Goodwill

The table below sets forth the activity in goodwill by reportable segment (in thousands):



	Reportable Segments
	Servicing ⁽¹⁾		Originations		Reverse Mortgage			Total
Balance at December 31, 2014	$	471,182	$	47,747	$	56,539		$	575,468
Impairment	—		—		(56,539		)	(56,539		)
Balance at June 30, 2015	$	471,182	$	47,747	$	—		$	518,929

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(1) The Servicing, Insurance and ARM reporting units are components of the Servicing segment.

During the quarter ended June 30, 2015, the Reverse Mortgage reporting unit experienced operational challenges in its retail origination channel and experienced a reduction in opportunities for additional sub-servicing business. Additionally, more experience exists with respect to previously introduced product changes that deferred a significant amount of cash flow to future years. The initial impact of this deferral of cash flows to future years has been greater than originally anticipated by the Company. During the second quarter new financial assessment requirements for the HECM program went into effect and there were new mortgagee letters issued that could impact the likelihood of curtailment events in future periods. The impact of these more recent changes remains uncertain. At the same time, the Reverse Mortgage reporting unit continues to experience increasing liquidity requirements for Ginnie Mae buyouts and, based on recent developments, an increase in obligations surrounding curtailment related items existing at the time of the RMS acquisition. Collectively, the impact of the greater than anticipated principal deferral, the operational challenges and the liquidity requirements has resulted in reduced and delayed cash flows in the reverse mortgage business.

The Company has revised its multi-year forecast for the reverse mortgage business. The change in assumptions used in the revised forecast and the fair value estimates utilized in the impairment testing of the Reverse Mortgage reporting unit goodwill incorporated lower projected revenue as a result of the factors noted above. The revised forecast also reflected changes related to current market trends and other expectations about the anticipated operating results of the reverse mortgage business.

Based on these factors, the Company determined that there were interim impairment indicators that led to the need for a quantitative impairment analysis for goodwill purposes during the second quarter.

Based on the step one analysis, the Company concluded that the fair value of the Reverse Mortgage reporting unit (determined based on the income approach) was below its carrying value and therefore was required to perform a step two analysis to determine the implied fair value of goodwill. The Company concluded, based on the step two analysis, that the carrying amount of the reporting unit's goodwill exceeded its implied fair value and as a result, recorded a $56.5 million goodwill impairment charge in the second quarter of 2015 which is included in the goodwill impairment line item on the consolidated statements of comprehensive income (loss).

The Company completed a qualitative assessment of any potential goodwill impairment as of June 30, 2015 for all other reporting units. Additionally, similar to 2014 the Company's share price continues to experience volatility. As a result, the Company reassessed its market capitalization based on its average market price relative to the aggregate fair value of its reporting units. The Company believes that based on its qualitative assessment the excess fair value in its reporting units is temporary in nature due to certain company specific factors, regulatory challenges and market developments in the Company's industry. The Company is beginning its annual budget process which will be the basis for completing its annual goodwill impairment test during the fourth quarter. Declines in expected future cash flows, reduction in expected future growth rates, or an increase in the risk-adjusted discount rate used to estimate fair value may result in a determination that an impairment adjustment is required resulting in a charge to earnings in a future period.

The Company will continue to evaluate goodwill on an annual basis and whenever events or changes in circumstances, such as significant adverse changes in business climate or operating results, new regulatory requirements and/or changes in management’s business strategy, indicate that there may be a potential indicator of impairment.