” basis, all economic beneficial rights to the clean-up call rights OLS is entitled to pursuant to servicing agreements that underlie Rights to MSRs owned by NRZ, for a payment upon exercise of 0.50% of the UPB of all performing mortgage loans (mortgage loans that are current or 30 days or less delinquent) associated with the applicable clean up-call.

In the event there is a future downgrade of OLS’ S&P servicer rating below its current rating of "Average," OLS has also agreed to compensate NRZ for certain increased costs associated with its servicing advance financing facilities, including increased costs of funding, to the extent such costs are the direct result of such downgrade. The Amendment provides that any such compensation, if required, shall not exceed $3.0 million for any calendar month or $36.0 million in the aggregate. In such an event, NRZ has agreed to use commercially reasonable efforts to assist OLS in curing any potential cost increases by obtaining amendments to the relevant financing agreements.

On April 17, 2015, we entered into an amendment to the SSTL facility agreement. Effective as of April 20, 2015, the amendment, among other things:


•	removed, with respect to the 2014 fiscal year, the requirement that our financial statements and the related audit report must be unqualified as to going concern; and


•	extended the required time period for delivery of the 2014 audited financial statements to May 29, 2015.

On April 30, 2015, we announced agreements with Fannie Mae and Freddie Mac to sell portfolios of non-performing loan servicing. We expect these transactions to close over the coming months, with the first transfer on May 1, 2015. These transactions will include payments to the GSEs to assume the delinquent servicing and may, in some cases, include settlements of certain indemnification obligations. We expect these transactions to be cash flow positive as we will be reimbursed for outstanding advances.

Organization (Policies)

12 Months Ended

Dec. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Consolidation and Basis of Presentation

Principles of Consolidation

We have eliminated intercompany accounts and transactions in consolidation.

Foreign Currency Translation

Reclassifications

Use of Estimates and Assumptions

Cash

Cash includes both interest-bearing and non-interest-bearing demand deposits with financial institutions that have original maturities of 90 days or less.

Mortgage Servicing Rights

Advances and Match Funded Advances

Loans Held for Sale

Loans Held for Investment

Transfers of Financial Assets

In the case of transfers of MSRs and Rights to MSRs where we retain the right to subservice, we defer the related gain or loss and amortize the balance over the life of the subservicing agreement.

Goodwill

Goodwill represents the cost of acquired businesses in excess of the fair value of the net assets acquired, including any identifiable intangible assets.

Premises and Equipment

We report premises and equipment at cost and, except for land, depreciate them over their estimated useful lives on a straight-line basis as follows:



Computer hardware and software	2 – 3 years
Buildings	40 years
Leasehold improvements	Term of the lease not to exceed useful life
Furniture and fixtures	5 years
Office equipment	5 years

Representation, Warranty and Indemnification Obligations

Litigation

Derivative Financial Instruments

The cash collateral held by counterparties to our derivative agreements is included in Other assets.

Convertible Preferred Stock

Stock-Based Compensation

Income Taxes

Basic and Diluted Earnings per Share

Recently Adopted Accounting Standards

Liabilities – Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (ASU 2013-04)

Income Taxes - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss or a Tax Credit Carryforward Exists (ASU 2013-11)

Business Combinations - Pushdown Accounting (ASU 2014-17)

Recently Issued Accounting Standards

Investments—Equity Method and Joint Ventures: Accounting for Investments in Qualified Affordable Housing Projects (ASU 2014-01)

Receivables—Troubled Debt Restructurings by Creditors: Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (ASU 2014-04)

Presentation of Financial Statements and Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08)

Revenue from Contracts with Customers (ASU 2014-09)

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

Transfers and Servicing: Repurchase-to-Maturity Transactions, Repurchase Financings and Disclosures (ASU 2014-11)

Compensation—Stock Compensation: Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (ASU 2014-12)

Consolidation: Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity (ASU 2014-13)

Receivables—Troubled Debt Restructurings by Creditors: Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure (ASU 2014-14)


1.	The loan has a government guarantee that is not separable from the loan before foreclosure.


2.	At the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim.


3.	At the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed.