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Transactions with NRM
12 Months Ended
Dec. 31, 2016
Transfers and Servicing [Abstract]  
Transactions With NRM Disclosure
Transactions with NRM
On August 8, 2016, Ditech Financial and NRM executed the NRM Flow and Bulk Agreement whereby Ditech Financial agreed to sell to NRM all of Ditech Financial’s right, title and interest in mortgage servicing rights with respect to a pool of mortgage loans, with subservicing retained. The NRM Flow and Bulk Agreement provides that, from time to time, Ditech Financial may sell additional MSR to NRM in bulk or as originated or acquired on a flow basis, subject in each case to the parties agreeing on price and certain other terms.
During 2016, in various bulk sale transactions under the NRM Flow and Bulk Agreement, the Company sold to NRM mortgage servicing rights relating to mortgage loans having an aggregate unpaid principal balance of $59.8 billion as of the applicable closing dates of such transactions, with subservicing retained. As of December 31, 2016, the Company had received $250.0 million in cash proceeds relating to such sales, which proceeds do not include certain holdback amounts relating to such sales that it expects to be paid to the Company over time. In addition, the Company has recently begun to sell NRM, on a flow basis and with subservicing retained, MSR relating to certain mortgage loans that it originates. NRM also acquired substantially all of WCO’s MSR portfolio in the fourth quarter of 2016, which consisted of MSR relating to mortgage loans having an aggregate unpaid principal balance of $9.8 billion as of the applicable closing dates, which was serviced by the Company and included $4.8 billion related to MSR that the Company previously accounted for as secured borrowings. Ditech Financial subservices these MSR under the NRM Subservicing Agreement.
The initial term of the NRM Flow and Bulk Agreement will expire on the third anniversary of the effective date and shall be renewed for successive one-year terms thereafter unless either party provides written notice to the other party of its election not to renew. Each party to the NRM Flow and Bulk Agreement also has termination rights upon the occurrence of certain events and NRM can terminate this agreement at any time on 30 days' notice. In connection with Ditech Financial’s entry into the NRM Flow and Bulk Agreement, the Company entered into a performance and payment guaranty whereby the Company guarantees performance of all obligations and all payments required by Ditech Financial under the NRM Flow and Bulk Agreement.
In addition, on August 8, 2016, Ditech Financial and NRM entered into the NRM Subservicing Agreement whereby Ditech Financial acts as subservicer for the mortgage loans whose MSR are sold by Ditech Financial to NRM under the NRM Flow and Bulk Agreement and for other mortgage loans as may be agreed upon by Ditech Financial and NRM from time to time, in exchange for a subservicing fee. Under the NRM Subservicing Agreement and a related agreement, Ditech Financial will perform all daily servicing obligations on behalf of NRM with respect to the MSR that are serviced by Ditech Financial pursuant to the terms of the NRM Subservicing Agreement, including collecting payments from borrowers and offering refinancing options to borrowers for purposes of minimizing portfolio runoff.
The initial term of the NRM Subservicing Agreement will expire on the first anniversary of the effective date thereof and will be automatically renewed for successive one-year terms thereafter. Ditech Financial may terminate the NRM Subservicing Agreement without cause at the end of the initial one-year term or at the end of any subsequent one-year renewal term by providing notice to NRM at least 120 days prior to the end of the applicable term. If Ditech Financial elects to terminate the NRM Subservicing Agreement without cause, Ditech Financial will not be entitled to receive any deconversion fee, will be responsible for certain servicing transfer costs and will owe NRM a transfer fee if such termination occurs within five years from the effective date of the agreement. Ditech Financial may also terminate the NRM Subservicing Agreement immediately for cause upon the occurrence of certain events, including, without limitation, any failure by NRM to remit payments (subject to a cure period), certain bankruptcy or insolvency events of NRM, NRM ceasing to be an approved servicer in good standing with Fannie Mae or Freddie Mac (unless caused by Ditech Financial) and any failure by NRM to perform, in any material respect, its obligations under the agreement (subject to a cure period). Upon any termination of the NRM Subservicing Agreement by Ditech Financial for cause, NRM will owe Ditech Financial a deconversion fee and be responsible for certain servicing transfer costs.