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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from: ____________________ to ____________________
Commission File No. 1-13219
OCWEN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Florida 65-0039856
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1661 Worthington Road, Suite 100 33409
West Palm Beach,
Florida
(Address of principal executive office) (Zip Code)
(561) 682-8000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par ValueOCNNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes No x
Number of shares of common stock outstanding as of April 30, 2024: 7,809,618 shares




OCWEN FINANCIAL CORPORATION
FORM 10-Q
TABLE OF CONTENTS
 
  PAGE
 
   
Consolidated Balance Sheets at March 31, 2024 and December 31, 2023
Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023
   
   
   
 
   
   

1


FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact included in this report, including statements regarding our financial position, business strategy and other plans and objectives for our future operations, are forward-looking statements.
Forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminology. Forward-looking statements are typically identified by words such as “expect”, “believe”, “foresee”, “anticipate”, “intend”, “estimate”, “goal”, “strategy”, “plan”, “target” and “project” or conditional verbs such as “will”, “may”, “should”, “could” or “would” or the negative of these terms, although not all forward-looking statements contain these words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Readers should bear these factors in mind when considering forward-looking statements and should not place undue reliance on such statements. Forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those suggested by such statements. In the past, actual results have differed from those suggested by forward-looking statements and this may happen again. Important factors that could cause actual results to differ include, but are not limited to, the risks discussed under Part I, Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023 and the following:
the potential for ongoing disruption in the financial markets and in commercial activity generally related to changes in monetary and fiscal policy, United States political developments, geopolitical events and other sources of instability;
the impacts of inflation, employment disruption, and other financial difficulties facing our borrowers;
the impact of the recent failures and re-organization of banking institutions and continued uncertainty in the banking industry;
the timing for completion of our proposed rebranding and its impact on our business and third parties’ perceptions of us;
our ability to timely reduce operating costs or generate offsetting revenue in proportion to the industry-wide decrease in originations activity, and the impact of cost-reduction initiatives on our business, operations, and financial performance;
our ability to maintain and increase market share in our target markets, including in forward and reverse servicing;
breach or failure of Ocwen’s, our contractual counterparties’, or our vendors’ information technology or other security systems or privacy protections, including any failure to protect customers’ data, resulting in disruption to our operations, loss of income, reputational damage, costly litigation and regulatory penalties;
our reliance on our technology vendors to adequately maintain and support our systems, including our servicing systems, loan originations and financial reporting systems, and uncertainty relating to our ability to transition to alternative vendors, if necessary, without incurring significant cost or disruption to our operations;
our ability to interpret correctly and comply with current or future liquidity, net worth and other financial and other requirements of regulators, the Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac) (together, the GSEs), and the Government National Mortgage Association (Ginnie Mae), as well as those set forth in our debt and other agreements, including our ability to implement, in a timely and cost-effective manner, our planned response to Ginnie Mae’s risk-based capital requirements that take effect on December 31, 2024;
the amount of common stock or senior debt that we may repurchase under any future stock or debt repurchase programs, the timing of such repurchases, and the long-term impact, if any, of repurchases on the trading price of our stock or our financial condition;
the timing of actions to refinance our senior secured notes and the terms of any such refinancing;
our ability to repay, renew and extend our other borrowings, borrow additional amounts as and when required, meet our MSR or other asset investment objectives and comply with our debt agreements, including the financial and other covenants contained in them;
the extent to which our mortgage servicing rights (MSR) joint venture with Oaktree Capital Management L.P. and its affiliates (Oaktree), other transactions and our enterprise sales initiatives will generate additional subservicing volume and result in increased profitability;
our ability, and the ability of MSR Asset Vehicle LLC (MAV), to bid competitively for, and close acquisitions of, MSRs on terms that will enable us to achieve our growth objectives and a favorable return on our investment in MAV;
uncertainty related to the future of MAV, one of our largest subservicing clients as of March 31, 2024, MAV’s continued ownership of its MSR portfolio after May 3, 2024, and any impact on our servicing revenue and MSR valuation adjustments as a result of the sale of MAV’s MSRs;

2


the extent to which our ownership stake in MAV’s holding company may be diluted, resulting in a reduced ability for us to participate in certain routine management decisions;
uncertainty related to our long-term relationship with Rithm Capital Corp. (Rithm), one of our largest subservicing clients as of March 31, 2024;
our ability to identify, enter into and close additional strategic transactions, including the ability to obtain regulatory approvals, enter into definitive financing arrangements, and satisfy closing conditions, and the timing for doing so;
our ability to efficiently integrate the operations and assets of acquired businesses and to retain their employees and customers over time;
the adequacy of our financial resources, including our sources of liquidity and ability to sell, fund and recover servicing advances, forward and reverse whole loans, future draws on existing reverse loans, and Home Equity Conversion Mortgage (HECM) and forward loan buyouts and put-backs;
uncertainty related to the ability of third-party obligors and financing sources to fund servicing advances on a timely basis on loans serviced by us;
increased servicing costs and reduced or delayed servicing income due to rising borrower delinquency levels, forbearance plans, moratoria on evictions and delays in foreclosure proceedings;
the characteristics of our servicing portfolio, including prepayment speeds along with delinquency and advance rates;
our ability to continue to collect certain expedited payment or convenience fees and potential liability for charging such fees;
an increase in severe weather or natural disaster events resulting in costly disruptions to our operations and increased servicing costs due to property damage;
our ability to successfully modify delinquent loans, manage foreclosures and maintain and sell foreclosed properties;
adverse effects on our business related to past, present or future claims, litigation, cease and desist orders and investigations relating to our business practices, including those brought by private parties and state regulators, the Consumer Financial Protection Bureau (CFPB), State Attorneys General, the Securities and Exchange Commission (SEC), the Department of Justice or the Department of Housing and Urban Development (HUD);
scrutiny of our compliance with COVID-19-related rules and regulations, including requirements instituted by state governments, the GSEs, Ginnie Mae and regulators;
the reactions of key counterparties, including lenders, the GSEs and Ginnie Mae, to our regulatory engagements and litigation matters;
any adverse developments in existing legal proceedings or the initiation of new legal proceedings;
our ability to efficiently manage our regulatory and contractual compliance obligations and fully comply with all applicable requirements, and the costs of doing so;
uncertainty related to changes in legislation, regulations, government programs and policies, industry initiatives, best servicing and lending practices, and media scrutiny of our business and industry;
the extent to which changes in, or in the interpretation of laws or regulations may require us to modify our business practices and expose us to increased expense and litigation risk, including with respect to the collection of expedited payment, or convenience, fees;
our ability to comply with our servicing agreements, including our ability to comply with our agreements with the GSEs and Ginnie Mae and maintain our seller/servicer and other statuses with them;
our servicer and credit ratings as well as other actions from various rating agencies, including the impact of prior or future downgrades of our servicer and credit ratings;
uncertainty related to the actions of loan owners and guarantors, including mortgage-backed securities investors, the GSEs, Ginnie Mae and trustees regarding loan put-backs, penalties and legal actions;
uncertainty related to the GSEs substantially curtailing or ceasing to purchase our conforming loan originations or the Federal Housing Administration (FHA) of the HUD, Department of Veterans Affairs (VA) or United States Department of Agriculture (USDA) ceasing to provide insurance;
our ability to recruit and retain senior managers and key employees;
increased compensation and benefits expense as a result of rising inflation and labor market trends;
uncertainty related to our reserves, valuations, provisions and anticipated realization of assets;
our ability to effectively manage our exposure to interest rate changes and foreign exchange fluctuations;
our ability to effectively transform our operations in response to changing business needs, including our ability to do so without unanticipated adverse tax consequences;
political or economic stability in the foreign countries in which we operate; and
our ability to maintain positive relationships with our large shareholders and obtain their support for management proposals requiring shareholder approval.

3



Further information on the risks specific to our business is detailed within this report and our other reports and filings with the SEC including our Annual Report on Form 10-K for the year ended December 31, 2023, our Quarterly Report on Form 10-Q and our Current Reports on Form 8-K since such date. Forward-looking statements speak only as of the date they were made and we disclaim any obligation to update or revise forward-looking statements whether because of new information, future events or otherwise.


4

PART I – FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share data)
 March 31, 2024December 31, 2023
Assets  
Cash and cash equivalents$185.1 $201.6 
Restricted cash ($33.8 and $24.2 related to variable interest entities (VIEs))
66.1 53.5 
Mortgage servicing rights (MSRs), at fair value2,374.7 2,272.2 
Advances, net ($506.5 and $573.0 related to VIEs)
602.7 678.8 
Loans held for sale ($1,025.7 and $674.2 carried at fair value) ($391.5 and $269.6 related to VIEs)
1,028.9 677.3 
Loans held for investment, at fair value ($5.5 and $5.6 related to VIEs)
8,130.5 7,975.5 
Receivables, net ($44.6 and $19.9 related to VIEs)
152.1 154.8 
Investment in equity method investee37.6 37.8 
Premises and equipment, net11.8 13.1 
Other assets ($12.4 and $22.0 carried at fair value) ($24.6 and $18.6 related to VIEs)
500.6 449.2 
Total assets$13,090.1 $12,513.7 
Liabilities and Stockholder’s Equity
  
Liabilities  
Home Equity Conversion Mortgage-Backed Securities (HMBS) related borrowings, at fair value$7,945.0 $7,797.3 
Other financing liabilities, at fair value ($402.7 and $409.2 due to related party) ($5.5 and $5.6 related to VIEs)
906.8 900.0 
Advance match funded liabilities ($439.5 and $498.9 related to VIEs)
440.2 499.7 
Mortgage loan financing facilities, net ($315.7 and $143.4 related to VIEs)
1,108.9 710.6 
MSR financing facilities, net964.1 916.2 
Senior notes, net ($242.4 and $239.7 due to related parties)
552.0 595.8 
Other liabilities ($7.2 and $7.2 carried at fair value)
741.0 692.3 
Total liabilities$12,658.0 12,111.9 
Commitments and Contingencies (Notes 20 and 21)
Stockholders’ Equity  
Common stock, $.01 par value; 13,333,333 shares authorized; 7,784,253 and 7,684,401 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
0.1 0.1 
Additional paid-in capital554.6 554.5 
Accumulated deficit(121.5)(151.6)
Accumulated other comprehensive loss, net of income taxes(1.1)(1.2)
Total stockholders’ equity432.1 401.8 
Total liabilities and stockholders’ equity$13,090.1 $12,513.7 

The accompanying notes are an integral part of these unaudited consolidated financial statements

5


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share data)
For the Three Months Ended March 31,
20242023
Revenue
Servicing and subservicing fees$204.5 $232.2 
Gain on reverse loans held for investment and HMBS-related borrowings, net
15.4 21.2 
Gain on loans held for sale, net
10.9 2.8 
Other revenue, net8.3 5.6 
Total revenue239.1 261.8 
MSR valuation adjustments, net(11.6)(69.0)
Operating expenses
Compensation and benefits53.6 58.0 
Servicing and origination 15.0 15.7 
Technology and communications12.7 13.4 
Professional services12.0 13.3 
Occupancy, equipment and mailing
7.7 8.8 
Other expenses 3.4 4.9 
Total operating expenses104.4 114.1 
Other income (expense)
Interest income17.5 14.1 
Interest expense ($11.2 and $10.8 on amounts due to related parties)
(67.4)(62.3)
Pledged MSR liability expense ($15.3 and $14.2 on amounts due to related party)
(44.9)(70.3)
Earnings of equity method investee2.7 0.3 
Gain on extinguishment of debt1.4  
Other, net(0.6)1.2 
Other income (expense), net(91.3)(117.0)
Income (loss) before income taxes31.8 (38.3)
Income tax expense
1.7 1.9 
Net income (loss)$30.1 $(40.2)
Earnings (loss) per share
Basic$3.91 $(5.34)
Diluted$3.74 $(5.34)
Weighted average common shares outstanding
Basic7,711,534 7,533,561 
Diluted8,046,188 7,533,561 

The accompanying notes are an integral part of these unaudited consolidated financial statements

6


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
 For the Three Months Ended March 31,
 20242023
Net income (loss)$30.1 $(40.2)
Other comprehensive income (loss), net of income taxes:  
Change in unfunded pension plan obligation liability
  
Other 0.1 
Comprehensive income (loss)$30.2 $(40.1)



The accompanying notes are an integral part of these unaudited consolidated financial statements

7








OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Dollars in millions)


 Common StockAdditional Paid-in Capital(Accumulated Deficit) Retained EarningsAccumulated Other Comprehensive Income (Loss), Net of Income TaxesTotal
 SharesAmount
Balance at December 31, 20237,684,401 $0.1 $554.5 $(151.6)$(1.2)$401.8 
Net income
— — — 30.1 — 30.1 
Equity-based compensation and other99,852 — 0.1 — — 0.1 
Other comprehensive income, net of income taxes— — — — 0.1 0.1 
Balance at March 31, 20247,784,253 $0.1 $554.6 $(121.5)$(1.1)$432.1 
Balance at December 31, 20227,526,117 $0.1 $547.0 $(87.9)$(2.5)$456.7 
Net loss
— — — (40.2)— (40.2)
Equity-based compensation and other112,494  (0.3)— — (0.3)
Other comprehensive income, net of income taxes— — — — 0.1 0.1 
Balance at March 31, 20237,638,611 $0.1 $546.7 $(128.1)$(2.4)$416.3 







The accompanying notes are an integral part of these unaudited consolidated financial statements

8


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
For the Three Months Ended March 31,
20242023
Cash flows from operating activities  
Net income (loss)$30.1 $(40.2)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:  
MSR valuation adjustments, net31.5 90.3 
Provision for bad debts (advances and receivables)6.9 5.7 
Provision for indemnification obligations1.2 2.9 
Depreciation1.4 1.8 
Amortization of debt issuance costs and discount8.1 2.8 
Amortization of intangibles0.9 1.5 
Gain on extinguishment of debt(1.4) 
Equity-based compensation expense2.0 2.1 
Gain on reverse loans held for investment and HMBS-related borrowings, net
(11.0)(14.2)
Gain on loans held for sale, net(10.9)(2.8)
Origination and purchase of loans held for sale (2,988.9)(2,552.4)
Proceeds from sale and collections of loans held for sale 2,604.1 2,312.3 
Changes in assets and liabilities:  
Decrease in advances73.5 62.8 
Decrease (increase) in receivables and other assets19.6 (28.3)
Increase in derivatives(34.8)(29.0)
Decrease in other liabilities(21.0)(20.5)
Other, net(8.2)(2.2)
Net cash used in operating activities(297.1)(207.4)
Cash flows from investing activities  
Origination of loans held for investment (250.3)(235.3)
 Principal payments received on loans held for investment
277.0 236.1 
Purchase of MSRs(26.4)(30.4)
Proceeds from sale of MSRs 0.1 0.3 
Proceeds from sale of advances0.9 4.6 
Purchase of real estate(11.9)(0.5)
Proceeds from sale of real estate7.0 0.8 
Additions to premises and equipment(0.1)(1.1)
Proceeds from sale of premises and equipment 0.1 
Distribution from (investment in) equity method investee, net0.1 5.5 
Net cash used in investing activities(3.6)(19.9)
Cash flows from financing activities  
Repayment of advance match funded liabilities, net(59.5)(43.8)
Proceeds from mortgage loan financing facilities, net396.8 245.6 
Proceeds from MSR financing facilities377.8 144.4 
Repayment of MSR financing facilities(329.1)(183.3)
Repurchase of Senior notes(45.5) 
Payment of debt issuance costs(3.0) 
Proceeds from other financing liabilities - Sale of MSRs accounted for as secured financing4.0 3.3 
Proceeds from other financing liabilities - Excess Servicing Spread (ESS) liability  68.7 
Repayment of other financing liabilities(20.0)(21.8)
 Proceeds from sale of Home Equity Conversion Mortgages (HECM, or reverse mortgages) accounted for as a financing (HMBS-related borrowings)
247.4 231.2 
Repayment of HMBS-related borrowings(272.1)(235.3)
Net cash provided by financing activities296.8 209.0 
Net increase (decrease) in cash, cash equivalents and restricted cash(3.9)(18.3)
Cash, cash equivalents and restricted cash at beginning of year255.1 274.2 
Cash, cash equivalents and restricted cash at end of period$251.2 $255.9 
Supplemental non-cash investing and financing activities:  
Recognition of gross right-of-use asset and lease liability:
Right-of-use asset$0.1 $0.6 
Lease liability0.1 0.6 
Transfer from loans held for investment to loans held for sale 1.0 1.6 
Transfers of loans held for sale to real estate owned (REO)3.0 4.4 
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited consolidated balance sheets and the unaudited consolidated statements of cash flows:
March 31, 2024March 31, 2023
Cash and cash equivalents$185.1 $216.6 
Restricted cash and equivalents:
Debt service accounts37.2 21.5 
Other restricted cash28.9 17.8 
Total cash, cash equivalents and restricted cash reported in the statements of cash flows$251.2 $255.9 
The accompanying notes are an integral part of these unaudited consolidated financial statements

9


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Dollars in millions, except per share data and unless otherwise indicated)
 
Note 1 - Organization and Basis of Presentation
Organization
Ocwen Financial Corporation (NYSE: OCN) (Ocwen, OFC, we, us and our) is a non-bank mortgage servicer and originator providing solutions to homeowners, clients, investors and others through its primary operating subsidiary, PHH Mortgage Corporation (PHH, formerly referred to as PMC). We are headquartered in West Palm Beach, Florida with offices and operations in the United States (U.S.), the United States Virgin Islands (USVI), India and the Philippines. Ocwen is a Florida corporation organized in February 1988.
Ocwen directly or indirectly owns all of the outstanding common stock of its operating subsidiaries, including PHH since its acquisition on October 4, 2018, Ocwen Financial Solutions Private Limited (OFSPL) and Ocwen USVI Services, LLC (OVIS). Effective May 3, 2021, Ocwen holds a 15% equity interest in MAV Canopy HoldCo I, LLC (MAV Canopy) that invests in mortgage servicing assets through its licensed mortgage subsidiary MSR Asset Vehicle LLC (MAV). See Note 11 - Investment in Equity Method Investee and Related Party Transactions for additional information.
We perform servicing activities related to our own MSR portfolio (primary) and on behalf of other servicers (subservicing), and investors (primary and master servicing), including the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively referred to as GSEs), the Government National Mortgage Association (Ginnie Mae, and together with the GSEs, the Agencies) and private-label securitizations (PLS, or non-Agency).
We source our servicing portfolio through multiple channels, including retail, wholesale, correspondent, flow MSR purchase agreements, the Agency Cash Window programs and bulk MSR purchases. We originate, sell and securitize conventional (conforming to the GSE underwriting standards) loans and government-insured (Federal Housing Administration (FHA), Department of Veterans Affairs (VA) or United States Department of Agriculture (USDA)) forward mortgage loans, generally with servicing retained. The GSEs or Ginnie Mae guarantee these mortgage securitizations. We originate and purchase Home Equity Conversion Mortgage (HECM) loans, or reverse mortgages, which are mostly insured by the FHA and we are an approved issuer of Home Equity Conversion Mortgage-Backed Securities (HMBS) that are guaranteed by Ginnie Mae.
We had a total of approximately 4,400 employees at March 31, 2024 of which approximately 3,000 were located in India and approximately 400 were based in the Philippines. Our operations in India and the Philippines provide internal support services to our loan servicing and originations businesses and our corporate functions.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions of the Securities and Exchange Commission (SEC) to Form 10-Q and SEC Regulation S-X, Article 10, Rule 10-01 for interim financial statements. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete financial statements. In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. The results of operations and other data for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2024. The unaudited consolidated financial statements presented herein should be read in conjunction with the audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions include, but are not limited to, those that relate to fair value measurements, income taxes and the provision for losses that may arise from contingencies including litigation proceedings. In developing estimates and assumptions, management uses all available information; however, actual results could materially differ from those estimates and assumptions.
10


Recently Adopted Accounting Standards
Leases (ASC 842) Common Control Arrangements (ASU 2023-01)
Prior to the issuance of this ASU, ASC 842 required all lessees to amortize leasehold improvements over the shorter of their useful life or the remaining term of the lease. For leases between entities under common control, the amendment in this ASU requires amortization of leasehold improvements over the useful life of those assets to the common control group, regardless of the lease term. When the lessee no longer controls the use of the asset underlying the common control lease, the leasehold improvements are accounted for as a transfer between entities under common control whereby the lessee records a distribution to the common control lessor through an adjustment to equity.
Our adoption of this standard on January 1, 2024 did not have a material impact on our consolidated financial statements.
Accounting Standards Issued but Not Yet Adopted
Business Combinations - Joint Venture Formations (ASC 805-60): Recognition and Initial Measurement (ASU 2023-05)
The amendments in this ASU require a joint venture to apply a new basis of accounting upon formation for the initial contribution of nonmonetary and monetary assets, initially measured at fair value (with exceptions to fair value measurement consistent with business combinations guidance). This ASU does not amend the definition of a joint venture, the accounting by an equity method investor for its investment in a joint venture, or the accounting by a joint venture for contributions received after its formation.
The amendments in this ASU are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. A joint venture formed prior to the adoption date may elect to apply the new guidance retrospectively back to the original formation date. We do not anticipate that the adoption of this standard will have a material impact on our consolidated financial statements.
Segment Reporting (ASC 280) Improvements to Reportable Segment Disclosures (ASU 2023-07)
The amendments in this ASU were issued to improve annual and interim reportable segment disclosure requirements, primarily through enhanced disclosures about expenses that are significant to the segment, regularly provided to or easily computed from information regularly provided to the chief operating decision maker (CODM), and included in the reported measure of segment profit or loss. This ASU also requires disclosure of the title and position of the individual or the name of the group identified as the CODM in the consolidated financial statements, as well as how the CODM uses each reported measure of segment profit or loss to assess performance and allocate resources to the segment. The ASU allows the disclosure of additional optional measures of a segment’s profit or loss for each reportable segment if used by the CODM, subject to additional segment disclosures and the SEC’s non-GAAP financial measures requirements.
The amended disclosures in this ASU are effective in the 2024 annual period and in 2025 for interim periods, and shall be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.
Income Taxes (ASC 740) Improvements to Income Tax Disclosures (ASU 2023-09)
The amendments in this ASU require disaggregated information about a reporting entity’s effective tax rate reconciliation, including a tabular rate reconciliation for specified categories and additional information for reconciling items that meet a quantitative threshold. The ASU also requires additional disaggregated information on income taxes paid to an individual jurisdiction equal to or greater than 5% of total income taxes paid.
The amended disclosures are effective in the 2025 annual period and in 2026 for interim periods, and shall be applied on a prospective basis with the option to apply the standard retrospectively.
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 transfers of financial assets and asset-backed financing arrangements using special purpose entities (SPEs) or variable interest entities (VIEs) into the following groups: (1) securitizations of residential mortgage loans, (2) financings of loans held for sale, (3) financings of advances and (4) MSR financings. Financing transactions that do not use SPEs or VIEs are disclosed in Note 13 – Borrowings.
11


Securitizations of Residential Mortgage Loans
Transfers of Forward Loans
We sell or securitize forward loans that we originate or purchase from third parties, generally in the form of mortgage-backed securities guaranteed by the GSEs or Ginnie Mae. Securitization typically occurs within 30 days of loan closing or purchase. 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.
The following table presents a summary of cash flows received from and paid to securitization trusts related to transfers of loans accounted for as sales that were outstanding:
 Three Months Ended March 31,
20242023
Proceeds received from securitizations$2,558.9 $2,316.8 
Servicing fees collected (1)38.3 27.0 
Purchases of previously transferred assets, net of claims reimbursed
(2.5)(3.1)
$2,594.7 $2,340.6 
(1)We receive servicing fees based upon the securitized loan balances and certain ancillary fees, all of which are reported in Servicing and subservicing fees in the unaudited consolidated statements of operations.
In connection with these transfers, we retained MSRs of $34.7 million and $31.1 million during the three months ended March 31, 2024 and 2023, respectively.
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. We receive customary origination representations and warranties from our network of approved correspondent lenders. To the extent that we have recourse against a third-party originator, we may recover part or all of any loss we incur. Also refer to the Loan Put-Back and Related Contingencies section of Note 21 – Contingencies.
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 an estimate of our maximum exposure to loss including the UPB of the transferred loans:
March 31, 2024December 31, 2023
Carrying value of assets
MSRs, at fair value$699.9 $636.5 
Advances94.7 99.0 
UPB of loans transferred (1)48,788.7 46,810.1 
Maximum exposure to loss (2)$49,583.4 $47,545.6 
(1)Includes $11.3 billion and $10.5 billion of loans delivered to Ginnie Mae as of March 31, 2024 and December 31, 2023, respectively, and includes loan modifications repurchased and delivered through the Ginnie Mae Early Buyout Program (EBO).
(2)The maximum exposure to loss in the table above is primarily based on the remaining UPB of loans serviced and assumes all loans were deemed worthless as of the reporting date. It does not take into consideration the proceeds from the underlying collateral liquidation, recoveries or any other recourse available to us, including from mortgage insurance, guarantees or correspondent sellers. We do not believe the maximum exposure to loss from our involvement with these previously transferred loans is representative of the actual loss we are likely to incur based on our contractual rights and historical loss experience and projections. Also, refer to the Loan Put-Back and Related Contingencies section in Note 21 – Contingencies.
At March 31, 2024 and December 31, 2023, 2.7% and 2.8%, respectively, of the transferred residential loans that we service were 60 days or more past due, including 60 days or more past due loans under forbearance. This includes 7.6% and 8.0%, respectively, of loans delivered to Ginnie Mae that are 60 days or more past due.
Transfers of Reverse Mortgages
We pool HECM loans into HMBS that we sell into the secondary market with servicing rights retained. As the transfers of the HECM loans do not qualify for sale accounting, we account for these transfers as financings, with the HECM loans classified as Loans held for investment, at fair value, on our unaudited consolidated balance sheets.
12


Financing of Loans Held for Sale, Receivables and Other Assets using SPEs
In 2021, we consolidated an SPE (trust) in connection with a warehouse mortgage loan financing facility structured as a gestation repurchase facility whereby Agency mortgage loans are transferred by PHH to the trust for collateralization purposes. As of March 31, 2024 and December 31, 2023, $150.1 million and $150.1 million, respectively, loans held for sale were pledged as collateral for $150.0 million and $150.0 million, respectively, debt certificates issued by the trust. See Note 13 – Borrowings.
We finance certain reverse mortgage buyouts that are insured by the FHA, including loans held for sale, receivables and REO properties, through private placement securitizations, referred to as OLIT transactions (Ocwen Loan Investment Trust). The securitization trusts issued senior and mezzanine class Notes to third party investors. We retain certain mezzanine class Notes and ownership interests and service the underlying assets. We determined we were the primary beneficiary, and thus consolidate the securitization trusts and related depositor. Recourse for the Notes is limited to the assets of the respective securitization trusts. We executed our second securitization in the three months ended March 31, 2024. Also refer to Note 13 – Borrowings.
The table below presents the carrying value and classification of the assets and liabilities reported on our consolidated balance sheet that are associated with the securitized reverse mortgage loans buyouts and financing liabilities:
March 31, 2024December 31, 2023
Mortgage loans (Loans held for sale)$241.5 $119.5 
Receivables, net44.6 19.9 
REO (Other assets)19.2 12.5 
Debt service and Interest reserve accounts (Restricted cash)20.6 6.8 
Total assets
$325.8 $158.6 
Outstanding borrowings (Mortgage loan financing facilities, net)356.0 164.4 
Unamortized discount and debt issuance costs (Mortgage loan financing facilities, net)(40.2)(21.0)
Accrued expenses and Accrued interest (Other liabilities)1.2 0.5 
Total liabilities
$317.0 $143.8 
Financings of Advances using SPEs
We pledged certain servicing advances as collateral to our advance financing facilities, referred to as advance match funded liabilities, with the use of SPEs that we consolidate and include in our consolidated financial statements.
The table below presents the carrying value and classification of the assets and liabilities of the advance financing facilities:
March 31, 2024December 31, 2023
Match funded advances (Advances, net)$506.5 $573.0 
Debt service accounts (Restricted cash)11.7 15.7 
Advance match funded liabilities439.5 498.9 
MSR Financings using SPEs
We consolidate two SPEs (PMC ESR Trusts) in connection with a third-party financing facility secured by certain of PHH’s Fannie Mae and Freddie Mac MSRs (GSE MSRs) and one SPE (PMC PLS ESR Issuer LLC) in connection with our PLS MSR financing facility (Ocwen Excess Spread-Collateralized Notes, Series 2022-PLS1 Class A).
On March 4, 2024, PHH entered into a $34.0 million repurchase agreement pursuant to which PHH sold the membership interest certificate representing 100% of the limited liability company interests in PMC PLS ESR Issuer LLC and has agreed to repurchase such membership interest certificate at a specified future date at the price set forth in the repurchase agreement. Ocwen guarantees the obligations of PHH under the facility subject to the terms and conditions set forth in the guaranty. The termination date of the facility is February 25, 2025. Also refer to Note 13 – Borrowings.
13


The table below presents the carrying value and classification of the assets and liabilities of the GSE MSR financing facility and the PLS Notes facility:
March 31, 2024December 31, 2023
MSRs pledged (MSRs, at fair value)$494.9 $449.6 
Debt service account (Restricted cash)1.6 1.7 
Outstanding borrowings (MSR financing facilities, net) 327.9 282.1 
Unamortized debt issuance costs (MSR financing facilities, net) (0.6)(0.4)
    
Note 3 – 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.
The carrying amounts and the estimated fair values of our financial instruments and certain of our nonfinancial assets measured at fair value on a recurring or non-recurring basis or disclosed, but not measured, at fair value are as follows:
  March 31, 2024December 31, 2023
 LevelCarrying ValueFair ValueCarrying ValueFair Value
Financial assets     
Loans held for sale
Loans held for sale, at fair value (a) (e)3, 2$1,025.7 $1,025.7 $674.2 $674.2 
Loans held for sale, at lower of cost or fair value (b)33.2 3.2 3.1 3.1 
Total Loans held for sale$1,028.9 $1,028.9 $677.3 $677.3 
Loans held for investment, at fair value
Loans held for investment - Reverse mortgages (a) 3$8,125.0 $8,125.0 $7,970.0 $7,970.0 
Loans held for investment - Restricted for securitization investors (a)35.5 5.5 5.6 5.6 
Total Loans held for investment, at fair value$8,130.5 $8,130.5 $7,975.5 $7,975.5 
Advances, net (c)3$602.7 $602.7 $678.8 $678.8 
Receivables, net (c)3$152.1 $152.1 $154.8 $154.8 
Financial liabilities     
Advance match funded liabilities (c)3$440.2 $440.2 $499.7 $499.7 
Financing liabilities, at fair value:
HMBS-related borrowings (a)3$7,945.0 $7,945.0 $7,797.3 $7,797.3 
Other financing liabilities
3906.8 906.8 900.0 900.0 
Mortgage loan financing facilities (c) (d)3$1,108.9 $1,119.3 $710.6 $717.6 
MSR financing facilities (c) (d)3$964.1 $950.5 $916.2 $900.3 
Senior notes
PMC Senior secured notes due 2026 (c) (d)
2$309.5 $302.7 $356.1 $326.0 
OFC Senior secured notes due 2027 (c) (d)3242.4 252.3 239.7 230.5 
Total Senior notes$552.0 $555.1 $595.8 $556.5 
14


  March 31, 2024December 31, 2023
 LevelCarrying ValueFair ValueCarrying ValueFair Value
Derivative financial instrument assets (liabilities), net     
Interest rate lock commitments (IRLCs) (a) 3$5.0 $5.0 $5.6 $5.6 
Forward sales of loans (a)
1(0.1)(0.1)(0.1)(0.1)
TBA / Forward mortgage-backed securities (MBS) trades (a)14.3 4.3 9.6 9.6 
Interest rate swap futures (a)1(0.7)(0.7)3.9 3.9 
TBA forward pipeline trades (a)1(3.7)(3.7)(6.3)(6.3)
Option contracts (a)1  1.9 1.9 
Other (a)3  (0.1)(0.1)
MSRs (a) 3$2,374.7 $2,374.7 $2,272.2 $2,272.2 
(a)Measured at fair value on a recurring basis in our financial statements.
(b)Measured at fair value on a non-recurring basis in our financial statements.
(c)Disclosed, but not measured at fair value in our financial statements. 
(d)The carrying values are net of unamortized debt issuance costs and discount. See Note 13 – Borrowings for additional information.
(e)The newly originated portfolio of GSE and forward Ginnie Mae loans held for sale pending securitization with the Agencies is classified as Level 2; all other loans are classified as Level 3.
15


The following tables present a reconciliation of the changes in fair value of certain Level 3 assets and liabilities that we measure at fair value on a recurring basis (refer to the respective notes for other Level 3 assets and liabilities):
Loans Held for Sale - Fair ValueESS Financing LiabilityIRLCs
Three months ended March 31, 2024
Beginning balance$203.1 $(248.9)$5.6 
Purchases, issuances, sales and settlements 
Purchases and other145.1 — — 
Issuances (1)— — 17.2 
Sales(38.0)— — 
Settlements (2)
(22.1)7.4 — 
Transfers from (to)
Loans held for investment, at fair value1.0 — — 
Loans held for sale, at fair value (1)— — (5.8)
REO (Other assets)(3.0)— — 
Receivables, net(10.6)— — 
Advances - (capitalization upon Ginnie Mae modification)
2.1 — — 
Net addition (disposition/derecognition)74.5 7.4 11.4 
Included in earnings:
Change in fair value (1)6.4 (11.9)(12.0)
Ending balance$284.0 $(253.4)$5.0 
Loans Held for Sale - Fair ValueESS Financing LiabilityIRLCs
Three months ended March 31, 2023
Beginning balance$32.1 $(199.0)$(0.7)
Purchases, issuances, sales and settlements
Purchases and other12.4 — — 
Issuances (1)— (68.7)5.8 
Sales(20.2)— — 
Settlements (2)
— 6.8 — 
Transfers from (to):
Loans held for sale, at fair value (1)— — (20.4)
Receivables, net(0.4)— — 
Net addition (disposition/derecognition)(8.2)(62.0)(14.6)
Included in earnings:
Change in fair value (1)
(0.5)(2.1)20.1 
Ending balance$23.3 $(263.1)$4.8 
(1)IRLC activity (issuances and transfers) represent changes in fair value included in earnings. This activity is presented on a gross basis in the table for disclosure purposes. Total net change in fair value included in earnings attributed to IRLCs is a gain (loss) of $(0.6) million and $5.6 million for the three months ended March 31, 2024 and 2023, respectively. See Note 15 – Derivative Financial Instruments and Hedging Activities.
(2)ESS financing liability settlement is determined based on collections on reference pools of the related mortgage loans.
A reconciliation from the beginning balances to the ending balances of Loans held for investment and HMBS-related borrowings, MSRs and Pledged MSR liabilities that we measure at fair value on a recurring basis is disclosed in Note 5 - Reverse Mortgages, Note 7 – Mortgage Servicing and Note 8 — Other Financing Liabilities, at Fair Value, respectively.
The significant unobservable assumptions that we make to estimate the fair value of certain assets and liabilities classified as Level 3 and measured at fair value on a recurring basis are provided below.
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Loans Held for Sale
The fair value of residential forward and reverse mortgage loans we purchased from Ginnie Mae guaranteed securitizations or from third parties (government insured reverse buyouts previously purchased from Ginnie Mae guaranteed securitizations) is estimated using both observable and unobservable inputs, including published Ginnie Mae prices or expected collateral values, as well as estimated default, prepayment, and discount rates. Significant unobservable inputs in estimating fair value include the estimated default rate and, for reverse loans the prepayment rate and liquidation timeline. Accordingly, these repurchased Ginnie Mae forward and reverse loans are classified as Level 3 within the valuation hierarchy.
Loans Held for Investment - Reverse Mortgages
Reverse mortgage loans held for investment are carried at fair value and classified as Level 3 within the valuation hierarchy. We measure these loans at fair value based 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, including future draw commitments for HECM loans. We engage third-party valuation experts in the determination of fair value. Significant unobservable assumptions include conditional prepayment rate and discount rate. The conditional prepayment rate assumption displayed in the table below is inclusive of voluntary (repayment or payoff) and involuntary (inactive/delinquent status and default) prepayments. The discount rate assumption is primarily based on an assessment of current market yields on reverse mortgage loan and tail securitizations, expected duration of the asset and current market interest rates.
Significant unobservable assumptionsMarch 31,
2024
December 31,
2023
Life in years
Range
0.8 to 8.0
0.8 to 7.9
Weighted average 5.15.2 
Conditional prepayment rate, including voluntary and involuntary prepayments
Range
11.6% to 35.5%
12.0% to 35.4%
Weighted average 17.5 %17.2 %
Discount rate5.2 %4.9 %
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 securitized loans held for investment, excluding future draw commitments, are partially offset by the effects of changes in the assumptions used to value the HMBS-related borrowings that are associated with these loans.
MSRs
MSRs are carried at fair value and classified within Level 3 of the valuation hierarchy. The fair value is equal to the fair value mark provided by the third-party valuation experts, without adjustment, except in the event we have a potential or completed sale, including transactions where we have executed letters of intent, in which case the fair value of the MSRs is recorded at the estimated sale price.
We engage third-party valuation experts who 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 and prepayment 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, generally the bulk market, incorporating available industry survey results, client feedback and our actual trade activity, and including risk premiums and liquidity adjustments. While interest rates are a key value driver, MSR fair value may change for other market-driven factors, including but not limited to the supply and demand of the market or the required yield or perceived value by investors of such MSRs. While the models and related assumptions used by the valuation experts are proprietary to them, we understand the methodologies 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 verification and analytical procedures, provide reasonable 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 and benchmarks of assumptions and value estimates.
A change in the valuation inputs or assumptions may result in a significantly higher or lower fair value measurement. Changes in market interest rates predominantly impact the fair value of Agency MSRs via prepayment speeds by altering the borrower refinance incentive and the non-Agency MSRs due to the impact on advance funding costs. In addition, changes in
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market interest rates impact float income. The significant unobservable assumptions used in the valuation of these MSRs include prepayment speeds, delinquency rates, cost to service and discount rates.
Significant unobservable assumptionsMarch 31, 2024December 31, 2023
AgencyNon-AgencyAgencyNon-Agency
Weighted average prepayment speed6.5 %7.9 %7.7 %7.9 %
Weighted average lifetime delinquency rate1.3 %10.3 %1.3 %10.0 %
Weighted average discount rate10.1 %10.9 %9.2 %11.4 %
Weighted average cost to service (in dollars)$71 $195 $71 $192 
Because the mortgages underlying these MSRs permit the borrowers to prepay the loans, the value of the MSRs generally tends to diminish in periods of declining interest rates, an improving housing market or expanded product availability (as prepayments increase) and increase in periods of rising interest rates, a deteriorating housing market or reduced product availability (as prepayments decrease). The following table summarizes the estimated change in the value of the MSRs as of March 31, 2024 given hypothetical increases in lifetime prepayments and yield assumptions:
Adverse change in fair value10%20%
Change in weighted average prepayment speeds (in percentage points)0.8 1.6 
Change in fair value due to change in weighted average prepayment speeds$(54.8)$(109.0)
Change in weighted average discount rate (in percentage points)1.0 2.0 
Change in fair value due to change in weighted average discount rate $(80.1)$(153.4)
Financing Liabilities
HMBS-Related Borrowings
HMBS-related borrowings are carried at fair value and classified as Level 3 within the valuation hierarchy. These borrowings are not actively traded, and therefore, quoted market prices are not available. We determine fair value using a discounted cash flow approach, by discounting the projected recovery of principal and interest over the estimated life of the borrowing at a market rate commensurate with the risk of the estimated cash flows.
We engage third-party valuation experts to support our valuation and provide observations and assumptions related to market activities. The fair value is equal to the fair value mark provided by a third-party valuation expert. We evaluate the reasonableness of our fair value estimate and assumptions using historical experience, or cash flow backtesting, adjusted for prevailing market conditions and benchmarks of assumptions and value estimates.
Significant unobservable assumptions include yield spread and discount rate. The yield spread and discount rate assumption for these liabilities are primarily based on an assessment of current market yields for newly issued HMBS, expected duration and current market interest rates.
Significant unobservable assumptionsMarch 31,
2024
December 31,
2023
Life in years
Range
0.8 to 8.0
0.8 to 7.9
Weighted average 5.15.2 
Conditional prepayment rate
Range
11.6% to 35.5%
12.0% to 35.4%
Weighted average17.5 %17.2 %
Discount rate5.1 %4.9 %
Significant increases or decreases in any of these assumptions in isolation could result in a significantly higher or lower fair value, respectively. The effects of changes in the assumptions used to value the HMBS-related borrowings are partially offset by the effects of changes in the assumptions used to value the associated pledged loans held for investment, excluding future draw commitments.
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Pledged MSR Liabilities
Pledged MSR liabilities are carried at fair value and classified as Level 3 within the valuation hierarchy. We determine the fair value of the pledged MSR liability following a similar approach as for the associated transferred MSRs. Fair value of the pledged MSR liability in connection with the MSR capital partner transactions (including MAV) is determined using the fair value mark provided by third-party valuation expert, consistent with the associated MSR, using the same methodology and assumptions, while considering cash flows contractually retained by PHH and expected life of subservicing agreement, when applicable. Fair value for the portion of the borrowing attributable to the MSRs underlying the Rights to MSRs in connection with Rithm transactions is determined using the fair value mark provided by the third-party valuation experts.
Significant unobservable assumptionsMarch 31,
2024
December 31,
2023
Weighted average prepayment speed5.4 %6.5 %
Weighted average delinquency rate2.8 %2.8 %
Weighted average subservicing life (in years)4.64.3
Weighted average discount rate10.6 %9.6 %
Weighted average cost to service (in dollars)$132 $130 
Significant increases or decreases in these assumptions in isolation would result in a significantly higher or lower fair value.
ESS Financing Liability
The Excess Servicing Spread (ESS) financing liability consists of the obligation to remit to a third party a specified percentage of future servicing fee collections on reference pools of mortgage loans, which we are entitled to as owner of the related MSRs. We have elected to carry the ESS financing liability at fair value and have classified it as Level 3 within the valuation hierarchy. The fair value represents the net present value of the expected servicing spread cash flows, consistent with the valuation model and behavioral projections of the underlying MSR, as applicable. The fair value of the ESS financing liability is determined using a third-party valuation expert. The significant unobservable assumptions used in the valuation of the ESS financing liability include prepayment speeds, delinquency rates, and discount rates. The discount rate is initially determined based on the expected cash flows and the proceeds from each issuance, and is subsequently updated, at each issuance level, to incorporate discount rate assumption updates for the underlying MSR or other factors, as provided by third-party valuation expert. At March 31, 2024 and December 31, 2023, the weighted average discount rate of the ESS financing liability was 9.4% and 9.4%, respectively. Refer to MSRs above for a description of other significant unobservable assumptions. Also see Note 8 — Other Financing Liabilities, at Fair Value.
Derivative Financial Instruments
IRLCs are classified as Level 3 assets as fallout rates were determined to be significant unobservable assumptions.
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Note 4 – Loans Held for Sale - Fair Value
The following table presents the estimated fair value of Loans held for sale for which we elected the fair value option:
March 31, 2024December 31, 2023
Unpaid principal balance$1,065.2 $678.8 
Premium (discount)(34.7)(2.4)
Unrealized gain (loss)(4.8)(2.2)
Total fair value$1,025.7 $674.2 
The following table presents the composition of Loans held for sale, at fair value by type:
 March 31, 2024December 31, 2023
GSE loans$408.9 $219.3 
Government- Forward loans339.0 254.0 
Forward loans repurchased from Ginnie Mae guaranteed securitization (1)19.7 19.1 
Reverse loans (2)
250.9 166.6 
Other residential mortgage loans7.2 15.2 
Total$1,025.7 $674.2 
(1)Pursuant to Ginnie Mae servicing guidelines.
(2)Includes government-insured inactive reverse mortgage loans purchased from Ginnie Mae securitization pools that reached the 98% of maximum claim amount and are generally liquidated through foreclosure and subsequent sale of the REO properties. As of March 31, 2024 and December 31, 2023, the balance includes $241.5 million and $119.5 million, respectively, of loans pledged as collateral for the Asset-Backed Notes issued by OLIT. Also see Note 2 – Securitizations and Variable Interest Entities and Note 13 – Borrowings.
The following table presents the activity of Loans held for sale, at fair value:

Three Months Ended March 31,
20242023
Beginning balance$674.2 $617.8 
Originations and purchases2,988.9 2,552.4 
Proceeds from sales(2,581.0)(2,296.1)
Principal collections(23.1)(15.4)
Transfers from (to):
Loans held for investment, at fair value 1.0 1.6 
Receivables, net(10.6)1.1 
REO (Other assets)(3.0)(4.2)
Advances (capitalization upon Ginnie Mae modifications)
2.1 2.0 
Fair value gain (loss) on loans held for sale, at fair value (1)
(27.5)(17.2)
Other 4.7 3.1 
Ending balance$1,025.7 $