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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, 2022
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 May 2, 2022: 9,250,500 shares




OCWEN FINANCIAL CORPORATION
FORM 10-Q
TABLE OF CONTENTS
 
  PAGE
 
4
   
Consolidated Balance Sheets at March 31, 2022 and December 31, 2021
   
   
   
 
   
   

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, 2021 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 disruption in the financial markets and in commercial activity generally related to COVID-19, international events including the conflict in Ukraine, changes in monetary and fiscal policy, and other sources of instability;
the impacts of employment disruption, inflation, 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 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;
our ability to reach an agreement to upsize MAV and the timing and terms of any such agreement;
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 extent to which we will be able to execute call rights transactions, and whether such transactions will generate the returns anticipated;
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, including an increase in severe weather events resulting in property damage and financial hardship to our borrowers;
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 improve our financial performance through cost re-engineering initiatives and other actions;
our ability to maintain and increase market share in our target markets, including in forward and reverse servicing;
our ability to reduce expenses in our mortgage origination business in response to market adjustments;
uncertainty related to our long-term relationship with New Residential Investment Corp. (NRZ), our largest servicing client;
uncertainty 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);
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;
2


the costs of complying with the terms of our settlements with regulatory agencies and disputes as to whether we have fully complied;
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;
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 the law as well as changes in the interpretation of law 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 current or future 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 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, or our vendors’, information technology or other security systems or breach of our, or our vendors’, 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;
increased difficulty recruiting and retaining existing or new senior managers and key employees;
increased compensation and benefits expense as a result of rising inflation and labor market trends;
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;
uncertainty relating to the likely replacement of the London Interbank Offered Rate (LIBOR) with the Secured Overnight Financing Rate (SOFR) and its impact on our credit arrangements;
our ability to effectively transform our operations in response to changing business needs, including our ability to do so without unanticipated adverse tax consequences;
increasingly frequent and costly disruptions to our operations as a result of severe weather events;
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, 2021 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.


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)
 March 31, 2022December 31, 2021
Assets  
Cash and cash equivalents$268,691 $192,792 
Restricted cash ($8,800 and $9,759 related to variable interest entities (VIEs))
76,294 70,654 
Mortgage servicing rights (MSRs), at fair value2,323,281 2,250,147 
Advances, net ($578,611 and $587,059 related to VIEs)
729,973 772,433 
Loans held for sale ($716,024 and $917,534 carried at fair value) ($241,676 and $462,144 related to VIEs)
725,051 928,527 
Loans held for investment, at fair value ($7,722 and $7,879 related to VIEs)
7,459,277 7,207,641 
Receivables, net213,460 180,707 
Investment in equity method investee34,925 23,297 
Premises and equipment, net20,573 13,674 
Other assets ($9,513 and $21,886 carried at fair value) ($1,066 and $1,530 related to VIEs)
446,284 507,250 
Total assets$12,297,809 $12,147,123 
Liabilities and Equity  
Liabilities  
Home Equity Conversion Mortgage-Backed Securities (HMBS) related borrowings, at fair value$7,118,844 $6,885,022 
Other financing liabilities, at fair value ($319,009 and $238,144 due to related party) ($7,722 and $7,879 related to VIEs )
872,036 804,963 
Advance match funded liabilities (related to VIEs)497,310 512,297 
Mortgage loan warehouse facilities959,121 1,085,076 
MSR financing facilities, net892,635 900,760 
Senior notes, net ($224,204 and $222,242 due to related party)
617,132 614,797 
Other liabilities ($12,916 and $3,080 carried at fair value)
806,601 867,514 
Total liabilities11,763,679 11,670,429 
Commitments and Contingencies (Notes 20 and 21)
Stockholders’ Equity  
Common stock, $.01 par value; 13,333,333 shares authorized; 9,243,658 and 9,208,312 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively.
92 92 
Additional paid-in capital591,811 592,572 
Accumulated deficit(55,522)(113,604)
Accumulated other comprehensive loss, net of income taxes(2,251)(2,366)
Total stockholders’ equity534,130 476,694 
Total liabilities and stockholders’ equity$12,297,809 $12,147,123 

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 March 31,
20222021
Revenue
Servicing and subservicing fees$212,623 $171,738 
Reverse mortgage revenue, net13,110 21,826 
Gain (loss) on loans held for sale, net(3,206)5,721 
Other revenue, net9,036 8,309 
Total revenue231,563 207,594 
MSR valuation adjustments, net62,632 21,208 
Operating expenses
Compensation and benefits68,003 68,281 
Technology and communications14,912 13,143 
Servicing and origination 14,167 27,470 
Professional services12,167 17,322 
Occupancy and equipment10,067 8,852 
Other expenses 7,702 4,561 
Total operating expenses127,018 139,629 
Other income (expense)
Interest income7,112 3,936 
Interest expense(37,875)(28,452)
Pledged MSR liability expense(86,897)(37,850)
Earnings of equity method investee12,003  
Loss on extinguishment of debt(33)(15,458)
Other, net(162)290 
Total other income (expense), net(105,852)(77,534)
Income before income taxes61,325 11,639 
Income tax expense (benefit)3,243 3,096 
Net income (loss)$58,082 $8,543 
Earnings per share
Basic$6.30 $0.98 
Diluted$6.01 $0.96 
Weighted average common shares outstanding
Basic9,215,122 8,688,009 
Diluted9,661,567 8,877,492 

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
(Dollars in thousands)
 For the Three Months Ended March 31,
 20222021
Net income (loss)$58,082 $8,543 
Other comprehensive income (loss), net of income taxes:  
Change in unfunded pension plan obligation liability
91 (367)
Other24 24 
Comprehensive income (loss)$58,197 $8,200 



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 MARCH 31, 2022 AND 2021
(Dollars in thousands)


 Common StockAdditional Paid-in Capital(Accumulated Deficit) Retained EarningsAccumulated Other Comprehensive Income (Loss), Net of Income TaxesTotal
 SharesAmount
Balance at December 31, 20219,208,312 $92 $592,572 $(113,604)$(2,366)$476,694 
Net income— — — 58,082 — 58,082 
Equity-based compensation and other35,346  (761)— — (761)
Other comprehensive income, net of income taxes— — — — 115 115 
Balance at March 31, 20229,243,658 $92 $591,811 $(55,522)$(2,251)$534,130 
Balance at December 31, 20208,687,750 $87 $556,062 $(131,682)$(9,095)$415,372 
Net income— — — 8,543 — 8,543 
Issuance of common stock warrants, net of issuance costs— — 15,753 — — 15,753 
Equity-based compensation and other13,780  685 — — 685 
Other comprehensive loss, net of income taxes— — — — (343)(343)
Balance at March 31, 20218,701,530 $87 $572,500 $(123,139)$(9,438)$440,010 

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

7


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the Three Months Ended March 31,
20222021
Cash flows from operating activities  
Net income$58,082 $8,543 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
MSR valuation adjustments, net(62,632)(21,208)
Loss on sale of MSRs, net100 25 
Provision for bad debts4,147 6,545 
Depreciation2,602 2,859 
Amortization of debt issuance costs and discount2,539 1,624 
Equity-based compensation expense(143)863 
Loss on extinguishment of debt33 15,458 
Loss on valuation of Pledged MSR financing liability55,459 1,551 
Net loss (gain) on valuation of loans held for investment and HMBS-related borrowings
3,132 (6,513)
Earnings of equity method investee(12,003) 
Loss (gain) on loans held for sale, net3,206 (5,721)
Origination and purchase of loans held for sale (3,472,610)(3,333,999)
Proceeds from sale and collections of loans held for sale 3,600,893 3,179,487 
Changes in assets and liabilities:  
Decrease in advances, net27,299 38,704 
Increase in receivables and other assets, net (12,017)(2,447)
Decrease in other liabilities(12,812)(13,245)
Other, net799 (2,833)
Net cash provided by (used in) operating activities186,074 (130,307)
Cash flows from investing activities  
Origination of loans held for investment (620,237)(326,735)
 Acquisition of loans held for investment, net (3,634) 
Principal payments received on loans held for investment
518,974 315,105 
Purchase of MSRs(64,297)(41,556)
Proceeds from sale of MSRs 134,284  
Additions to premises and equipment(1,411)(137)
Purchase of real estate(197)(2,165)
Proceeds from sale of real estate2,058 2,306 
Investment in equity method investee(16,500) 
Distribution of capital from equity method investee16,875  
Other, net401 350 
Net cash used in investing activities(33,684)(52,832)
Cash flows from financing activities  
Repayment of advance match funded liabilities, net(14,987)(30,851)
Repayment of other financing liabilities(28,423)(18,566)
Proceeds from (repayment of) mortgage loan warehouse facilities, net(125,956)157,720 
Proceeds from MSR financing facilities114,220 64,098 
Repayment of MSR financing facilities(121,048)(44,661)
Repayment of Senior notes (319,156)
Proceeds from issuance of Senior notes and warrants 572,944 
Repayment of senior secured term loan (SSTL) borrowings (188,700)
Payment of debt issuance costs(948)(6,795)
Proceeds from sale of MSRs accounted for as secured financing39,772  
Proceeds from sale of Home Equity Conversion Mortgages (HECM, or reverse mortgages) accounted for as a financing (HMBS-related borrowings)
583,899 287,830 
Repayment of HMBS-related borrowings(517,380)(311,562)
Net cash provided by (used in) financing activities(70,851)162,301 
Net increase (decrease) in cash, cash equivalents and restricted cash81,539 (20,838)
Cash, cash equivalents and restricted cash at beginning of year263,446 357,265 
Cash, cash equivalents and restricted cash at end of period$344,985 $336,427 
Supplemental non-cash investing and financing activities:  
Loans held for investment acquired at fair value$224,052 $ 
HMBS-related borrowings assumed at fair value(219,509) 
Holdback(909) 
Net cash paid to acquire loans held for investment$3,634 $ 
Recognition of gross right-of-use asset and lease liability:
Right-of-use asset$8,097 $292 
Lease liability8,097 292 
Transfers of loans held for sale to real estate owned (REO)358 2,525 
Transfer from loans held for investment to loans held for sale 3,138 901 
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, 2022March 31, 2021
Cash and cash equivalents$268,691 $259,108 
Restricted cash and equivalents:
Debt service accounts13,119 15,930 
Other restricted cash63,175 61,389 
Total cash, cash equivalents and restricted cash reported in the statements of cash flows$344,985 $336,427 
The accompanying notes are an integral part of these unaudited consolidated financial statements

8


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(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 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), 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 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 5,800 employees at March 31, 2022 of which approximately 3,300 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 66% were engaged in supporting our loan servicing operations as of March 31, 2022.
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, 2022 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2022. 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, 2021.

9


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
Earnings Per Share (ASC 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (ASC 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force) (ASU 2021-04)
The amendments in this ASU provide the following guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic: (1) treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument, (2) measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange and (3) recognize the effect of a modification or an exchange of a freestanding equity-classified written call option to compensate for goods or services in accordance with the guidance in ASC 718. In a multiple-element transaction (for example, one that includes both debt financing and equity financing), the total effect of the modification should be allocated to the respective elements in the transaction.
Our adoption of this standard on January 1, 2022 did not have a material impact on our consolidated financial statements.
Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04)
This standard provides for optional expedients and other guidance regarding the accounting related to modifications of contracts, hedging relationships and other transactions affected by the phase-out of certain tenors of the London Inter-bank Offered Rate (LIBOR) by the end of 2021 (or June 30, 2023 for U.S. dollar LIBOR of certain tenors). This guidance is effective upon issuance in March 2020 through December 31, 2022 and allows for retrospective application to contract modifications as early as January 1, 2020. We elected to retrospectively adopt this ASU as of January 1, 2020 which resulted in no immediate impact on our consolidated financial statements. Although we do not have any hedge accounting relationships, many of our debt facilities and loan agreements incorporate LIBOR as the referenced interest rate. Some of these facilities and loan agreements either matured prior to the end of 2021 or have terms in place that provide for an alternative to LIBOR upon its phase-out. We do not anticipate that this standard will have a material impact on our consolidated financial statements.
Accounting Standards Issued but Not Yet Adopted
Business Combinations (ASC 805) - Accounting for Contract Assets and Contract Liabilities (ASU 2021-08)
The amendments in this Update apply to all entities that enter into a business combination within the scope of Subtopic 805-10, Business Combinations— Overall. The amendments in this ASU are issued to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the following: (1) recognition of an acquired contract liability and (2) payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in this ASU require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied ASC 606 to determine what to record for the acquired revenue contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements (if the acquiree prepared financial statements in accordance with generally accepted accounting principles (GAAP)).
The amendments in this ASU are effective for us on January 1, 2023. We do not anticipate that the adoption of this standard will have a material impact on our consolidated financial statements.
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
10


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.
From time to time, we may acquire beneficial interests issued in connection with mortgage-backed securitizations where we may also be the master and/or primary servicer. These beneficial interests consist of subordinate and residual interests acquired from third-parties in market transactions. We consolidate the VIE when we conclude we are the primary beneficiary.
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,
20222021
Proceeds received from securitizations$3,588,272 $3,248,918 
Servicing fees collected (1)21,669 13,178 
Purchases of previously transferred assets, net of claims reimbursed
(2,030)(3,239)
$3,607,911 $3,258,857 
(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 $45.8 million and $34.3 million during the three months ended March 31, 2022 and 2021, respectively. We securitize forward and reverse residential mortgage loans involving the GSEs and loans insured by the FHA or VA through Ginnie Mae.
Certain obligations arise from the agreements associated with our transfers of loans. Under these agreements, we may be obligated to repurchase the loans, or otherwise indemnify or reimburse the investor or insurer for losses incurred due to material breach of contractual representations and warranties.
The following table presents the carrying amounts of our assets that relate to our continuing involvement with forward loans that we have transferred with servicing rights retained as well as an estimate of our maximum exposure to loss including the UPB of the transferred loans:
March 31, 2022December 31, 2021
Carrying value of assets
MSRs, at fair value$449,129 $360,830 
Advances103,416 151,166 
UPB of loans transferred (1)34,717,859 31,864,769 
Maximum exposure to loss$35,270,404 $32,376,765 
(1)Includes $5.5 billion and $5.6 billion of loans delivered to Ginnie Mae as of March 31, 2022 and December 31, 2021, respectively, and includes loan modifications delivered through the Ginnie Mae Early Buyout Program (EBO).
At March 31, 2022 and December 31, 2021, 3.0% and 3.6%, 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 10.7% and 12.0%, 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 or we sell the loans to third parties with servicing rights released. We have determined that loan transfers in the HMBS program do not meet the definition of a participating interest and the servicing requirements require the issuer/servicer to absorb some level of interest rate risk, cash flow timing risk and incidental credit risk. As a result, the transfers of the HECM loans do not qualify for sale accounting, and therefore, we account for these transfers as financings. Under this accounting treatment, the HECM loans are
11


classified as Loans held for investment, at fair value, on our unaudited consolidated balance sheets. Holders of participating interests in the HMBS have no recourse against the assets of Ocwen, except with respect to standard representations and warranties and our contractual obligation to service the HECM loans and the HMBS.
Financing of Loans Held for Sale using SPEs
We entered into a warehouse mortgage loan financing facility with a third-party lender involving an SPE (trust). This facility is structured as a gestation repurchase facility whereby Agency mortgage loans are transferred by PMC to the trust for collateralization purposes. We have designed the trust to facilitate the third party financing facility and have determined that the trust is a VIE for which we are the primary beneficiary. Therefore, we have included the trust in our consolidated financial statements.
The table below presents the carrying value and classification of the assets and liabilities of the loans held for sale financing facility:
March 31, 2022December 31, 2021
Mortgage loans (Loans held for sale, at fair value)$241,676 $462,144 
Outstanding borrowings (Mortgage loan warehouse facilities) (1)280,271 459,344 
(1) Additional cash collateral was posted at March 31, 2022 (reported within restricted cash) due to timing of loan sales.
Financings of Advances using SPEs
Match funded advances, i.e., advances that are pledged as collateral to our advance facilities, result from our transfers of residential loan servicing advances to SPEs in exchange for cash. We consolidate these SPEs because we have determined that we are the primary beneficiary of the SPEs. Through wholly-owned subsidiaries we hold the sole equity interests in the SPEs and service the mortgage loans that generate the advances. These SPEs issue debt supported by collections on the transferred advances, and we refer to this debt as Advance match funded liabilities. Holders of the debt issued by the SPEs have recourse only to the assets of the SPE for satisfaction of the debt.
The table below presents the carrying value and classification of the assets and liabilities of the advance financing facilities:
March 31, 2022December 31, 2021
Match funded advances (Advances, net)$578,611 $587,059 
Debt service accounts (Restricted cash)6,574 7,687 
Unamortized deferred lender fees (Other assets)872 1,305 
Prepaid interest (Other assets)194 225 
Advance match funded liabilities497,310 512,297 
MSR Financings using SPEs
We established two SPEs (trusts) in connection with a third-party financing facility secured by certain Fannie Mae and Freddie Mac MSRs (Agency MSRs). We determined that the trusts are VIEs for which we are the primary beneficiary. Therefore, we have included the trusts in our consolidated financial statements. We have the power to direct the activities of the VIEs that most significantly impact the VIE’s economic performance given that we are the servicer of the Agency MSRs that result in cash flows to the trusts. In addition, we have designed the trusts at inception to facilitate the third-party funding facility under which we have the obligation to absorb the losses of the VIEs that could be potentially significant to the VIEs.
The table below presents the carrying value and classification of the assets and liabilities of the Agency MSR financing facility:
March 31, 2022December 31, 2021
MSRs pledged (MSRs, at fair value)$582,076 $630,605 
Unamortized deferred lender fees (Other assets)748 1,495 
Debt service account (Restricted cash)103 104 
Outstanding borrowings (MSR financing facilities, net) 282,351 317,523 
In 2019, we issued Ocwen Excess Spread-Collateralized Notes, Series 2019-PLS1 Class A (PLS Notes) secured by certain of PMC’s private label MSRs (PLS MSRs). On March 15, 2022, we replaced the existing PLS Notes with a new series of notes,
12


Ocwen Excess Spread-Collateralized Notes, Series 2022-PLS1 Class A, at an initial principal amount of $75.0 million. An SPE, PMC PLS ESR Issuer LLC (PLS Issuer), was established in this connection as a wholly owned subsidiary of PMC. Ocwen guarantees the obligations of PLS Issuer under the facility.
We determined that PLS Issuer is a VIE for which we are the primary beneficiary. Therefore, we have included PLS Issuer in our consolidated financial statements. We have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance given that we are the servicer of the MSRs that result in cash flows to PLS Issuer. In addition, PMC has designed PLS Issuer at inception to facilitate the funding for general corporate purposes. Separately, in return for the participation interests, PMC received the proceeds from issuance of the PLS Notes. PMC is the sole member of PLS Issuer, thus PMC has the obligation to absorb the losses of the VIE that could be potentially significant to the VIE.
The table below presents the carrying value and classification of the assets and liabilities of the PLS Notes facility:
March 31, 2022December 31, 2021
MSRs pledged (MSRs, at fair value)$112,992 $99,833 
Debt service account (Restricted cash)2,123 1,968 
Outstanding borrowings (MSR financing facilities, net) 72,838 41,663 
Unamortized debt issuance costs (MSR financing facilities, net) 996 413 
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, 2022December 31, 2021
 LevelCarrying ValueFair ValueCarrying ValueFair Value
Financial assets     
Loans held for sale
Loans held for sale, at fair value (a) (e)3, 2$716,024 $716,024 $917,534 $917,534 
Loans held for sale, at lower of cost or fair value (b)
39,027 9,027 10,993 10,993 
Total Loans held for sale$725,051 $725,051 $928,527 $928,527 
Loans held for investment
Loans held for investment - Reverse mortgages (a) 3$7,451,555 $7,451,555 $7,199,762 $7,199,762 
Loans held for investment - Restricted for securitization investors (a)
37,722 7,722 7,879 7,879 
Total loans held for investment
$7,459,277 $7,459,277 $7,207,641 $7,207,641 
13


  March 31, 2022December 31, 2021
 LevelCarrying ValueFair ValueCarrying ValueFair Value
Advances, net (c)
3$729,973 $729,973 $772,433 $772,433 
Receivables, net (c)3213,460 213,460 180,707 180,707 
Mortgage-backed securities (a)3  1 1 
Corporate bonds (a)2211 211 211 211 
Financial liabilities:     
Advance match funded liabilities (c)3$497,310 $495,880 $512,297 $511,994 
Financing liabilities:
HMBS-related borrowings (a)3$7,118,844 $7,118,844 $6,885,022 $6,885,022 
Other financing liabilities
Financing liability -Transferred MSR liability (a) 3864,315 864,315 797,084 797,084 
Financing liability - Owed to securitization investors (a)37,721 7,721 7,879 7,879 
Total Other financing liabilities872,036 872,036 804,963 804,963 
 
Mortgage loan warehouse facilities (c)3959,121 959,121 1,085,076 1,085,076 
MSR financing facilities (c) (d)3892,635 870,538 900,760 873,820 
Senior notes:
PMC Senior secured notes due 2026 (c) (d)2392,928 374,528 392,555 413,472 
OFC Senior secured notes due 2027 (c) (d)3224,204 236,272 222,242 261,455 
Total Senior notes$617,132 $610,800 $614,797 $674,927 
Derivative financial instrument assets (liabilities)
     
Interest rate lock commitments (IRLCs) (a) 3$5,673 $5,673 $18,085 $18,085 
Forward trades - Loans held for sale (a)
18 8 364 364 
TBA / Forward mortgage-backed securities (MBS) trades (a)1(3,952)(3,952)(240)(240)
Interest rate swap futures (a)1  1,734 1,734 
Option contracts (a)2(4,666)(4,666)(