Indebtedness

6 Months Ended

Jun. 30, 2020

9. Indebtedness

Notes Payable


						June 30, 2020						December 31, 2019
Advance Facilities	Interest Rate	Maturity Date	Collateral	Capacity Amount		Outstanding		Collateral Pledged		Outstanding		Collateral pledged
$875 advance facility⁽¹⁾	CP+2.5% to 6.5%	April 2021	Servicing advance receivables	$	875	$	193	$	220	$	37	$	88
$425 advance facility⁽²⁾	LIBOR+2.8% to 6.5%	October 2021	Servicing advance receivables	425		211		273		224		285
$250 advance facility⁽³⁾	LIBOR+1.5% to 2.6%	December 2020	Servicing advance receivables	250		—		—		98		167
$200 advance facility	LIBOR+2.5%	January 2021	Servicing advance receivables	200		76		106		63		125
Advance facilities principal amount										480		$	599	422	$	665
Unamortized debt issuance costs										(5)				—
Advance facilities, net												$	475		$	422

⁽¹⁾The capacity amount for this advance facility increased from $125 to $875 in April 2020.

⁽²⁾The capacity amount for this advance facility increased from $325 to $425 in April 2020.

⁽³⁾This advance facility was terminated and transferred to another advance facility in April 2020.


						June 30, 2020						December 31, 2019
Warehouse Facilities	Interest Rate	Maturity Date	Collateral	Capacity Amount		Outstanding		Collateral pledged		Outstanding		Collateral pledged
$1,500 warehouse facility	LIBOR+1.7%	June 2021	Mortgage loans or MBS	$	1,500	$	669	$	637	$	759	$	733
$1,200 warehouse facility	LIBOR+1.5% to 3.0%	November 2020	Mortgage loans or MBS	1,200		568		606		683		724
$800 warehouse facility⁽¹⁾	LIBOR+2.1% to 3.8%	April 2021	Mortgage loans or MBS	800		642		700		589		656
$750 warehouse facility	LIBOR+1.4% to 2.8%	September 2020	Mortgage loans or MBS	750		572		583		411		425
$700 warehouse facility	LIBOR+1.3% to 2.2%	November 2020	Mortgage loans or MBS	700		624		644		469		488
$600 warehouse facility	LIBOR+2.2%	February 2021	Mortgage loans or MBS	600		233		278		174		202
$500 warehouse facility	LIBOR+2.5% to 4.0%	May 2021	Mortgage loans or MBS	500		—		1		336		349
$250 warehouse facility⁽²⁾	LIBOR+1.4% to 2.3%	September 2020	Mortgage loans or MBS	250		—		—		762		783
$200 warehouse facility	LIBOR+1.4%	January 2021	Mortgage loans or MBS	200		175		175		136		136
$200 warehouse facility	LIBOR+2.5%	May 2021	Mortgage loans or MBS	200		50		74		54		78
$200 warehouse facility	LIBOR+1.8%	April 2021	Mortgage loans or MBS	200		19		19		27		27
$200 warehouse facility	LIBOR+1.3%	October 2020	Mortgage loans or MBS	200		—		—		—		—
$50 warehouse facility	LIBOR+1.8% to 4.8%	April 2021	Mortgage loans or MBS	50		31		36		11		15
$40 warehouse facility	LIBOR+3.3%	September 2020	Mortgage loans or MBS	40		4		4		5		6
Warehouse facilities principal amount														3,587		3,757		4,416		4,622
MSR Facility
$450 warehouse facility⁽³⁾	LIBOR+5.1%	May 2021	MSR	450		300		628		150		945
$400 warehouse facility	LIBOR+2.3%	December 2020	MSR	400		75		176		—		200
$150 warehouse facility⁽¹⁾	LIBOR+3.8%	April 2021	MSR	150		40		117		—		130
$50 warehouse facility	LIBOR+2.8%	August 2020	MSR	50		30		87		10		84
MSR facilities principal amount														445		1,008		160		1,359
Warehouse and MSR facilities principal amount														4,032		$	4,765	4,576		$	5,981
Unamortized debt issuance costs								(1)				(1)
Warehouse facilities, net														$	4,031			$	4,575

Pledged Collateral:
Mortgage loans held for sale								$	2,963	$	3,016	$	3,826	$	3,931
Reverse mortgage interests								624		741		590		691
MSR								445		1,008		160		1,359

⁽¹⁾Total capacity amount for this facility is $800 of which $150 is a sublimit for MSR financing.

⁽²⁾The capacity amount for this warehouse facility decreased from $1,000 to $250 in May 2020.

⁽³⁾The capacity amount for this MSR facility increased from $400 to $450 in May 2020.

Unsecured Senior Notes

Unsecured senior notes consist of the following:


Unsecured senior notes	June 30, 2020		December 31, 2019
$950 face value, 8.125% interest rate payable semi-annually, due July 2023	$	950	$	950
$750 face value, 9.125% interest rate payable semi-annually, due July 2026	750		750
$600 face value, 6.000% interest rate payable semi-annually, due January 2027⁽¹⁾	600		—
$600 face value, 6.500% interest rate payable semi-annually, due July 2021⁽²⁾	—		492
$300 face value, 6.500% interest rate payable semi-annually, due June 2022⁽²⁾	—		206
Unsecured senior notes principal amount	2,300		2,398
Unamortized debt issuance costs, premium and discount	(39)		(32)
Unsecured senior notes, net	$	2,261	$	2,366

⁽¹⁾On January 16, 2020, the Company completed an offering of $600 aggregate principal amount of 6.000% Senior Notes due 2027 (the “2027 Notes”).

⁽²⁾This note was redeemed in full on February 15, 2020 using the net proceeds of the 2027 Notes offering, together with cash on hand.

The ratios included in the indentures for the unsecured senior notes are incurrence-based compared to the customary ratio covenants that are often found in credit agreements that require a company to maintain a certain ratio. The incurrence-based covenants limit the issuer(s) and restricted subsidiaries ability to incur additional indebtedness, pay dividends, make certain investments, create liens, consolidate, merge or sell substantially all of their assets or enter into certain transactions with affiliates. The indentures contain certain events of default, including (subject, in some cases, to customary cure periods and materiality thresholds) defaults based on (i) the failure to make payments under the applicable indenture when due, (ii) breach of covenants, (iii) cross-defaults to certain other indebtedness, (iv) certain bankruptcy or insolvency events, (v) material judgments and (vi) invalidity of material guarantees.

The indentures provide that on or before certain fixed dates, the Company may redeem up to 40% of the aggregate principal amount of the unsecured senior notes with the net proceeds of certain equity offerings at fixed redemption prices, plus accrued and unpaid interest, to the redemption dates, subject to compliance with certain conditions. In addition, the Company may redeem all or a portion of the unsecured senior notes at any time on or after certain fixed dates at the applicable redemption prices set forth in the indentures plus accrued and unpaid interest, to the redemption dates. No notes were repurchased or redeemed during the three months ended June 30, 2020. During the six months ended June 30, 2020, the Company repaid $100 in principal of outstanding notes. Additionally, the Company redeemed $598 in principal of outstanding notes during the six months ended June 30, 2020, resulting in a gain of $1. No notes were repurchased or redeemed during the three and six months ended June 30, 2019.

As of June 30, 2020, the expected maturities of the Company’s unsecured senior notes based on contractual maturities are as follows:


Year Ending December 31,	Amount
2020	$	—
2021	—
2022	—
2023	950
2024	—
Thereafter	1,350
Total unsecured senior notes principal amount	$	2,300

Other Nonrecourse Debt

Other nonrecourse debt consists of the following:


						June 30, 2020		December 31, 2019
Other nonrecourse debt	Issue Date	Maturity Date	Class of Note	Collateral Amount		Outstanding		Outstanding
Participating interest financing⁽¹⁾	—	—	—	$	—	$	3,875	$	4,284
Securitization of nonperforming HECM loans
Trust 2019-2	November 2019	November 2029	A, M1, M2, M3, M4, M5	287		274		333
Trust 2019-1	June 2019	June 2029	A, M1, M2, M3, M4, M5	264		244		302
Trust 2018-3	November 2018	November 2028	A, M1, M2, M3, M4, M5	200		179		209
Trust 2018-2	July 2018	July 2028	A, M1, M2, M3, M4, M5	149		127		148
Other nonrecourse debt principal amount						4,699		5,276
Unamortized debt issuance costs, premium and discount						8		10
Other nonrecourse debt, net						$	4,707	$	5,286

⁽¹⁾Amounts represent the Company’s participating interest in GNMA HMBS securitized portfolios.

Participating Interest Financing

Participating interest financing represents the obligation of HMBS pools to third-party security holders. The Company issues HMBS in connection with the securitization of borrower draws and accrues interest on HECM loans. Proceeds are received in exchange for securitized advances on the HECM loan amounts transferred to GNMA, and the Company retains a beneficial interest (referred to as a “participating interest”) in the securitization trust in which the HECM loans and HMBS obligations are held and assume both issuer and servicer responsibilities in accordance with GNMA HMBS program guidelines. Monthly cash flows generated from the HECM loans are used to service the HMBS obligations. The interest rate is based on the underlying HMBS rate with a range of 0.6% to 5.6%.

Securitizations of Nonperforming HECM Loans

From time to time, the Company securitizes its interests in non-performing reverse mortgages. The transactions provide investors with the ability to invest in a pool of both non-performing HECM loans secured by one-to-four-family residential properties and a pool of REO properties acquired through foreclosure of a deed in lieu of foreclosure in connection with HECM loans that are covered by FHA insurance. The transactions provide the Company with access to liquidity for the non-performing HECM loan portfolio, ongoing servicing fees, and potential residual returns. The transactions are structured as secured borrowings with the reverse mortgage loans included in the consolidated financial statements as reverse mortgage interests and the related financing included in other nonrecourse debt. Interest is accrued at a rate of 2.3% to 6.0% on the outstanding securitized notes and recorded as interest expense in consolidated statements of operations. The HECM securitizations are callable with expected weighted average lives of less than one to three years. The Company may re-securitize the previously called loans from earlier HECM securitizations to achieve a lower cost of funds.

Financial Covenants

The Company’s credit facilities contain various financial covenants which primarily relate to required tangible net worth amounts, liquidity reserves, leverage requirements, and profitability requirements, which are measured at the Company’s operating subsidiary, Nationstar Mortgage LLC. The Company was in compliance with its required financial covenants as of June 30, 2020.