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Transactions with NRM
12 Months Ended
Dec. 31, 2018
Transfers and Servicing [Abstract]  
Transactions With NRM Disclosure
Transactions with NRM
NRM Flow and Bulk Agreement
On August 8, 2016, the Company and NRM executed the NRM Flow and Bulk Agreement whereby the Company agreed to sell to NRM all of the Company’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, the Company 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.
On January 17, 2018, the Company agreed to sell to NRM MSR relating to mortgage loans having an aggregate unpaid principal balance of approximately $11.3 billion as of such sale date, with subservicing retained, and received approximately $90.4 million in cash proceeds from NRM as partial consideration for this MSR sale. The Company used 80% of such cash proceeds to repay borrowings under the 2013 Credit Agreement and used the remaining cash proceeds for general corporate purposes. During June 2018, under an agreement similar to the NRM Flow and Bulk Agreement, the Company agreed to sell to New Penn Financial, which became an affiliate of NRM when acquired by NRM on July 3, 2018, MSR relating to mortgage loans having an aggregate unpaid principal balance of approximately $4.7 billion as of the sale date, with servicing released, and received approximately $56.7 million in cash proceeds from NRM as partial consideration for the MSR sale. Since entering into the NRM Flow and Bulk Agreement and through December 31, 2018, in various bulk transactions under the NRM Flow and Bulk Agreement and a similar agreement, the Company has sold MSR to NRM relating to mortgage loans having an aggregate unpaid principal balance of $75.8 billion as of the applicable closing dates of such transactions. As of December 31, 2018, the Company has received $397.1 million in cash proceeds relating to such sales, which proceeds do not include certain holdback amounts relating to such sales that are expected to be paid to the Company over time. For the year ended December 31, 2018, the Company received $34.5 million in cash proceeds relating to these holdback amounts and at December 31, 2018 and 2017 had a servicing rights holdback receivable, net from NRM of $10.8 million and $31.3 million, respectively, which is recorded in receivables, net on the consolidated balance sheets.
The Company also transferred MSR to NRM under flow transactions relating to mortgage loans consisting entirely of co-issue loans with an aggregate unpaid principal balance of $3.6 billion and $469.5 million for the period from February 10, 2018 through December 31, 2018 and the period from January 1, 2018 through February 9, 2018, respectively. For the year ended December 31, 2017, the Company transferred MSR to NRM under flow transactions relating to mortgage loans with an aggregate unpaid principal balance of $7.6 billion, which included co-issue loans with an aggregate unpaid principal balance of $6.4 billion. These transfers included recapture activities of generally non-NRM portfolio serviced loans with an aggregate unpaid balance of $1.6 billion and $236.9 million for the period from February 10, 2018 through December 31, 2018 and the period from January 1, 2018 through February 9, 2018, respectively. In addition, these transfers generated revenues of $44.1 million, $3.8 million and $61.8 million for the period from February 10, 2018 through December 31, 2018, the period from January 1, 2018 through February 9, 2018 and the year ended December 31, 2017, respectively, which are recorded in net gains on sales of loans on the consolidated statements of comprehensive income (loss).
NRM Subservicing Agreement
On August 8, 2016, the Company and NRM entered into the NRM Subservicing Agreement whereby the Company acts as subservicer for the mortgage loans whose MSR are sold by the Company to NRM under the NRM Flow and Bulk Agreement and for other mortgage loans as may be agreed upon by the Company and NRM from time to time, in exchange for a subservicing fee. Under the NRM Subservicing Agreement and a related agreement, the Company performs all daily servicing obligations on behalf of NRM, including collecting payments from borrowers and offering refinancing options to borrowers for purposes of minimizing portfolio runoff. On January 17, 2018, the Company and NRM executed a Side Letter Agreement pursuant to which, among other things, certain provisions of the NRM Subservicing Agreement were amended and/or waived. On June 28, 2018, the Company and NRM executed an additional Side Letter Agreement, pursuant to which, among other things, NRM agreed to use commercially reasonable efforts to add additional loans to the NRM Subservicing Agreement for the Company to subservice.
On January 17, 2019, the Company received a notice from NRM initiating the process of termination under the NRM Subservicing Agreement. Any termination of the NRM Subservicing Agreement would not be effective until a servicing transfer has been completed in accordance with applicable requirements. The Company is reviewing the grounds for termination in consultation with its stakeholders and is considering all of its options with respect thereto including legal rights and remedies. The Company is proceeding with strategic alternatives assuming there is not an ongoing subservicing relationship with NRM. The Company’s plans are not contingent on any continuing relationship with NRM. Refer to Note 31 for additional information regarding the Company's recapitalization efforts.
The Company expects that it will take several months to complete the transfer of servicing on loans that are subserviced for NRM under the NRM Subservicing Agreement. The receipt of the notice of termination, in and of itself, is not an event of default or cross-default under our debt documents or warehouse facilities. Subsequent to receiving the aforementioned notice from NRM, and at the direction of and in coordination with NRM, on March 16, 2019 and April 1, 2019, the Company completed the transfer of servicing on certain NRM subservicing portfolios containing, in aggregate, approximately 208,000 accounts. The Company is working with NRM to complete additional transfers of servicing on the remaining loans it subservices for NRM under the NRM Subservicing Agreement.
With respect to the Company, for mortgage loans that were being subserviced by the Company under the NRM Subservicing Agreement prior to January 17, 2018, and for any additional mortgage loans that the Company subserviced under the NRM Subservicing Agreement that were added to such agreement after such date (other than (i) mortgage loans relating to MSR sold to NRM by the Company in a bulk sale agreed to by the parties on January 17, 2018 and (ii) mortgage loans relating to MSR sold to NRM by the Company on a flow basis under the NRM Flow and Bulk Agreement after such date), the initial term of the NRM Subservicing Agreement expired on August 8, 2017 and was automatically renewed for a successive one-year term, and was further automatically renewed for a successive one-year term thereafter until the aforementioned notice of termination.
With respect to the Company, for mortgage loans relating to MSR sold to NRM by the Company in a bulk MSR sale agreed to by the parties on January 17, 2018 and mortgage loans relating to MSR sold to NRM by the Company on a flow basis under the NRM Flow and Bulk Agreement after such date, the initial term of the NRM Subservicing Agreement was scheduled to expire on January 17, 2019 (with respect to the aforementioned bulk MSR sale) or, with respect to each flow MSR assignment agreement executed by the parties after such date in connection with any flow MSR sales by the Company to NRM after such date, the first anniversary of the first day of the calendar quarter following the calendar quarter during which such flow MSR assignment agreement was executed; however, such expiration dates were superseded by the aforementioned notice of termination, and the NRM Subservicing Agreement is expected to terminate upon completion of the servicing transfer.
With respect to NRM, for mortgage loans that were being subserviced by the Company under the NRM Subservicing Agreement prior to January 17, 2018, and for any additional mortgage loans that the Company subserviced under the NRM Subservicing Agreement that were added to such agreement after such date (other than (i) mortgage loans relating to MSR sold to NRM by the Company in a bulk sale agreed to by the parties on January 17, 2018 and (ii) mortgage loans relating to MSR sold to NRM by the Company on a flow basis under the NRM Flow and Bulk Agreement after such date), the initial term of the NRM Subservicing Agreement expired on August 8, 2017 and thereafter the agreement would automatically terminate with respect to such mortgage loans, unless renewed by NRM on a monthly basis. Since the expiration of the initial term, NRM has renewed the NRM Subservicing Agreement each month thereafter until the aforementioned notice of termination received by the Company from NRM on January 17, 2019.
In the case of mortgage loans relating to MSR sold to NRM by the Company in a bulk MSR sale agreed to by the parties on January 17, 2018 and mortgage loans relating to MSR sold to NRM by the Company on a flow basis under the NRM Flow and Bulk Agreement after such date, the initial term of the NRM Subservicing Agreement was scheduled to expire on January 17, 2019 (with respect to the aforementioned bulk MSR sale) or, with respect to each flow MSR assignment agreement executed by the parties after such date in connection with any flow MSR sales by the Company to NRM after such date, the first anniversary of the first day of the calendar quarter following the calendar quarter during which such flow MSR assignment agreement was executed; however, such expiration dates were superseded by the aforementioned notice of termination, and the NRM Subservicing Agreement is expected to terminate upon completion of the servicing transfer.