SEC Filing | Ocwen Financial Corporation

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ocn-20200930

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 September 30, 2020


☐			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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	OCN	New 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 filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller 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 October 30, 2020: 8,683,994 shares

OCWEN FINANCIAL CORPORATION

FORM 10-Q

TABLE OF CONTENTS


		PAGE
PART I - FINANCIAL INFORMATION

Item 1.	Unaudited Consolidated Financial Statements	3

	Consolidated Balance Sheets at September 30, 2020 and December 31, 2019	4

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019	5

	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2020 and 2019	6

	Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2020 and 2019	7

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	9

	Notes to Unaudited Consolidated Financial Statements	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	64

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	106

Item 4.	Controls and Procedures	110

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	111

Item 1A.	Risk Factors	111

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	111

Item 6.	Exhibits	112

Signatures		113

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 or referenced under Item 1A, Risk Factors and the following:

•uncertainty relating to the continuing impacts of the COVID-19 pandemic, including with respect to the response of the U.S. government, state governments, the Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac) (together, the GSEs), the Government National Mortgage Association (Ginnie Mae) and regulators;

•the potential for ongoing COVID-19 related disruption in the financial markets and in commercial activity generally, increased unemployment, and other financial difficulties facing our borrowers;

•the proportion of borrowers who enter into forbearance plans, the financial ability of borrowers to resume repayment and their timing for doing so;

•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, and HECM and forward loan buyouts and put backs, as well as repay, renew and extend 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;

•increased servicing costs based on rising borrower delinquency levels or other factors;

•reduced collection of servicing fees and ancillary income and delayed collection of servicing revenue as a result of forbearance plans and moratoria on evictions and foreclosure proceedings;

•our ability to continue to improve our financial performance through cost re-engineering initiatives and other actions;

•our ability to continue to grow our lending business and increase our lending volumes in a competitive market and uncertain interest rate environment;

•uncertainty related to our long-term relationship and remaining agreements with New Residential Investment Corp. (NRZ), our largest servicing client;

•uncertainty related to claims, litigation, cease and desist orders and investigations brought by government agencies and private parties regarding our servicing, foreclosure, modification, origination and other practices, including uncertainty related to past, present or future investigations, litigation, cease and desist orders and settlements with 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);

•adverse effects on our business as a result of regulatory investigations, litigation, cease and desist orders or settlements and the reactions of key counterparties, including lenders, the GSEs and Ginnie Mae;

•our ability to comply with the terms of our settlements with regulatory agencies and the costs of doing so;

•any adverse developments in existing legal proceedings or the initiation of new legal proceedings;

•our ability to effectively manage our regulatory and contractual compliance obligations;

•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;

•our ability to interpret correctly and comply with liquidity, net worth and other financial and other requirements of regulators, the GSEs and Ginnie Mae, as well as those set forth in our debt and other agreements;

•our ability to comply with our servicing agreements, including our ability to comply with our agreements with, and the requirements of, 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;

•failure of our information technology or other security systems or breach of our privacy protections, including any failure to protect customers’ data;

•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;

•the loss of the services of our senior managers and key employees;

•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 or Department of Veterans Affairs (VA) ceasing to provide insurance;

•uncertainty related to our ability to continue to collect certain expedited payment or convenience fees and potential liability for charging such fees;

•uncertainty related to our reserves, valuations, provisions and anticipated realization of assets;

•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;

•the characteristics of our servicing portfolio, including prepayment speeds along with delinquency and advance rates;

•our ability to successfully modify delinquent loans, manage foreclosures and sell foreclosed properties;

•uncertainty related to the processes for judicial and non-judicial foreclosure proceedings, including potential additional costs or delays or moratoria in the future or claims pertaining to past practices;

•our ability to adequately manage and maintain real estate owned (REO) properties and vacant properties collateralizing loans that we service;

•our ability to realize anticipated future gains from future draws on existing loans in our reverse mortgage portfolio;

•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;

•uncertainty related to the political or economic stability of the United States and of the foreign countries in which we have operations; and

•our ability to maintain positive relationships with our large shareholders and obtain their support for management proposals requiring shareholder approval.

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, 2019 and our Quarterly Reports on Form 10-Q and 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.

PART I – FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)


	September 30, 2020		December 31, 2019
Assets
Cash and cash equivalents	$	321,455	$	428,339
Restricted cash (amounts related to variable interest entities (VIEs) of $13,108 and $20,434)	61,511		64,001
Mortgage servicing rights (MSRs), at fair value	1,069,013		1,486,395
Advances, net (amounts related to VIEs of $660,816 and $801,990)	832,604		1,056,523

Loans held for sale ($366,966 and $208,752 carried at fair value)	390,631		275,269
Loans held for investment, at fair value (amounts related to VIEs of $11,012 and $23,342)	6,860,942		6,292,938
Receivables, net	201,607		201,220

Premises and equipment, net	23,620		38,274




Other assets ($25,204 and $8,524 carried at fair value) (amounts related to VIEs of $7,584 and $4,078)	662,468		563,240

Total assets	$	10,423,851	$	10,406,199

Liabilities and Equity
Liabilities
Home Equity Conversion Mortgage-Backed Securities (HMBS) related borrowings, at fair value	$	6,606,543	$	6,063,435
Advance match funded liabilities (related to VIEs)	580,078		679,109
Other financing liabilities, at fair value (amounts related to VIEs of $11,012 and $22,002)	588,321		972,595
Other secured borrowings, net (amounts related to VIEs $186,986 and $240,893)	915,292		1,025,791
Senior notes, net	311,689		311,085

Other liabilities ($1,671 and $100 carried at fair value) (amounts related to VIEs of $93 and $144)	997,461		942,173

Total liabilities	9,999,384		9,994,188

Commitments and Contingencies (Notes 21 and 22)

Stockholders’ Equity

Common stock, $.01 par value; 13,333,333 shares authorized; 8,672,272 and 8,990,816 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively	87		90

Additional paid-in capital	556,176		558,057
Accumulated deficit	(124,459)		(138,542)
Accumulated other comprehensive loss, net of income taxes	(7,337)		(7,594)


Total stockholders’ equity	424,467		412,011
Total liabilities and stockholders’ equity	$	10,423,851	$	10,406,199

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

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Revenue
Servicing and subservicing fees	$	181,722	$	248,517	$	568,445	$	745,093
Reverse mortgage revenue, net	14,499		20,260		51,055		72,876
Gain on loans held for sale, net	45,886		9,012		92,764		26,312

Other revenue, net	6,928		5,726		17,637		17,460
Total revenue	249,035		283,515		729,901		861,741

MSR valuation adjustments, net	(33,814)		134,561		(231,368)		(121,705)

Operating expenses
Compensation and benefits	69,648		73,414		195,393		250,393
Servicing and origination	22,930		36,619		60,547		86,827
Professional services	28,361		36,628		77,816		77,205
Technology and communications	15,850		16,644		47,154		61,080
Occupancy and equipment	9,572		17,262		37,677		52,550


Other expenses	3,161		(1,282)		12,958		6,563
Total operating expenses	149,522		179,285		431,545		534,618

Other income (expense)
Interest income	3,801		4,129		12,762		12,524
Interest expense	(26,815)		(29,506)		(83,557)		(84,636)
Pledged MSR liability expense	(57,404)		(256,416)		(105,684)		(303,302)


Gain on repurchase of senior secured notes	—		5,099		—		5,099
Other, net	3,345		(414)		4,616		1,163
Total other expense, net	(77,073)		(277,108)		(171,863)		(369,152)

Loss before income taxes	(11,374)		(38,317)		(104,875)		(163,734)
Income tax (benefit) expense	(1,954)		4,450		(71,920)		13,264
Net loss	$	(9,420)	$	(42,767)	$	(32,955)	$	(176,998)



Loss per share
Basic	$	(1.09)	$	(4.77)	$	(3.76)	$	(19.76)
Diluted	$	(1.09)	$	(4.77)	$	(3.76)	$	(19.76)

Weighted average common shares outstanding
Basic	8,669,550		8,973,053		8,770,102		8,955,288
Diluted	8,669,550		8,973,053		8,770,102		8,955,288

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

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Net loss	$	(9,420)	$	(42,767)	$	(32,955)	$	(176,998)

Other comprehensive income, net of income taxes:

Reclassification adjustment for losses on cash flow hedges included in net income	42		38		118		108
Change in unfunded pension plan obligation liability	47		611		139		1,285
Other	—		8		—		21
Comprehensive loss	$	(9,331)	$	(42,110)	$	(32,698)	$	(175,584)

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

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Dollars in thousands)


	Common Stock			Additional Paid-in Capital		(Accumulated Deficit) Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net of Income Taxes		Total
	Shares	Amount
Three Months Ended September 30, 2020 and 2019
Balance at June 30, 2020	8,667,260	$	87	$	555,147	$	(115,039)	$	(7,426)	$	432,769
Net loss	—	—		—		(9,420)		—		(9,420)







Additional shares issued on reverse stock split rounding	4,692	—		—		—		—		—
Equity-based compensation and other	320	—		1,029		—		—		1,029
Other comprehensive income, net of income taxes	—	—		—		—		89		89
Balance at September 30, 2020	8,672,272	$	87	$	556,176	$	(124,459)	$	(7,337)	$	424,467

Balance at June 30, 2019	8,973,053	$	90	$	556,952	$	(130,648)	$	(3,500)	$	422,894
Net loss	—	—		—		(42,767)		—		(42,767)






Equity-based compensation and other	—	—		401		—		—		401
Other comprehensive income, net of income taxes	—	—		—		—		657		657
Balance at September 30, 2019	8,973,053	$	90	$	557,353	$	(173,415)	$	(2,843)	$	381,185

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

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Dollars in thousands)


	Common Stock			Additional Paid-in Capital		(Accumulated Deficit) Retained Earnings		Accumulated Other Comprehensive Loss, Net of Income Taxes		Total
	Shares	Amount
Nine Months Ended September 30, 2020 and 2019
Balance at December 31, 2019	8,990,816	$	90	$	558,057	$	(138,542)	$	(7,594)	$	412,011
Net loss	—	—		—		(32,955)		—		(32,955)


Cumulative effect of adoption of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-13	—	—		—		47,038		—		47,038

Repurchase of common stock	(377,484)	(4)		(4,601)		—		—		(4,605)


Additional shares issued on reverse stock split rounding	4,692	—		—		—		—		—
Equity-based compensation and other	54,248	1		2,720		—		—		2,721
Other comprehensive income, net of income taxes	—	—		—		—		257		257
Balance at September 30, 2020	8,672,272	$	87	$	556,176	$	(124,459)	$	(7,337)	$	424,467

Balance at December 31, 2018	8,927,495	$	89	$	555,306	$	3,567	$	(4,257)	$	554,705
Net loss	—	—		—		(176,998)		—		(176,998)

Cumulative effect of adoption of FASB ASU No. 2016-02	—	—		—		16		—		16




Equity-based compensation and other	45,558	1		2,047		—		—		2,048
Other comprehensive income, net of income taxes	—	—		—		—		1,414		1,414
Balance at September 30, 2019	8,973,053	$	90	$	557,353	$	(173,415)	$	(2,843)	$	381,185

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

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)


	For the Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities
Net loss	$	(32,955)	$	(176,998)
Adjustments to reconcile net loss to net cash provided by operating activities:
MSR valuation adjustments, net	231,368		121,705
Gain on sale of MSRs, net	(48)		(571)

Provision for bad debts	18,801		26,971
Depreciation	15,398		26,020
Gain on repurchase of senior notes	—		(5,099)

Amortization of debt issuance costs	4,631		2,268
Equity-based compensation expense	2,392		1,890




(Gain) loss on valuation of Pledged MSR financing liability	(21,314)		123,721
Net gain on valuation of loans held for investment and HMBS-related borrowings	(14,410)		(50,221)
Gain on loans held for sale, net	(92,764)		(26,312)
Bargain purchase gain	—		381
Origination and purchase of loans held for sale	(4,378,999)		(872,914)
Proceeds from sale and collections of loans held for sale	4,259,127		787,683
Changes in assets and liabilities:
Decrease in advances, net	210,688		189,876
Decrease in receivables and other assets, net	105,023		123,283
Decrease in other liabilities	(47,981)		(82,942)
Other, net	(10,918)		(4,671)
Net cash provided by operating activities	248,039		184,070

Cash flows from investing activities
Origination of loans held for investment	(867,702)		(675,898)
Principal payments received on loans held for investment	619,486		383,806
Purchase of MSRs	(82,990)		(112,417)
Proceeds from sale of MSRs	—		1,159
Acquisition of advances in connection with the purchase of MSRs	—		(1,457)

Proceeds from sale of advances	561		2,876


Additions to premises and equipment	(3,394)		(1,342)
Proceeds from sale of real estate	5,123		5,572


Other, net	800		420
Net cash used in investing activities	(328,116)		(397,281)

Cash flows from financing activities
Repayment of advance match funded liabilities, net	(99,031)		(90,787)

Repayment of other financing liabilities	(84,185)		(168,898)
Proceeds from mortgage loan warehouse facilities, net	109,538		87,484
Proceeds from MSR financing facilities	128,641		144,260
Repayment of MSR financing facilities	(208,996)		(6,648)
Repayment and repurchases of Senior notes	—		(131,791)
Proceeds from issuance of additional senior secured term loan (SSTL)	—		119,100
Repayment of SSTL borrowings	(136,066)		(19,074)
Payment of debt issuance costs	(7,522)		(1,284)
Proceeds from sale of MSRs accounted for as a financing	—		1,221
Proceeds from sale of Home Equity Conversion Mortgages (HECM, or reverse mortgages) accounted for as a financing (HMBS-related borrowings)	885,987		665,820
Repayment of HMBS-related borrowings	(613,026)		(377,094)


Repurchase of common stock	(4,605)		—


Other, net	(32)		(2,363)
Net cash (used in) provided by financing activities	(29,297)		219,946

Net (decrease) increase in cash, cash equivalents and restricted cash	(109,374)		6,735
Cash, cash equivalents and restricted cash at beginning of year	492,340		397,010
Cash, cash equivalents and restricted cash at end of period	$	382,966	$	403,745

Supplemental non-cash investing and financing activities:

Deconsolidation of mortgage-backed securitization trusts (VIEs)
Loans held for investment	$	(10,715)	$	—
Other financing liabilities	(9,519)		—
Derecognition of MSRs and financing liabilities:
MSRs	$	(263,344)	$	—
Financing liability - MSRs pledged (Rights to MSRs)	(263,344)		—
Recognition of future draw commitments for HECM loans at fair value upon adoption of FASB ASU No. 2016-13	$	47,038	$	—
Recognition of gross right-of-use asset and lease liability:
Right-of-use asset	$	2,608	$	66,231
Lease liability	2,597		66,247
Transfers of loans held for sale to real estate owned (REO)	$	2,554	$	4,240

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:


	September 30, 2020		September 30, 2019
Cash and cash equivalents	$	321,455	$	345,084
Restricted cash and equivalents:
Debt service accounts	14,873		17,026
Other restricted cash	46,638		41,635
Total cash, cash equivalents and restricted cash reported in the statements of cash flows	$	382,966	$	403,745

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

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(Dollars in thousands, except per share data and unless otherwise indicated)


Note 1 - Organization and Basis of Presentation

Organization

Ocwen Financial Corporation (NYSE: OCN) (Ocwen, we, us and our) is a non-bank mortgage servicer and originator providing solutions to homeowners, investors and others through its primary operating subsidiary, PHH Mortgage Corporation (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 PMC since its acquisition on October 4, 2018, Ocwen Financial Solutions Private Limited (OFSPL) and Ocwen USVI Services, LLC (OVIS). On March 13, 2020, as part of Ocwen's legal entity restructuring, Ocwen’s wholly-owned subsidiary Liberty Home Equity Solutions, Inc. (Liberty) and PMC entered into an amended asset purchase agreement pursuant to which Liberty transferred substantially all of its assets, liabilities, contracts and employees to PMC effective March 15, 2020. We continue to originate and service reverse mortgage loans under the brand name Liberty Reverse Mortgage.

We perform servicing activities related to our own MSR portfolio (primary) and on behalf of other servicers (subservicing), the largest being New Residential Investment Corp. (NRZ), and investors (primary and master servicing), 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 (PLS, or non-Agency). As a subservicer or primary servicer, we may be required to make advances for certain property tax and insurance premium payments, default and property maintenance payments and principal and interest payments on behalf of delinquent borrowers to mortgage loan investors before recovering them from borrowers. Most, but not all, of our subservicing agreements provide for us to be reimbursed for any such advances by the owner of the servicing rights. Advances made by us as primary servicer are generally recovered from the borrower or the mortgage loan investor. 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 source our servicing portfolio through multiple channels, including recapture, retail, wholesale, correspondent, flow MSR purchase agreements, the GSE Cash Window programs and bulk MSR purchases. We originate, sell and securitize conventional (conforming to the underwriting standards of Fannie Mae or Freddie Mac; collectively referred to as Agency or GSE loans) and government-insured (Federal Housing Administration (FHA) or Department of Veterans Affairs (VA)) forward mortgages, generally servicing retained. The GSEs or Ginnie Mae guarantee these mortgage securitizations. We originate Home Equity Conversion Mortgage (HECM) loans, or reverse mortgages, that 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. In addition to our originated MSRs, we acquire MSRs through flow purchase agreements, the GSE Cash Window and Co-issue programs and bulk MSR purchases, and we acquire new subservicing through our enterprise sales.

We had a total of approximately 5,200 employees at September 30, 2020 of which approximately 3,300 were located in India and approximately 400 were based in the Philippines. Our operations in India and the Philippines primarily provide internal support services, principally to our loan servicing business and our corporate functions. Of our foreign-based employees, approximately 74% were engaged in supporting our loan servicing operations as of September 30, 2020.

We are facing certain challenges and uncertainties that could have significant adverse effects on our business, financial condition, liquidity and results of operations, and some of these challenges and uncertainties are amplified by the Coronavirus Disease 2019 (COVID-19) pandemic. Historical losses have significantly eroded stockholders’ equity and weakened our financial condition. Our near-term priority is to return to sustainable profitability in the shortest timeframe possible within an appropriate risk and compliance environment. If we are able to execute on our key business initiatives, we believe we will drive stronger financial pe