21. Segment Reporting

Management has organized the Company into six reportable segments based primarily on its services as follows:

•

Servicing — consists of operations that perform servicing for third-party investors of residential mortgages, manufactured housing and consumer installment loans and contracts, as well as for the Loans and Residuals segment and for the Non-Residual Trusts. Beginning in the first quarter of 2013, the Servicing segment services forward loans that have been originated or purchased by the Originations segment and sold to third-parties with servicing rights retained.

•

Asset Receivables Management — performs collections of post charge-off deficiency balances on behalf of third-party securitization trusts and other asset owners.

•

Insurance — provides voluntary and lender-placed hazard insurance for residential loans, as well as other ancillary products, through the Company’s insurance agency for a commission and a reinsurer to third parties as well as to the Loans and Residuals segment.

•

Loans and Residuals — consists of the assets and mortgage-backed debt of the Residual Trusts and the unencumbered held for investment forward residential loan portfolio and real estate owned.

•

Reverse Mortgage — consists of operations that purchase and originate reverse mortgage loans that are securitized but remain on the consolidated balance sheet as collateral for secured borrowings. This segment also performs servicing for third party investors in reverse mortgage loans and provides other ancillary services for the reverse mortgage market.

•

Originations — consists of operations that originate and purchase forward loans that are sold to third parties with servicing rights generally retained. The Originations segment was previously included in the Other segment, but became a reportable operating segment because of growth in the business resulting from the acquisition of the ResCap net assets. Activity prior to the acquisition of the ResCap net assets primarily consisted of brokerage operations whereby the Originations segment received origination commissions.

The Company has revised its presentation of financial results by reportable segment for the three and six months ended June 30, 2012 to reflect the results of its Originations segment, which was previously included in Other. Also, as discussed in Note 1, during the three months ended June 30, 2013 the Company changed the accounting for recently purchased servicing rights. As a result, servicing rights and related changes in fair value have been reallocated to the Servicing segment from the Insurance and Originations segments. This change increased income before taxes for the three months ended March 31, 2013 recognized by the Insurance and Originations segments by $0.2 million and $13.9 million, respectively, and decreased income before taxes by $14.1 million for the Servicing segment.

The Company also revised its method of allocating assets to business segments during the fourth quarter of 2012. As a result, the Company has recast segment assets of the prior periods to reflect the new allocation method on a consistent basis for all periods presented. The revised asset allocation primarily includes intersegment receivables and current and deferred tax assets in the calculation of total segment assets whereas they previously were not included. As of June 30, 2012, the change in method increased assets allocated to the Servicing, Insurance, Loans and Residuals, Originations, and Other segments by $6.5 million, $29.3 million, $16.9 million, $2.9 million, and $288.9 million, respectively, and decreased assets allocated to the Asset Receivables Management segment and eliminations by $1.8 million and $342.7 million, respectively.

In order to reconcile the financial results for the Company’s reportable segments to the consolidated results, the Company has presented the revenue and expenses and total assets of the Non-Residual Trusts and other non-reportable operating segments, as well as certain corporate expenses, which have not been allocated to the business segments, in Other. Intersegment servicing and insurance revenues and expenses have been eliminated. Intersegment revenues are recognized on the same basis of accounting as such revenue is recognized in the consolidated statements of comprehensive income.

Presented in the tables below are the Company’s financial results by reportable segment reconciled to the consolidated income before income taxes and total assets by reportable segment reconciled to consolidated total assets (in thousands):


	For the Three Months Ended June 30, 2013
	Servicing			Asset Receivables Management		Insurance		Loans and Residuals		Reverse Mortgage			Originations		Other			Eliminations			Total Consolidated
REVENUES
Net servicing revenue and fees ⁽¹⁾	$	244,432		$	11,102	$	—	$	—	$	6,624		$	—	$	—		$	(4,852	)	$	257,306
Net gains on sales of loans		—			—		—		—		250			235,699		—			—			235,949
Interest income on loans		—			—		—		36,796		—			—		—			—			36,796
Insurance revenue		—			—		18,050		—		—			—		—			—			18,050
Other revenues		457			69		6		1		2,366			15,527		2,706			—			21,132

Total revenues		244,889			11,171		18,056		36,797		9,240			251,226		2,706			(4,852	)		569,233
EXPENSES
Interest expense		5,166			—		—		21,800		2,166			8,600		30,558			—			68,290
Depreciation and amortization		9,445			1,614		1,168		—		2,691			2,689		7			—			17,614
Provision for loan losses		—			—		—		95		—			—		—			—			95
Other expenses, net		116,914			5,722		7,934		4,718		40,931			94,058		7,625			(4,852	)		273,050

Total expenses		131,525			7,336		9,102		26,613		45,788			105,347		38,190			(4,852	)		359,049
OTHER GAINS (LOSSES)
Net fair value gains on reverse loans and related HMBS obligations		—			—		—		—		26,731			—		—			—			26,731
Other net fair value gains (losses)		(179	)		—		—		566		—			—		1,269			—			1,656

Total other gains (losses)		(179	)		—		—		566		26,731			—		1,269			—			28,387

Income (loss) before income taxes	$	113,185		$	3,835	$	8,954	$	10,750	$	(9,817	)	$	145,879	$	(34,215	)	$	—		$	238,571


	At June 30, 2013
Total assets	$	3,829,682		$	54,008	$	212,424	$	1,549,098	$	8,351,798		$	2,122,345	$	1,573,710		$	(762,853	)	$	16,930,212

(1)	The Company’s Servicing and Asset Receivables Management segments include net servicing revenue and fees of $4.7 million and $0.1 million, respectively, associated with intercompany activity with the Loans and Residuals and Other segments.


	For the Six Months Ended June 30, 2013
	Servicing			Asset Receivables Management		Insurance		Loans and Residuals		Reverse Mortgage		Originations		Other			Eliminations			Total Consolidated
REVENUES
Net servicing revenue and fees ⁽¹⁾	$	369,559		$	21,192	$	—	$	—	$	13,372	$	—	$	—		$	(9,808	)	$	394,315
Net gains on sales of loans		—			—		—		—		4,633		309,761		—			—			314,394
Interest income on loans		—			—		—		73,694		—		—		—			—			73,694
Insurance revenue		—			—		35,584		—		—		—		—			—			35,584
Other revenues		919			133		13		4		5,311		17,524		5,122			(39	)		28,987

Total revenues		370,478			21,325		35,597		73,698		23,316		327,285		5,122			(9,847	)		846,974
EXPENSES
Interest expense		7,576			—		—		44,096		5,695		9,306		55,759			—			122,432
Depreciation and amortization		18,302			3,370		2,482		—		5,414		4,366		13			—			33,947
Provision for loan losses		—			—		—		1,821		—		—		—			—			1,821
Other expenses, net		208,962			11,752		16,442		8,822		73,454		133,475		24,533			(9,847	)		467,593

Total expenses		234,840			15,122		18,924		54,739		84,563		147,147		80,305			(9,847	)		625,793
OTHER GAINS (LOSSES)
Net fair value gains on reverse loans and related HMBS obligations		—			—		—		—		63,519		—		—			—			63,519
Other net fair value gains (losses)		(424	)		—		—		404		—		—		415			—			395

Total other gains (losses)		(424	)		—		—		404		63,519		—		415			—			63,914

Income (loss) before income taxes	$	135,214		$	6,203	$	16,673	$	19,363	$	2,272	$	180,138	$	(74,768	)	$	—		$	285,095

(1)	The Company’s Servicing and Asset Receivables Management segments include net servicing revenue and fees of $9.6 million and $0.2 million, respectively, associated with intercompany activity with the Loans and Residuals and Other segments.


	For the Three Months Ended June 30, 2012
	Servicing			Asset Receivables Management		Insurance		Loans and Residuals		Originations		Other			Eliminations			Total Consolidated
REVENUES
Net servicing revenue and fees ⁽¹⁾	$	84,454		$	9,501	$	—	$	—	$	—	$	—		$	(5,285	)	$	88,670
Interest income on loans		—			—		—		40,453		—		—			—			40,453
Insurance revenue		—			—		16,803		—		—		—			—			16,803
Other revenues		1,033			—		187		—		1,480		2,263			—			4,963

Total revenues		85,487			9,501		16,990		40,453		1,480		2,263			(5,285	)		150,889
EXPENSES
Interest expense		1,228			—		—		23,425		—		19,870			—			44,523
Depreciation and amortization		8,588			1,893		1,310		—		15		8			—			11,814
Provision for loan losses		—			—		—		1,957		—		—			—			1,957
Other expenses, net		70,585			5,545		8,703		7,322		1,324		4,414			(5,285	)		92,608

Total expenses		80,401			7,438		10,013		32,704		1,339		24,292			(5,285	)		150,902
OTHER GAINS (LOSSES)
Other net fair value gains (losses)		(246	)		—		—		118		—		916			—			788

Total other gains (losses)		(246	)		—		—		118		—		916			—			788

Income (loss) before income taxes	$	4,840		$	2,063	$	6,977	$	7,867	$	141	$	(21,113	)	$	—		$	775


	At June 30, 2012
Total assets	$	1,390,748		$	58,575	$	182,034	$	1,655,203	$	2,919	$	1,139,514		$	(342,676	)	$	4,086,317

(1)	The Company’s Servicing and Asset Receivables Management segments include net servicing revenue and fees of $5.1 million and $0.2 million, respectively, associated with intercompany activity with the Loans and Residuals and Other segments.


	For the Six Months Ended June 30, 2012
	Servicing			Asset Receivables Management		Insurance		Loans and Residuals			Originations			Other			Eliminations			Total Consolidated
REVENUES
Net servicing revenue and fees ⁽¹⁾	$	171,269		$	17,829	$	—	$	—		$	—		$	—		$	(10,695	)	$	178,403
Interest income on loans		—			—		—		79,733			—			—			—			79,733
Insurance revenue		—			—		36,765		—			—			—			—			36,765
Other revenues		1,819			—		489		—			2,098			4,423			—			8,829

Total revenues		173,088			17,829		37,254		79,733			2,098			4,423			(10,695	)		303,730
EXPENSES
Interest expense		2,723			—		—		47,403			—			40,235			—			90,361
Depreciation and amortization		17,239			3,897		2,657		—			25			15			—			23,833
Provision for loan losses		—			—		—		3,526			—			—			—			3,526
Other expenses, net		137,246			10,708		18,123		14,788			2,095			10,261			(10,695	)		182,526

Total expenses		157,208			14,605		20,780		65,717			2,120			50,511			(10,695	)		300,246
OTHER GAINS (LOSSES)
Other net fair value gains (losses)		(532	)		—		—		(177	)		—			6,260			—			5,551

Total other gains (losses)		(532	)		—		—		(177	)		—			6,260			—			5,551

Income (loss) before income taxes	$	15,348		$	3,224	$	16,474	$	13,839		$	(22	)	$	(39,828	)	$	—		$	9,035

(1)	The Company’s Servicing and Asset Receivables Management segments include net servicing revenue and fees of $10.4 million and $0.3 million, respectively, associated with intercompany activity with the Loans and Residuals and Other segments.