Variable Interest Entities

3 Months Ended

Mar. 31, 2014

Variable Interest Entities

Variable Interest Entities

15.  Variable Interest Entities

Servicing Advance Receivables Trust

In the first quarter of 2014, PHH Servicer Advance Receivables Trust (“PSART”) and PHH Servicer Advance Funding Depositor, LLC (the “Depositor”) (collectively the “Servicing Advance Receivables Trust”) were formed.  PSART is a special purpose bankruptcy remote trust and was formed for the purpose of issuing asset-backed notes secured by servicing advance receivables.  The Company, the Depositor and  PSART entered into a Receivables Purchase and Contribution Agreement under which the Company has conveyed (and may in the future convey) to the Depositor the contractual right to reimbursement of certain mortgage loan servicing advances made by the Company related to its servicing activities.  The Depositor in turn sells the servicing advances to PSART.  Upon the initial funding of the entity, the Company determined that PSART and the Depositor are variable interest entities based on their nature and purpose, and that the Company is the primary beneficiary.

In March 2014, PSART entered into an agreement to issue asset-backed notes as further discussed in Note 9, “Debt and Borrowing Arrangements”.  Certain capital transactions are executed between the Company and the Depositor whereby subsidiaries of the Company contribute receivables to the Depositor and receive distributions upon the issuance of notes or leveraging of note series.  During the three months ended March 31, 2014, the Company and its subsidiaries contributed Accounts receivable of $156 million to the Depositor, and received distributions of $117 million.

Assets and liabilities of significant consolidated variable interest entities are included in the Condensed Consolidated Balance Sheets as follows:

	March 31, 2014
							Servicing
			Chesapeake		FLRT and		Advance
	PHH Home		and D.L.		PHH Lease		Receivables
	Loans		Peterson Trust		Receivables LP		Trust
	(In millions)
ASSETS
Cash	$	80	$	10	$	—	$	—
Restricted cash(1)	3		196		47		58
Mortgage loans held for sale	268		—		—		—
Accounts receivable, net	12		45		—		97
Net investment in fleet leases	—		2,991		565		—
Property and equipment, net	2		—		—		—
Other assets	8		15		6		1
Total assets	$	373	$	3,257	$	618	$	156
Assets held as collateral(2)	$	258	$	3,232	$	612	$	155
LIABILITIES
Accounts payable and accrued expenses	$	13	$	2	$	6	$	—
Debt	247		2,873		564		117
Other liabilities	12		—		—		—
Total liabilities(3)	$	272	$	2,875	$	570	$	117

	December 31, 2013
			Chesapeake		FLRT and
	PHH Home		and D.L.		PHH Lease
	Loans		Peterson Trust		Receivables LP
	(In millions)
ASSETS
Cash	$	91	$	5	$	—
Restricted cash(1)	3		157		46
Mortgage loans held for sale	308		—		—
Accounts receivable, net	7		46		—
Net investment in fleet leases	—		2,982		599
Property and equipment, net	2		—		—
Other assets	7		12		6
Total assets	$	418	$	3,202	$	651
Assets held as collateral(2)	$	300	$	3,185	$	645
LIABILITIES
Accounts payable and accrued expenses	$	15	$	2	$	5
Debt	280		2,866		598
Other liabilities	11		—		—
Total liabilities(3)	$	306	$	2,868	$	603

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(1) Represents amounts specifically designated to purchase assets, repay debt and/or provide over-collateralization related to vehicle  management asset-backed debt arrangements.

(2) Represents amounts not available to pay the Company’s general obligations.  See Note 9, “Debt and Borrowing Arrangements” for further information.

(3) Excludes intercompany payables.