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Warehouse Borrowings
12 Months Ended
Dec. 31, 2016
Debt Disclosure [Abstract]  
Warehouse Borrowings Disclosure
Warehouse Borrowings
The Company's subsidiaries enter into master repurchase agreements with lenders providing warehouse facilities. The warehouse facilities are used to fund the origination and purchase of residential loans, as well as the repurchase of certain HECMs and real estate owned from Ginnie Mae securitization pools. The facilities had an aggregate funding capacity of $2.5 billion at December 31, 2016 and are secured by certain residential loans and real estate owned. At December 31, 2016, the interest rates on the facilities were primarily based on LIBOR plus between 2.10% and 3.13%, and have various expiration dates through February 2018. The facilities had a weighted-average stated interest rate of 3.27% and 2.83% at December 31, 2016 and 2015, respectively. At December 31, 2016, $1.1 billion of the outstanding borrowings were secured by $1.2 billion in originated and purchased residential loans and $104.8 million of outstanding borrowings were secured by $118.3 million in repurchased HECMs and real estate owned.
One of the warehouse facilities, utilized to finance the origination of reverse loans, and which has total and uncommitted capacity of $125.0 million matured on February 11, 2017. Borrowings under this facility were fully repaid by the maturity date.
Borrowings utilized to fund the origination and purchase of residential loans are due upon the earlier of sale or securitization of the loan or within 60 to 90 days of borrowing. On average, the Company sells or securitizes these loans approximately 20 days from the date of borrowing. Borrowings utilized to repurchase HECMs and real estate owned are due upon the earlier of receipt of claim proceeds from HUD or receipt of proceeds from liquidation of the related real estate owned. In any event, borrowings associated with repurchased HECMs are due within 364 days of borrowing while borrowings relating to repurchased real estate owned are due, depending on the agreement, within 180 days or 364 days. In accordance with the terms of the agreements, the Company may be required to post cash collateral should the fair value of the pledged assets decrease below certain contractual thresholds. The Company is exposed to counterparty credit risk associated with the repurchase agreements in the event of non-performance by the counterparties. The amount at risk during the term of the repurchase agreement is equal to the difference between the amount borrowed by the Company and the fair value of the pledged assets. The Company mitigates this risk through counterparty monitoring procedures, including monitoring of the counterparties' credit ratings and review of their financial statements.
All of the Company’s master repurchase agreements contain customary events of default and covenants, the most significant of which are financial covenants. Financial covenants most sensitive to the Company’s operating results and financial position are minimum tangible net worth requirements, indebtedness to tangible net worth ratio requirements, and minimum liquidity and profitability requirements.
The three Ditech Financial master repurchase agreements that contain profitability covenants were amended to allow for a net loss under such covenants for the quarters ended December 31, 2016 and March 31, 2017. Without these amendments, Ditech Financial would not have been in compliance with these covenants for the quarter ended December 31, 2016. These amendments, amongst other things, also decrease the Company's advance rate under certain facilities, and require the Company to maintain additional cash in a deposit account for one of the facilities. This cash is included in restricted cash on the consolidated balance sheets.
During the quarter ended March 31, 2016, one of RMS’s master repurchase agreements was amended to allow for a lower adjusted EBITDA (as determined pursuant to this agreement) for each of the first quarter and second quarter of 2016 under such agreement’s profitability covenant. In August 2016, an additional amendment was executed to allow for a lower adjusted EBITDA for each of the third quarter and fourth quarter of 2016 under such agreement's profitability covenant.
As a result of Ditech and RMS obtaining these amendments, the Company's subsidiaries were in compliance with all financial covenants relating to master repurchase agreements at December 31, 2016.
The Company's subsidiaries are dependent on the ability to secure warehouse facilities on acceptable terms and to renew, replace or resize existing facilities as they expire. If the Company fails to comply with the terms of an agreement that results in an event of default or breach of covenant without obtaining a waiver or amendment, the Company may be subject to termination of future funding, enforcement of liens against assets securing the respective facility, repurchase of assets pledged in a repurchase agreement, acceleration of outstanding obligations, or other adverse actions. The Company intends to renew, replace, or extend its facilities and may seek waivers or amendments in the future, if necessary. The Company has plans in place to strengthen its operating results under its new leadership team, including transformation of its originations business as well as cost reduction efforts and efficiency initiatives; however, there can be no assurance that these or others actions will be successful.