Servicing Rights Related Liabilities

Servicing rights related liabilities consist of the following (in thousands):



	December 31,
	2016		2015
MSR liabilities related to NRM sales	$	1,902	$	—
Excess servicing spread liabilities	—		100,111
Servicing rights financing	—		16,889
Total servicing rights related liabilities	$	1,902	$	117,000

MSR Liabilities Related to NRM Sales

The Company has a recapture agreement relating to certain subservicing performed on behalf of NRM, including subservicing relating to the servicing rights sold to NRM as discussed further in Note 4. NRM is entitled to the servicing right resulting from the refinancing by the Company of a loan in the servicing portfolio previously transferred to NRM. As transfer of the servicing rights on the refinanced loans has not yet occurred, the Company records a MSR liability relating to the MSR that will ultimately be transferred to NRM. The Company will transfer the MSR upon investor approval.

Excess Servicing Spread Liabilities

The Company sold to WCO portions of the excess servicing spread associated with certain mortgage loans serviced by the Company for $46.8 million and $75.4 million in November 2015 and July 2014, respectively. The Company retained all ancillary income associated with servicing the portfolio in addition to the receipt of a base servicing fee. The Company continued to be the servicer of the residential loans and provided all servicing functions, including responsibility to make advances. Payments on the excess servicing spread liabilities were based on future servicing fees received from residential loans underlying the servicing rights. Interest expense on the excess servicing spread liabilities, which represents the accretion of fair value, was $12.1 million and $9.0 million for the years ended December 31, 2016 and 2015, respectively. There was no contractual interest rate on the excess servicing spread liabilities.

Contemporaneous with the agreement relating to the sale of the excess servicing spread in November 2015, the Company entered into a recapture agreement with WCO entitling WCO to the excess servicing spread on the subsequent refinancing by the Company of a loan in the original excess servicing spread portfolio. The new or replacement loan will be governed by the same terms set forth in the related excess servicing spread sale agreement. If the Company is unable to deliver, or WCO is unable to accept delivery of, the excess servicing spread associated with the new or replacement loan, then, in each case, the Company is obligated to “repurchase” the excess servicing spread related to the refinanced loan at the excess spread recapture price, as defined in the recapture agreement, upon the request of WCO.

During the fourth quarter of 2016, the Company sold NRM the servicing rights relating to such excess servicing spread, with subservicing retained by the Company. In connection with these transactions, the Company derecognized the excess servicing spread liabilities. Refer to Note 4 for additional information on these transactions.

Servicing Rights Financing

In November 2015, the Company sold servicing rights to WCO for a sales price of $17.8 million. In May 2016, the Company sold additional MSR to WCO for a sales price of $27.9 million. The Company also entered into an agreement to subservice the related residential loans. As a result, the Company continued to be the servicer of the residential loans and provided all servicing functions, including responsibility to make advances, and receives a subservicing fee for such services. The Company retained all ancillary income associated with servicing the portfolio. WCO was required to reimburse the Company for advances within 30 days of invoice. Payments on the servicing rights financing were based on future servicing fees received from residential loans underlying the servicing rights. Interest expense on the service rights financing, which represents the accretion of fair value, was $4.2 million and $0.3 million for the years ended December 31, 2016 and 2015, respectively. There was no contractual interest rate on the service rights financing.

The Company had a recapture agreement relating to certain subservicing performed on behalf of WCO, including subservicing relating to the servicing rights sold to WCO during the years ended December 31, 2016 and 2015, whereby WCO is entitled to the servicing right resulting from the refinancing by the Company of a loan in the original servicing portfolio. The new or replacement loan will be governed by the same terms set forth in the related subservicing agreement. In the event the Company originates a new loan that is not in compliance with the recapture agreement or fails to deliver the new loan to Fannie Mae or Freddie Mac as soon as commercially reasonable, the Company, upon WCO's demand, was obligated to repurchase the servicing right related to the original loan at the servicing rights recapture price, as defined in the recapture agreement, or replace the servicing rights with another loan, subject to mutually agreed upon terms.

During the fourth quarter of 2016, in connection with the sale by WCO of substantially all of its assets, including servicing rights which were previously sold by the Company to WCO and accounted for as secured borrowings, the Company derecognized the servicing rights financing. Refer to Note 4 for additional information on these transactions.