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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 June 30, 2021
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 July 30, 2021: 9,189,030 shares




OCWEN FINANCIAL CORPORATION
FORM 10-Q
TABLE OF CONTENTS
 
  PAGE
 
   
   
   
   
 
   
   

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 or referenced under Part II, Item 1A, Risk Factors of this report and the following:
uncertainty relating to the continuing impacts of the Coronavirus 2019 (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 extent to which our mortgage servicing right (MSR) joint venture with Oaktree Capital Management L.P. and its affiliates (Oaktree), other recent transactions and our enterprise sales initiatives will generate additional subservicing volume and result in increased profitability;
our ability to deploy the proceeds of the senior secured notes in suitable investments at appropriate returns;
our ability to close announced bulk acquisitions of MSRs and other transactions, including the ability to obtain regulatory approvals, enter into definitive financing arrangements, and satisfy closing conditions, and the timing for doing so;
the timeline for closing our agreement with Reverse Mortgage Solutions, Inc. (RMS) and our ability to efficiently integrate the operations, assets and employees of its reverse mortgage servicing platform;
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 Home Equity Conversion Mortgage (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, including whether our subservicing agreements will renew or terminate in July 2022;
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;
2


the extent to which a recent judicial interpretation of the Fair Debt Collection Practices Act may require us to modify our business practices and expose us to increased expense and litigation risk;
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, 2020 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.


3

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)
 June 30, 2021December 31, 2020
Assets  
Cash and cash equivalents$243,582 $284,802 
Restricted cash (amounts related to variable interest entities (VIEs) of $12,404 and $16,791)
67,918 72,463 
Mortgage servicing rights (MSRs), at fair value2,072,518 1,294,817 
Advances, net (amounts related to VIEs of $610,964 and $651,576)
761,973 828,239 
Loans held for sale ($680,866 and $366,364 carried at fair value) (amounts related to VIEs of $154,687 and $0)
696,020 387,836 
Loans held for investment, at fair value (amounts related to VIEs of $8,680 and $9,770)
7,120,953 7,006,897 
Receivables, net165,185 187,665 
Premises and equipment, net15,748 16,925 
Investment in equity method investee11,878  
Other assets ($26,403 and $25,476 carried at fair value) (amounts related to VIEs of $2,426 and $4,544)
611,935 571,483 
Total assets$11,767,710 $10,651,127 
Liabilities and Equity  
Liabilities  
Home Equity Conversion Mortgage-Backed Securities (HMBS) related borrowings, at fair value$6,823,911 $6,772,711 
Other financing liabilities, at fair value (amounts related to VIEs of $8,680 and $9,770)
544,251 576,722 
Advance match funded liabilities (related to VIEs)530,182 581,288 
Mortgage loan warehouse facilities773,352 451,713 
MSR financing facilities, net1,012,478 437,672 
Senior secured term loan, net  179,776 
Senior notes, net610,600 311,898 
Other liabilities ($4,039 and $4,638 carried at fair value)
1,025,836 923,975 
Total liabilities11,320,610 10,235,755 
Commitments and Contingencies (Notes 21 and 22)
Stockholders’ Equity  
Common stock, $.01 par value; 13,333,333 shares authorized; 9,189,030 and 8,687,750 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively.
92 87 
Additional paid-in capital590,252 556,062 
Accumulated deficit(133,461)(131,682)
Accumulated other comprehensive loss, net of income taxes(9,783)(9,095)
Total stockholders’ equity447,100 415,372 
Total liabilities and stockholders’ equity$11,767,710 $10,651,127 

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

4


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
For the Three Months Ended June 30,For the Six Months Ended June 30,
2021202020212020
Revenue
Servicing and subservicing fees$184,441 $175,240 $356,179 $386,723 
Reverse mortgage revenue, net29,301 13,759 51,127 36,556 
Gain on loans held for sale, net42,713 33,547 48,434 46,878 
Other revenue, net8,990 4,478 17,299 10,709 
Total revenue265,445 227,024 473,039 480,866 
MSR valuation adjustments, net(72,450)(23,434)(51,242)(197,554)
Operating expenses  
Compensation and benefits72,172 65,017 140,453 125,745 
Servicing and origination 26,642 17,361 54,112 37,617 
Professional services25,544 23,818 42,866 49,455 
Technology and communications13,170 16,111 26,313 31,304 
Occupancy and equipment7,885 16,136 16,737 28,105 
Other expenses 4,395 6,366 8,956 9,797 
Total operating expenses149,808 144,809 289,437 282,023 
Other income (expense)
Interest income4,188 3,566 8,124 8,961 
Interest expense(33,516)(26,760)(61,968)(56,742)
Pledged MSR liability expense(39,810)(41,686)(77,660)(48,280)
Loss on extinguishment of debt  (15,458) 
Earnings of equity method investee350  350  
Other, net3,364 (57)3,654 1,271 
Total other expense, net(65,424)(64,937)(142,958)(94,790)
Loss before income taxes(22,237)(6,156)(10,598)(93,501)
Income tax benefit(11,915)(8,110)(8,819)(69,966)
Net income (loss)$(10,322)$1,954 $(1,779)$(23,535)
Earnings (loss) per share
Basic$(1.15)$0.23 $(0.20)$(2.67)
Diluted$(1.15)$0.23 $(0.20)$(2.67)
Weighted average common shares outstanding
Basic8,999,544 8,651,273 8,844,637 8,820,931 
Diluted8,999,544 8,661,490 8,844,637 8,820,931 

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

5


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)
 For the Three Months Ended June 30,For the Six Months Ended June 30,
 2021202020212020
Net income (loss)$(10,322)$1,954 $(1,779)$(23,535)
Other comprehensive income, net of income taxes:   
Change in unfunded pension plan obligation liability
(367)46 (733)92 
Other22 40 45 76 
Comprehensive income (loss)$(10,667)$2,040 $(2,467)$(23,367)



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

6


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020
(Dollars in thousands)


 Common StockAdditional Paid-in Capital(Accumulated Deficit) Retained EarningsAccumulated Other Comprehensive Income (Loss), Net of Income TaxesTotal
 SharesAmount
Three Months Ended June 30, 2021 and 2020
Balance at March 31, 20218,701,530 $87 $572,500 $(123,139)$(9,438)$440,010 
Net loss— — — (10,322)— (10,322)
Issuance of common stock
426,705 4 12,165 — — 12,169 
Issuance of common stock warrants, net of issuance costs — — 4,203 — — 4,203 
Equity-based compensation and other60,795 1 1,384 — — 1,385 
Other comprehensive loss, net of income taxes— — — — (345)(345)
Balance at June 30, 20219,189,030 $92 $590,252 $(133,461)$(9,783)$447,100 
Balance at March 31, 20208,638,818 $86 $554,276 $(116,993)$(7,512)$429,857 
Net income— — — 1,954 — 1,954 
Equity-based compensation and other28,442 1 871 — — 872 
Other comprehensive income, net of income taxes— — — — 86 86 
Balance at June 30, 20208,667,260 $87 $555,147 $(115,039)$(7,426)$432,769 











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 SIX MONTHS ENDED JUNE 30, 2021 AND 2020
(Dollars in thousands)
 Common StockAdditional Paid-in Capital(Accumulated Deficit) Retained EarningsAccumulated Other Comprehensive Loss, Net of Income TaxesTotal
 SharesAmount
Six Months Ended June 30, 2021 and 2020
Balance at December 31, 20208,687,750 $87 $556,062 $(131,682)$(9,095)$415,372 
Net loss— — — (1,779)— (1,779)
Issuance of common stock
426,705 4 12,165 — — 12,169 
Issuance of common stock warrants, net of issuance costs— — 19,956 — — 19,956 
Equity-based compensation and other74,575 1 2,069 — — 2,070 
Other comprehensive income, net of income taxes— — — — (688)(688)
Balance at June 30, 20219,189,030 $92 $590,252 $(133,461)$(9,783)$447,100 
Balance at December 31, 20198,990,816 $90 $558,057 $(138,542)$(7,594)$412,011 
Net loss— — — (23,535)— (23,535)
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)
Equity-based compensation and other53,928 1 1,691 — — 1,692 
Other comprehensive income, net of income taxes— — — — 168 168 
Balance at June 30, 20208,667,260 $87 $555,147 $(115,039)$(7,426)$432,769 

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 thousands)
For the Six Months Ended June 30,
20212020
Cash flows from operating activities  
Net loss$(1,779)$(23,535)
Adjustments to reconcile loss to net cash (used in) provided by operating activities:  
MSR valuation adjustments, net51,242 197,554 
Loss (gain) on sale of MSRs, net41 (161)
Provision for bad debts11,522 11,939 
Depreciation5,066 11,093 
Amortization of debt issuance costs and discount3,232 4,181 
Equity-based compensation expense2,260 1,523 
Loss on extinguishment of debt15,458  
Loss (gain) on valuation of Pledged MSR financing liability9,944 (31,716)
Net gain on valuation of loans held for investment and HMBS-related borrowings
(18,505)(15,351)
Gain on loans held for sale, net(48,434)(46,878)
Origination and purchase of loans held for sale (6,620,727)(1,949,022)
Proceeds from sale and collections of loans held for sale 6,287,238 1,936,204 
Changes in assets and liabilities:  
Decrease in advances, net56,461 144,020 
Decrease in receivables and other assets, net 44,368 39,998 
Decrease in other liabilities(9,034)(45,533)
Other, net(4,590)(9,497)
Net cash (used in) provided by operating activities(216,237)224,819 
Cash flows from investing activities  
Origination of loans held for investment (720,442)(568,074)
Principal payments received on loans held for investment
722,099 370,114 
Purchase of MSRs(712,578)(48,014)
Investment in equity method investee(11,528) 
Other, net(47)2,589 
Net cash used in investing activities(722,496)(243,385)
Cash flows from financing activities  
Repayment of advance match funded liabilities, net(51,106)(66,459)
Repayment of other financing liabilities(39,616)(68,534)
Proceeds from (repayment of) mortgage loan warehouse facilities, net321,639 (6,881)
Proceeds from MSR financing facilities630,003 129,452 
Repayment of MSR financing facilities(53,509)(166,055)
Repayment of Senior notes(319,156) 
Proceeds from issuance of Senior notes and warrants647,944  
Repayment of senior secured term loan (SSTL) borrowings(188,700)(131,066)
Payment of debt issuance costs(16,032)(7,451)
Proceeds from sale of Home Equity Conversion Mortgages (HECM, or reverse mortgages) accounted for as a financing (HMBS-related borrowings)
667,480 590,640 
Repayment of HMBS-related borrowings(715,332)(365,233)
Issuance of common stock9,878  
Repurchase of common stock  (4,605)
Other, net(525)(33)
Net cash provided by (used in) financing activities892,968 (96,225)
Net decrease in cash, cash equivalents and restricted cash(45,765)(114,791)
Cash, cash equivalents and restricted cash at beginning of year357,265 492,340 
Cash, cash equivalents and restricted cash at end of period$311,500 $377,549 
Supplemental non-cash investing and financing activities:  
Recognition of gross right-of-use asset and lease liability:
Right-of-use asset$3,204 $2,608 
Lease liability3,204 2,597 
Transfers of loans held for sale to real estate owned (REO)$3,545 $841 
Transfer from loans held for investment to loans held for sale 1,678 1,119 
Derecognition of MSRs and financing liabilities:
MSRs $ $(263,344)
Financing liability - MSRs pledged (Rights to MSRs)
 (263,344)
Deconsolidation of mortgage-backed securitization trusts (VIEs)
Loans held for investment$ $(10,715)
Other financing liabilities (9,519)
Recognition of future draw commitments for HECM loans at fair value upon adoption of FASB ASU No. 2016-13
$ $47,038 
Supplemental information - Sale and deconsolidation of subsidiary  
Cash proceeds received$4,409 $ 
Equity / cash balance held by subsidiary upon sale(5,250) 
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:
June 30, 2021June 30, 2020
Cash and cash equivalents$243,582 $313,736 
Restricted cash and equivalents:
Debt service accounts15,643 18,757 
Other restricted cash52,275 45,056 
Total cash, cash equivalents and restricted cash reported in the statements of cash flows$311,500 $377,549 

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
JUNE 30, 2021
(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, OFC, 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). 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 10 - Investment in Equity Method Investee for additional information.
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 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). 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 Agency 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 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, 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.
We had a total of approximately 5,200 employees at June 30, 2021 of which approximately 3,100 were located in India and approximately 500 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 69% were engaged in supporting our loan servicing operations as of June 30, 2021.
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 and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2021. 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, 2020.
10


In August 2020, Ocwen implemented a reverse stock split of its shares of common stock in a ratio of one-for-15. The number of shares, loss per share amounts, repurchase price per share amounts, and Common stock and Additional paid-in capital balances have been retroactively adjusted for all periods presented in this Quarterly Report on Form 10-Q to give effect to the reverse stock split as if it occurred at the beginning of the first period presented. See Note 14 – Equity for additional information.
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.
Recently Adopted Accounting Standards
Income Taxes (ASC Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12)
The FASB issued this ASU to Accounting Standards Codification (ASC) Topic 740, Income Taxes, as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Amendments include the removal of certain exceptions to the general principles of ASC Topic 740 in such areas as intraperiod tax allocation, year to date losses in interim periods and deferred tax liabilities related to outside basis differences. Amendments also include simplification in other areas such as interim recognition of enactment of tax laws or rate changes and accounting for a franchise tax (or similar tax) that is partially based on income.
Our adoption of this standard on January 1, 2021 did not have a material impact on our consolidated financial statements.
Debt—Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity's Own Equity—Accounting for Convertible Instruments and Contracts in an Entity's Own Equity (ASU 2020-06)
The amendments in this ASU simplify the accounting for certain financial instruments with characteristics of liabilities and equity by reducing the number of accounting models for convertible debt and convertible preferred stock instruments. In addition, this ASU amended the derivative guidance for the “own stock” scope exception and certain aspects when calculating earnings per share. The amendments in this ASU affect entities that issue convertible instruments and/or contracts in an entity’s own equity.
The amendments in this ASU are effective on January 1, 2022, with early adoption permitted on January 1, 2021. Our early adoption of this standard on January 1, 2021 did not have a material impact on our consolidated financial statements.
Investments—Equity Securities (ASC Topic 321), Investments—Equity Method and Joint Ventures (ASC Topic 323), and Derivatives and Hedging (ASC Topic 815) (ASU 2020-01)
The amendments in this ASU affect all entities that apply the guidance in ASC Topics 321, 323, and 815 and (1) elect to apply the measurement alternative or (2) enter into a forward contract or purchase an option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting. The amendments clarify that forward or option contracts to purchase investments that will be accounted for using the equity method that do not meet the definition of a derivative under ASC Topic 815 are in the scope of ASC Topic 321. Therefore, when the purchase contract is considered a forward or option contract in the scope of this guidance, the investor would account for changes in the contract’s fair value prior to closing through earnings, unless the contract qualifies for the measurement alternative and it is elected. If the measurement alternative is elected, the change in the fair value of the contract would be reflected in earnings upon closing. In addition, if there are observable transactions or impairments before closing, the guidance would require remeasurement of the contract to fair value.
The guidance in this ASU also specifies that when applying the measurement alternative in ASC Topic 321, observable
transactions include those transactions by the investor that result in the application or discontinuation of the equity method
of accounting.
The amendments under this ASU are effective prospectively. Our adoption of this standard on January 1, 2021 did not have a material impact on our consolidated financial statements.
11


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 12 – Borrowings.
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 June 30,Six Months Ended June 30,
2021202020212020
Proceeds received from securitizations$3,147,912 $1,071,252 $6,396,831 $1,891,253 
Servicing fees collected (1)14,350 10,391 27,528 22,643 
Purchases of previously transferred assets, net of claims reimbursed
(6,780)(1,669)(10,019)(4,277)
$3,155,482 $1,079,974 $6,414,340 $1,909,619 
(1)