NATIONSTAR MORTGAGE HOLDINGS INC., 10-Q filed on 11/6/2012
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2012
Nov. 2, 2012
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
Nationstar Mortgage Holdings Inc.  
 
Entity Central Index Key
0001520566 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2012 
 
Amendment Flag
false 
 
Document Fiscal Year Focus
2012 
 
Document Fiscal Period Focus
Q3 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Non-accelerated Filer 
 
Member units
 
90,409,425 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Assets
 
 
Cash and cash equivalents
$ 430,815 
$ 62,445 
Restricted cash
258,858 
71,499 
Accounts receivable
2,852,985 
562,300 
Mortgage loans held for sale
703,214 
458,626 
Mortgage loans held for investment, subject to nonrecourse debt - Legacy Assets, net of allowance for loan losses of $6,101 and $5,824, respectively
238,178 
243,480 
Reverse mortgage interests
452,886 
0 
Receivables from affiliates
13,301 
4,609 
Mortgage servicing rights - fair value
592,692 
251,050 
Mortgage servicing rights - amortized cost
8,036 
0 
Property and equipment, net of accumulated depreciation of $42,573 and $39,201, respectively
48,714 
24,073 
Real estate owned (REO), net
3,193 
3,668 
Other assets
338,359 
106,181 
Total assets
5,941,231 
1,787,931 
Liabilities and equity
 
 
Notes payable
2,532,316 
873,179 
Unsecured senior notes
1,062,423 
280,199 
Payables and accrued liabilities
762,268 
183,789 
Derivative financial instruments
37,835 
12,370 
Mortgage servicing liabilities
82,313 
0 
Nonrecourse debt - Legacy Assets
101,898 
112,490 
Excess spread financing - fair value
255,484 
44,595 
Participating interest financing
415,448 
0 
Total liabilities
5,249,985 
1,506,622 
Commitments and contingencies - See Note 18
   
   
Members' units related to Nationstar Mortgage LLC
0 
281,309 
Preferred stock at $0.01 par value - 300,000 shares authorized, no shares issued and outstanding
0 
0 
Common stock at $0.01 par value - 1,000,000 shares authorized, 89,167 shares issued and outstanding
904 
0 
Additional paid-in-capital
553,380 
0 
Accumulated other comprehensive loss
0 
0 
Retained earnings
141,528 
0 
Common stock held by subsidiary
(4,566)
0 
Total equity
691,246 
281,309 
Total liabilities and equity
$ 5,941,231 
$ 1,787,931 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Allowance for loan losses of mortgage loans held for investment, subject to nonrecourse debt
$ 7,645 
$ 5,824 
Accumulated depreciation of property and equipment
$ 45,544 
$ 39,201 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
300,000 
300,000 
Preferred stock, shares issued
0 
0 
Preferred stock, shares outstanding
0 
0 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
1,000,000 
1,000,000 
Common Stock, Shares issued
90,412 
89,167 
Common Stock, Shares outstanding
90,412 
89,167 
Unaudited Consolidated Statements of Operations and Comprehensive Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Revenues:
 
 
 
 
Servicing fee income
$ 135,504 
$ 53,031 
$ 305,546 
$ 160,755 
Other fee income
2,396 
7,660 
21,259 
23,999 
Total fee income
137,900 
60,691 
326,805 
184,754 
Gain on mortgage loans held for sale
139,259 
30,232 
312,116 
73,560 
Total revenues
277,159 
90,923 
638,921 
258,314 
Expenses and impairments:
 
 
 
 
Salaries, wages and benefits
98,107 
50,904 
238,519 
146,199 
General and administrative
51,585 
25,397 
127,107 
56,707 
Provision for loan losses
1,545 
877 
3,153 
2,005 
Loss on foreclosed real estate
(2,050)
2,558 
1,705 
6,904 
Occupancy
5,641 
3,458 
11,293 
7,902 
Total expenses and impairments
154,828 
83,194 
381,777 
219,717 
Other income (expense):
 
 
 
 
Interest income
23,542 
16,201 
52,633 
51,246 
Interest expense
(65,015)
(26,376)
(125,908)
(76,929)
Loss on interest rate swaps and caps
(1,077)
0 
(1,702)
0 
Fair value changes in ABS securitizations
0 
(654)
0 
(6,919)
Total other income (expense)
(42,550)
(10,829)
(74,977)
(32,602)
Income before taxes
79,781 
(3,100)
182,167 
5,995 
Income tax expense
24,714 
0 
40,639 
0 
Net income
55,067 
(3,100)
141,528 
5,995 
Other comprehensive income, net of tax:
 
 
 
 
Change in value of designated cash flow hedge
0 
0 
(423)
(1,071)
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, before Tax
423 
0 
423 
0 
Comprehensive income
$ 55,490 
$ (3,100)
$ 141,528 
$ 4,924 
Earnings per share:
 
 
 
 
Basic earnings per share (in dollars per share)
$ 0.62 
$ (0.04)
$ 1.68 
$ 0.09 
Diluted earnings per share (in dollars per share)
$ 0.61 
$ (0.04)
$ 1.68 
$ 0.09 
Weighted average shares:
 
 
 
 
Basic (shares)
89,168 
70,000 
84,038 
70,000 
Dilutive effect of stock awards (shares)
597 
0 
360 
0 
Diluted (shares)
89,765 
70,000 
84,398 
70,000 
Dividends declared per share (in dollars per share)
$ 0 
$ 0 
$ 0 
$ 0 
Consolidated Statements of Shareholders' Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock
Members' Units
Additional Paid-in Capital
Accumulated Other Comprehensive Income
Retained Earnings
Common Shares Held By Subsidiary
Balance at Dec. 31, 2010
$ 256,372 
 
$ 255,301 
 
$ 1,071 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Share-based compensation
14,815 
 
14,815 
 
 
 
 
Distributions to parent
(4,348)
 
(4,348)
 
 
 
 
Tax related share-based settlement of units by members
(5,346)
 
(5,346)
 
 
 
 
Net income
20,887 
 
20,887 
 
 
 
 
Change in value of cash flow hedge
(1,071)
 
0 
 
(1,071)
 
 
Balance at Dec. 31, 2011
281,309 
0 
281,309 
0 
0 
0 
0 
Balance, shares at Dec. 31, 2011
 
0 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Contributions from parent - FIF HE
12,764 
 
12,764 
 
 
 
 
LLC conversion of equity to common shares
0 
700 
(294,073)
293,373 
 
 
 
LLC conversion of equity to common shares, shares
 
70,000,000 
 
 
 
 
 
Common stock issuance
246,700 
192 
 
246,508 
 
 
 
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures
0 
 
 
 
 
 
 
Common stock issuance, shares
 
19,167,000 
 
 
 
 
 
Share-based compensation
10,665 
 
 
10,665 
 
 
 
Excess tax benefit from share-based compensation
2,846 
 
 
2,846 
 
 
 
Tax related share-based settlement of units by members
(4,566)
 
 
 
 
 
(4,566)
Net income
141,528 
 
 
 
 
141,528 
 
Change in value of cash flow hedge
(423)
 
 
 
(423)
 
 
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, before Tax
423 
 
 
 
423 
 
 
Balance at Sep. 30, 2012
$ 691,246 
$ 904 
$ 0 
$ 553,380 
$ 0 
$ 141,528 
$ (4,566)
Balance, shares at Sep. 30, 2012
 
90,418,000 
 
 
 
 
 
Unaudited Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Operating activities
 
 
Net income
$ 141,528 
$ 5,995 
Adjustments to reconcile net income to net cash (used in) / provided by operating activities:
 
 
Share-based compensation
10,665 
12,201 
Gain on mortgage loans held for sale
(312,116)
(73,560)
Provision for loan losses
3,153 
2,005 
Loss on foreclosed real estate
1,705 
6,904 
Loss on equity method investments
1,327 
971 
(Gain) / loss on derivatives including ineffectiveness on interest rate swaps and caps
1,702 
(2,032)
Fair value changes in ABS securitizations
0 
6,919 
Fair value changes in excess spread financing
5,050 
0 
Depreciation and amortization
6,358 
2,551 
Fair value changes in mortgage servicing rights
42,810 
30,757 
Amortizable/Accretion of mortgage servicing rights at amortized cost
(3,276)
0 
Amortization of debt discount
18,101 
10,324 
Amortization of discounts
(4,002)
(4,001)
Mortgage loans originated and purchased, net of fees
(4,814,018)
(2,285,558)
Cost of loans sold and principal payments and prepayments, and other changes in mortgage loans originated as held for sale, net of fees
4,769,317 
2,334,807 
Changes in assets and liabilities:
 
 
Accounts receivable, net
(268,394)
(35,055)
Receivables from affiliates
653 
2,911 
Reverse mortgage interests
(317,272)
0 
Other assets
(135,107)
(2,037)
Payables and accrued liabilities
231,925 
35,840 
Net cash (used in)/provided by operating activities
(619,891)
49,942 
Investing activities
 
 
Principal payments received and other changes on mortgage loans held for investment, subject to ABS nonrecourse debt
0 
29,395 
Property and equipment additions, net of disposals
(20,699)
(15,147)
Acquisition of equity method investee
0 
(6,600)
Cash proceeds from assumption of reverse mortgage servicing obligations, net
(31,169)
0 
Purchase of forward mortgage servicing rights, net of liabilities incurred
(2,024,019)
(40,305)
Loan Repurchases from Ginnie Mae
(6,856)
0 
Proceeds from sales of REO
8,434 
22,897 
Net cash (used in) / provided by investing activities
(2,074,309)
(9,760)
Financing activities
 
 
Issuance of Senior Unsecured Notes, net
781,196 
0 
Transfers (to) / from restricted cash, net
(187,359)
18,312 
Issuance of common stock, net of IPO issuance costs
246,700 
0 
Issuance of participating interest financing
416,303 
0 
Issuance of excess spread financing
215,570 
0 
Increase (decrease) in notes payable
1,659,137 
29,025 
Repayment of nonrecourse debt - Legacy assets
(12,306)
(26,119)
Repayment of ABS nonrecourse debt
0 
(47,175)
Repayment of excess servicing spread financing
(12,981)
0 
Distributions to parent - FIF
0 
(3,900)
Debt financing costs
(43,690)
(2,734)
Tax related share-based settlement of units by members
0 
(4,809)
Net cash provided by / (used in) financing activities
3,062,570 
(37,400)
Net increase / (decrease) in cash and cash equivalents
368,370 
2,782 
Cash and cash equivalents at beginning of period
62,445 
21,223 
Cash and cash equivalents at end of period
430,815 
24,005 
Supplemental disclosures of non-cash activities
 
 
Transfer of mortgage loans held for sale to REO at fair value
0 
90 
Transfer of mortgage loans held for investment to REO at fair value
2,808 
3,675 
Transfer of mortgage loans held for investment, subject to ABS nonrecourse debt to REO at fair value
0 
9,616 
Mortgage servicing rights resulting from sale or securitization of mortgage loans
37,578 
17,985 
Excess tax benefit from share based compensation
2,846 
0 
Tax related share-based settlement of common stock
4,566 
0 
Liabilities incurred from acquired servicer advances
$ 294,671 
$ 0 
Nature of Business, Basis of Presentation and Material Transaction
Nature of Business, Basis of Presentation and Material Transaction
Nature of Business, Basis of Presentation and Material Transaction
Nature of Business
Nationstar Mortgage Holdings Inc. (Nationstar Inc. or the Company) is a Delaware corporation, formed in conjunction with and for the purpose of effecting an initial public offering by allowing common shareholders to own equity in a corporation instead of in a limited liability company.
Nationstar Inc. is a holding company that conducts no operating activities and owns no significant assets other than through its interests in its subsidiaries. Through its subsidiaries, Nationstar Inc. is engaged primarily in the servicing of residential mortgage loans for others and the origination and selling or securitization of single-family conforming mortgage loans to government-sponsored entities (GSE) or other third-party investors in the secondary market. Nationstar Mortgage LLC (Nationstar), the Company's principal operating subsidiary, is one of the largest high touch non-bank servicers in the United States.
Basis of Presentation
In conjunction with the initial public offering of Nationstar Inc., Nationstar became a wholly-owned indirect subsidiary of Nationstar Inc. Prior to the reorganization and initial public offering (Reorganization), Nationstar was a wholly-owned subsidiary of FIF HE Holdings LLC (FIF). Nationstar Inc. was formed solely for the purpose of reorganizing the structure of FIF and Nationstar so that the common stock issuer was a corporation rather than a limited liability company. As such, investors own common stock rather than equity interests in a limited liability company. Upon completion of the initial public offering and Reorganization, all of the equity interests in Nationstar were transferred from FIF to two direct wholly-owned subsidiaries of Nationstar Inc. In conjunction with the Reorganization, FIF contributed certain assets to Nationstar. The Reorganization has been accounted for as a reorganization under common control and, accordingly, there was no change in the basis of the assets and liabilities. As part of the Reorganization, FIF exchanged its equity in Nationstar for 70,000,000 shares of common stock in Nationstar Inc.
The consolidated financial statements include the accounts of Nationstar Inc. and its wholly-owned subsidiaries and those variable interest entities (VIEs) where Nationstar Inc.'s wholly-owned subsidiaries are the primary beneficiaries. Nationstar Inc. applies the equity method of accounting to investments when the entity is not a VIE and Nationstar Inc. is able to exercise significant influence, but not control, over the policies and procedures of the entity but owns less than 50% of the voting interests. Intercompany balances and transactions have been eliminated. Results of operations, assets and liabilities of VIEs are included from the date that Nationstar Inc. became the primary beneficiary through the date Nationstar Inc. ceases to be the primary beneficiary.
The interim consolidated financial statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results of the interim periods have been included. The consolidated interim financial statements of Nationstar Inc. have been prepared in accordance with generally accepted accounting principles for interim information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (SEC). Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States (GAAP) for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in Nationstar Mortgage LLC's Annual Report on Form 10-K filed on March 15, 2012. The results of operations for the nine month period ended September 30, 2012, are not necessarily indicative of the results that may be expected for the year ended December 31, 2012. Certain prior period amounts have been reclassified to conform to the current period presentation. Nationstar Inc. evaluated subsequent events through the date these interim consolidated financial statements were issued.
Material Second Quarter Transaction
On March 6, 2012, Nationstar entered into an asset purchase agreement with Aurora Bank FSB and Aurora Loan Services LLC, (collectively Aurora). Nationstar and Aurora closed the asset purchase in June 2012. Nationstar paid Aurora approximately $2.0 billion that included mortgage servicing rights of approximately $271.5 million and servicing advance receivables of approximately $1.7 billion. As a part of the purchase, certain other assets and liabilities were also acquired. The mortgage servicing rights relate to approximately 300,000 residential mortgage loans with an unpaid principal balance of over $63 billion. As of the closing date, Nationstar entered into certain financing arrangements amounting to approximately $1.3 billion for the servicing advance receivables and $176.5 million for excess spread financing related to the mortgage servicing rights. The remainder of the purchase price was funded with Nationstar cash.
Recent Accounting Developments
Recent Accounting Developments
Recent Accounting Developments
Accounting Standards Update No. 2011-03, Reconsideration of Effective Control for Repurchase Agreements (Update No. 2011-03). Update No. 2011-03 is intended to improve the accounting and reporting of repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. This amendment removes the criterion pertaining to an exchange of collateral such that it should not be a determining factor in assessing effective control, including (i) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (ii) the collateral maintenance implementation guidance related to that criterion. Other criteria applicable to the assessment of effective control are not changed by the amendments in the update. The amendments in this update were effective for interim and annual periods beginning after December 15, 2011. The adoption of Update No. 2011-03 did not have a material impact on the Company’s financial condition, liquidity or results of operations.
Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (Update No. 2011-04). Update No. 2011-04 is intended to provide common fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards (IFRS). The changes required in this update include changing the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this update are to be applied prospectively and were effective for interim and annual periods beginning after December 15, 2011. Upon adoption, certain disclosure requirements were added to the Fair Value Measurements footnote. The adoption of Update No. 2011-04 did not have a material impact on the Company’s financial condition, liquidity or results of operations.
Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income (Update No. 2011-05). Update No. 2011-05 is intended to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Update No. 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity and now requires that all non-owner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This update does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this update are to be applied retrospectively and were effective for interim and annual periods beginning after December 15, 2011. The adoption of Update No. 2011-05 did not have a material impact on the Company’s financial statements.
Accounting Standards Update No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No 2011-05 (Update No. 2011-12). Update 2011-12 is intended to temporarily defer the effective date of the requirement to present separate line items on the income statement for reclassification adjustments of items out of accumulated other comprehensive income into net income as required by Update No. 2011-05. All other requirements in Update 2011-05 are not affected by this update. This update does not change the requirement to present reclassifications adjustments within other comprehensive income either on the face of the statement that reports other comprehensive income or in the notes to the financial statements (Update 2011-05). The amendments in this update were effective for interim and annual periods beginning after December 15, 2011. The adoption of Update No. 2011-12 did not have a material impact on the Company's financial statements.
Variable Interest Entities and Securitizations
Variable Interest Entities and Securitizations
Variable Interest Entities and Securitizations
Nationstar has been the transferor in connection with a number of securitizations or asset-backed financing arrangements, from which Nationstar has continuing involvement with the underlying transferred financial assets. Nationstar aggregates these securitizations or asset-backed financing arrangements into two groups: 1) securitizations of residential mortgage loans and 2) transfers accounted for as secured borrowings.
On securitizations of residential mortgage loans, Nationstar’s continuing involvement typically includes acting as servicer for the mortgage loans held by the trust and holding beneficial interests in the trust. Nationstar’s responsibilities as servicer include, among other things, collecting monthly payments, maintaining escrow accounts, providing periodic reports and managing insurance in exchange for a contractually specified servicing fee. The beneficial interests held consist of both subordinate and residual securities that were retained at the time of the securitization and any mortgage servicing rights subsequently retained in the securitization.
Nationstar also maintains various agreements with special purpose entities (SPEs), under which Nationstar transfers mortgage loans and/or advances on residential mortgage loans in exchange for cash. These SPEs issue debt supported by collections on the transferred mortgage loans and/or advances. These transfers do not qualify for sale treatment because Nationstar continues to retain control over the transferred assets. As a result, Nationstar accounts for these transfers as financings and continues to carry the transferred assets and recognizes the related liabilities on Nationstar’s consolidated balance sheets. Collections on the mortgage loans and/or advances pledged to the SPEs are used to repay principal and interest and to pay the expenses of the entity. The holders of these beneficial interests issued by these SPEs do not have recourse to Nationstar and can only look to the assets of the SPEs themselves for satisfaction of the debt.
A Variable Interest Entity (VIE) is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary, which is the entity that, through its variable interests has both the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.
Current accounting guidance requires that all existing SPEs be evaluated for consolidation. Nationstar identified certain securitization trusts where Nationstar, through its affiliates, continued to hold beneficial interests in these trusts. These retained beneficial interests obligate Nationstar to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant. In addition, Nationstar as master servicer on the related mortgage loans, retains the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE. When it is determined that Nationstar has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE, the assets and liabilities of these VIEs are included in Nationstar’s consolidated financial statements. Upon consolidation of these VIEs, Nationstar derecognized all previously recognized beneficial interests obtained as part of the securitization, including any retained investment in debt securities, mortgage servicing rights, and any remaining residual interests. In addition, Nationstar recognized the securitized mortgage loans as mortgage loans held for investment, subject to ABS nonrecourse debt, and the related asset-backed certificates (ABS nonrecourse debt) acquired by third parties as ABS nonrecourse debt on Nationstar’s consolidated balance sheet.
As a result of market conditions and deteriorating credit performance on these consolidated VIEs, Nationstar expects minimal to no future cash flows on the economic residual. Under existing GAAP, Nationstar would be required to provide for additional allowances for loan losses on the securitization collateral as credit performance deteriorated, with no offsetting reduction in the securitization’s debt balances, even though any nonperformance of the assets will ultimately pass through as a reduction of amounts owed to the debt holders once they are extinguished. Therefore, Nationstar would be required to record accounting losses beyond its economic exposure.
To more accurately represent the future economic performance of the securitization collateral and related debt balances, Nationstar elected the fair value option provided for by Accounting Standards Codification (ASC) ASC 825-10, Financial Instruments-Overall. This option was applied to all eligible items within the VIE, including mortgage loans held for investment, subject to ABS nonrecourse debt, and the related ABS nonrecourse debt.

Subsequent to this fair value election, Nationstar no longer records an allowance for loan loss on mortgage loans held for investment, subject to ABS nonrecourse debt. Nationstar continues to record interest income in Nationstar’s consolidated statement of operations on these fair value elected loans until they are placed on a nonaccrual status when they are 90 days or more past due. The fair value adjustment recorded for the mortgage loans held for investment is classified within fair value changes of ABS securitizations in Nationstar’s consolidated statement of operations.
Subsequent to the fair value election for ABS nonrecourse debt, Nationstar continues to record interest expense in Nationstar’s consolidated statement of operations on the fair value elected ABS nonrecourse debt. The fair value adjustment recorded for the ABS nonrecourse debt is classified within fair value changes of ABS securitizations in Nationstar’s consolidated statement of operations.
Under the existing pooling and servicing agreements of these securitization trusts, the principal and interest cash flows on the underlying securitized loans are used to service the asset-backed certificates. Accordingly, the timing of the principal payments on this nonrecourse debt is dependent on the payments received on the underlying mortgage loans and liquidation of real estate owned.
Nationstar consolidates the SPEs created for the purpose of issuing debt supported by collections on loans and advances that have been transferred to it as VIEs, and Nationstar is the primary beneficiary of these VIEs. The Company consolidates the assets and liabilities of the VIEs onto its consolidated financial statements.
In December 2011, Nationstar sold its remaining variable interest in a securitization trust that had been a consolidated VIE since January 1, 2010 and deconsolidated the VIE. In accordance with ASC 810 Nationstar has evaluated this securitization trust and determined that Nationstar no longer has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE, and this securitization trust was derecognized as of December 31, 2011. Upon deconsolidation of this VIE, Nationstar derecognized the securitized mortgage loans held for investment, subject to ABS nonrecourse debt, the related ABS nonrecourse debt, as well as certain other assets and liabilities of the securitization trust, and recognized any MSRs on the consolidated balance sheet. The impact of this derecognition on the Company’s consolidated statement of operations was recognized in the fourth quarter of 2011 in the fair value changes in ABS securitizations line item.

A summary of the assets and liabilities of Nationstar’s transactions with VIEs included in the Company’s consolidated financial statements as of September 30, 2012 and December 31, 2011 is presented in the following tables (in thousands):
 
 
September 30, 2012
 
December 31, 2011
 
Transfers
Accounted for as
Secured
Borrowings
 
Transfers
Accounted for as
Secured
Borrowings
ASSETS
 
 
 
Restricted cash
$
126,002

 
$
22,316

Accounts receivable
2,269,229

 
279,414

Mortgage loans held for investment, subject to nonrecourse debt
228,041

 
237,496

REO
1,830

 
3,668

Total Assets
$
2,625,102

 
$
542,894

LIABILITIES
 
 
 
Notes payable
$
1,707,941

 
$
244,574

Payables and accrued liabilities
2,412

 
977

Derivative financial instruments
7,041

 
—

Nonrecourse debt–Legacy Assets
101,898

 
112,490

Total Liabilities
$
1,819,292

 
$
358,041


A summary of the outstanding collateral and certificate balances for securitization trusts, including any retained beneficial interests and MSRs, that were not consolidated by Nationstar for the periods indicated are as follows (in thousands):
 
September 30, 2012
 
December 31, 2011
Total collateral balances
$
4,239,774

 
$
4,579,142

Total certificate balances
4,230,472

 
4,582,598

Total mortgage servicing rights at fair value
23,367

 
28,635


Nationstar has not retained any variable interests in the unconsolidated securitization trusts that were outstanding as of September 30, 2012 or December 31, 2011, and therefore does not have a significant maximum exposure to loss related to these unconsolidated VIEs. A summary of mortgage loans transferred to unconsolidated securitization trusts that are 60 days or more past due and the credit losses incurred in the unconsolidated securitization trusts are presented below (in thousands):
 
 
As of or for the nine months ended,
 
September 30, 2012
 
September 30, 2011
 
Principal
Amount
of Loans
60 Days or
More Past Due
 
Credit Losses
 
Principal
Amount
of Loans
60 Days or
More Past Due
 
Credit Losses
Total securitization trusts
$
1,060,797

 
$
208,628

 
$
801,216

 
$
182,991


Certain cash flows received from securitization trusts accounted for as sales for the dates indicated were as follows (in thousands):
 
 
For the three months ended
 
For the nine months ended
 
September 30, 2012
 
September 30, 2011
 
September 30, 2012
 
September 30, 2011
 
Servicing Fees
Received
 
Loan
Repurchases
 
Servicing Fees
Received
Loan
Repurchases
 
Servicing Fees
Received
 
Loan
Repurchases
 
Servicing Fees
Received
Loan
Repurchases
Total securitization trusts
$
6,317

 
$
—

 
$
5,870

$
—

 
$
22,149

 
$
—

 
$
21,221

$
—

Consolidated Statement of Cash Flows-Supplemental Disclosure
Consolidated Statement of Cash Flows-Supplemental Disclosure
Consolidated Statement of Cash Flows-Supplemental Disclosure
Total interest paid for the nine months ended September 30, 2012 and 2011 was approximately $78.2 million and $61.8 million, respectively. Income taxes paid for the nine months ended September 30, 2012 was $18.2 million. There were no income taxes paid for the nine months ended September 30, 2011.
Accounts Receivable
Accounts Receivable
Accounts Receivable
Accounts receivable consist primarily of accrued interest receivable on mortgage loans and securitizations, accrued servicing fees, and advances made to unconsolidated securitization trusts, as required under various servicing agreements related to delinquent loans, which are ultimately paid back to Nationstar from such trusts and third parties.
Accounts receivable consist of the following (in thousands):
 
 
September 30, 2012
 
December 31, 2011
Delinquent interest advances
$
1,508,429

 
$
213,737

Corporate and escrow advances
1,159,711

 
299,946

Accrued servicing fees
94,214

 
20,865

Reverse mortgage
26,240

 
—

Receivables from trusts
13,175

 
4,664

Accrued interest
3,942

 
1,512

Insurance deposits
1,750

 
1,750

Other
45,524

 
19,826

Total accounts receivable
$
2,852,985

 
$
562,300

Mortgage Loans Held for Sale and Investment
Mortgage Loans Held for Sale and Investment
Mortgage Loans Held for Sale and Investment
Mortgage loans held for sale
Nationstar maintains a strategy of originating mortgage loan products primarily for the purpose of selling to GSEs or other third party investors in the secondary market. Generally, all newly originated mortgage loans held for sale are delivered to third-party purchasers or securitized shortly after origination.
Nationstar has elected to measure newly originated prime residential mortgage loans held for sale at fair value, as permitted under ASC 825, Financial Instruments. Nationstar estimates fair value by evaluating a variety of market indicators, including recent trades and outstanding commitments, calculated on an aggregate basis (see Note 14 – Fair Value Measurements).
Mortgage loans held for sale consist of the following (in thousands):
 
 
September 30, 2012
 
December 31, 2011
Mortgage loans held for sale – unpaid principal balance
$
668,345

 
$
442,596

Mark-to-market adjustment
34,869

 
16,030

Total mortgage loans held for sale
$
703,214

 
$
458,626


We had no mortgage loans held for sale on a nonaccrual status at September 30, 2012 or December 31, 2011.
A reconciliation of the changes in mortgage loans held for sale to the amounts presented in the consolidated statements of cash flows for the dates indicated is presented in the following table (in thousands):
 
For the nine months ended September 30,
2012
 
2011
Mortgage loans held for sale – beginning balance
$
458,626

 
$
369,617

Mortgage loans originated and purchased, net of fees
4,814,018

 
2,285,558

Cost of loans sold, net of fees
(4,606,909
)
 
(2,287,430
)
Principal payments received on mortgage loans held for sale and other changes
38,935

 
10,475

Transfer of mortgage loans held for sale to held for investment
(1,456
)
 
(288
)
Mortgage loans held for sale – ending balance
$
703,214

 
$
377,932


Mortgage loans held for investment, subject to nonrecourse debt - legacy assets, net
Mortgage loans held for investment, subject to nonrecourse debt – legacy assets principally consist of nonconforming or subprime mortgage loans securitized which serve as collateral for the issued debt. These loans were transferred on October 1, 2009 from mortgage loans held for sale at fair value on the transfer date, as determined by the present value of expected future cash flows, with no valuation allowance recorded. The difference between the undiscounted cash flows expected and the investment in the loan is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at transfer are not recognized as a yield adjustment or as a loss accrual or a valuation allowance. Increases in expected cash flows subsequent to the transfer are recognized prospectively through adjustment of the yield on the loans over the remaining life. Decreases in expected cash flows subsequent to transfer are recognized as a valuation allowance.
An allowance for loan losses is established by recording a provision for loan losses in the consolidated statement of operations when management believes a loss has occurred on a loan held for investment. When management determines that a loan held for investment is partially or fully uncollectible, the estimated loss is charged against the allowance for loan losses. Recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.

Nationstar accounts for the loans that were transferred to held for investment from held for sale during October 2009 in a manner similar to ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. At the date of transfer, management evaluated such loans to determine whether there was evidence of deterioration of credit quality since acquisition and if it was probable that Nationstar would be unable to collect all amounts due according to the loan’s contractual terms. The transferred loans were aggregated into separate pools of loans based on common risk characteristics (loan delinquency). Nationstar considers expected prepayments, and estimates the amount and timing of undiscounted expected principal, interest, and other cash flows for each aggregated pool of loans. The determination of expected cash flows utilizes internal inputs such as prepayment speeds and credit losses. These internal inputs require the use of judgment and can have a significant impact on the accretion of income and/or valuation allowance. Nationstar determines the excess of the pool’s scheduled contractual principal and contractual interest payments over all cash flows expected as of the transfer date as an amount that should not be accreted (nonaccretable difference). The remaining amount is accreted into interest income over the remaining life of the pool of loans (accretable yield).
Over the life of the transferred loans, management continues to estimate cash flows expected to be collected. Nationstar evaluates at the balance sheet date whether the present value of the loans determined using the effective interest rates has decreased, and if so, records an allowance for loan loss. The present value of any subsequent increase in the transferred loans cash flows expected to be collected is used first to reverse any existing allowance for loan loss related to such loans. Any remaining increase in cash flows expected to be collected are used to adjust the amount of accretable yield recognized on a prospective basis over the remaining life of the loans.
Nationstar accounts for its allowance for loan losses for all other mortgage loans held for investment in accordance with ASC 450-20, Loss Contingencies. The allowance for loan losses represents management’s best estimate of probable losses inherent in the loans held for investment portfolio. Mortgage loans held for investment portfolio is comprised primarily of large groups of homogeneous residential mortgage loans. These loans are evaluated based on the loan’s present delinquency status. The entire allowance is available to absorb probable credit losses from the entire held for investment portfolio.



Mortgage loans held for investment, subject to nonrecourse debt—legacy assets, net as of the dates indicated include (in thousands):
 
 
 
September 30, 2012
 
December 31, 2011
Mortgage loans held for investment, subject to nonrecourse debt - legacy assets, net – unpaid principal balance
 
$
361,474

 
$
375,720

Transfer discount
 

 

Accretable
 
(20,828
)
 
(22,392
)
Non-accretable
 
(94,823
)
 
(104,024
)
Allowance for loan losses
 
(7,645)
 
(5,824
)
Total mortgage loans held for investment, subject to nonrecourse debt -legacy assets, net
 
$
238,178

 
$
243,480



The changes in accretable yield on loans transferred to mortgage loans held for investment, subject to nonrecourse debt- legacy assets were as follows (in thousands):
 
 
Nine months ended September 30, 2012
 
Year ended December 31, 2011
Accretable Yield
 
 
 
Balance at the beginning of the period
$
22,392

 
$
25,219

Additions
—

 
—

Accretion
(2,728
)
 
(4,131
)
Reclassifications from (to) nonaccretable discount
1,164

 
1,304

Disposals
—

 
—

Balance at the end of the period
$
20,828

 
$
22,392


Nationstar may periodically modify the terms of any outstanding mortgage loans held for investment, subject to nonrecourse debt-legacy assets, net for loans that are either in default or in imminent default. Modifications often involve reduced payments by borrowers, modification of the original terms of the mortgage loans, forgiveness of debt and/or increased servicing advances. As a result of the volume of modification agreements entered into, the estimated average outstanding life in this pool of mortgage loans has been extended. Nationstar records interest income on the transferred loans on a level-yield method. To maintain a level-yield on these transferred loans over the estimated extended life, Nationstar reclassified approximately $1.2 million for the nine months ended September 30, 2012, and $1.3 million for the year ended December 31, 2011 from nonaccretable difference. Furthermore, Nationstar considers the decrease in principal, interest, and other cash flows expected to be collected arising from the transferred loans as an impairment, and Nationstar recorded provisions for loan losses of $1.5 million and $0.9 million for the three months ended September 30, 2012 and 2011 on the transferred loans to reflect this impairment. Nationstar recorded provisions for loan losses of $2.0 million for the nine months ended September 30, 2011, and $3.2 million for the nine months ended September 30, 2012 on the transferred loans to reflect this impairment.
Nationstar collectively evaluates all mortgage loans held for investment, subject to nonrecourse debt-legacy assets for impairment. The changes in the allowance for loan losses on mortgage loans held for investment, subject to nonrecourse debt-legacy assets, net were as follows (in thousands) for the dates indicated:
 
 
Nine months ended September 30, 2012
 
Performing
 
Non-Performing
 
Total
Balance at the beginning of the period
$
1,641

 
$
4,183

 
$
5,824

Provision for loan losses
2,249

 
904

 
3,153

Charge-offs
(978
)
 
(354
)
 
(1,332
)
Balance at the end of the period
$
2,912

 
$
4,733

 
$
7,645

Ending balance – collectively evaluated for impairment
$
278,367

 
$
83,107

 
$
361,474

 
 
Year ended December 31, 2011
 
Performing
 
Non-Performing
 
Total
Balance at the beginning of the period
$
829

 
$
2,469

 
$
3,298

Provision for loan losses
1,346

 
2,191

 
3,537

Recoveries on loans previously charged-off
—

 
—

 
—

Charge-offs
(534
)
 
(477
)
 
(1,011
)
Balance at the end of the period
$
1,641

 
$
4,183

 
$
5,824

Ending balance – Collectively evaluated for impairment
$
283,770

 
$
91,950

 
$
375,720


Loan delinquency and loan-to-value ratio (LTV) are common credit quality indicators that Nationstar monitors and utilizes in its evaluation of the adequacy of the allowance for loan losses, of which the primary indicator of credit quality is loan delinquency. LTV refers to the ratio of comparing the loan’s unpaid principal balance to the property’s collateral value. Loan delinquencies and unpaid principal balances are updated monthly based upon collection activity. Collateral values are updated from third-party providers on a periodic basis. For an event requiring a decision based at least in part on the collateral value, Nationstar takes its last known value provided by a third party and then adjusts the value based on the applicable home price index.

The following tables provide the outstanding unpaid principal balance of Nationstar’s mortgage loans held for investment by credit quality indicators as of dates indicated.
 
 
September 30, 2012
 
December 31, 2011
 
(in thousands)
Credit Quality by Delinquency Status
 
 
 
Performing
$
278,367

 
$
283,770

Non-Performing
83,107

 
91,950

Total
$
361,474

 
$
375,720

Credit Quality by Loan-to-Value Ratio
 
 
 
Less than 60
$
40,060

 
$
42,438

Less than 70 and more than 60
15,817

 
15,968

Less than 80 and more than 70
22,627

 
25,190

Less than 90 and more than 80
28,863

 
32,620

Less than 100 and more than 90
32,804

 
33,708

Greater than 100
221,303

 
225,796

Total
$
361,474

 
$
375,720


Performing loans refer to loans that are less than 90 days delinquent. Non-performing loans refer to loans that are greater than 90 days delinquent.
Reverse mortgage interests
Reverse mortgage interests consists of fees paid to taxing authorities for borrowers’ unpaid taxes and insurance, and payments made to borrowers for line of credit draws on the reverse mortgages. These advances include due and payable advances, which are recovered upon the sale of the subject property, and defaulted advances that can be securitized and sold. As of September 30, 2012, Nationstar had $452.9 million in outstanding reverse mortgage interests.
Nationstar accounts for outstanding and future reverse mortgage interests as financing receivables in accordance with ASC 310, Receivables. Interest and other unpaid taxes and fees are accrued monthly and capitalized as part of the outstanding advance balance. When Nationstar determines that a loss on the advance balance is probable and that the carrying balance may be partially or fully uncollectible, an allowance for loan loss is established by recording a provision for loan losses in the consolidated statement of operations.
Mortgage Servicing Rights (MSRs)
Mortgage Servicing Rights (MSRs)
Mortgage Servicing Rights (MSRs)
MSRs at fair value
Nationstar recognizes MSRs related to all existing residential mortgage loans transferred to a third party in a transfer that meets the requirements for sale accounting and for which the servicing rights are retained. Additionally, Nationstar may acquire the rights to service residential mortgage loans that do not relate to assets transferred by Nationstar through the purchase of these rights from third parties.
Nationstar identifies MSRs related to all existing forward residential mortgage loans transferred to a third party in a transfer that meets the requirements for sale accounting or through the acquisition of rights to service forward residential mortgage loans that do not relate to assets transferred by Nationstar through the purchase of these rights from third parties as a class of MSR. Nationstar applies fair value accounting to this class of MSRs, with all changes in fair value recorded as charges or credits to servicing fee income in accordance with ASC 860-50, Servicing Assets and Liabilities.

MSRs arise from contractual agreements between Nationstar and investors in mortgage securities and mortgage loans. Nationstar records MSR assets when it sells loans on a servicing-retained basis, at the time of securitization or through the acquisition or assumption of the right to service a financial asset. Under these contracts, Nationstar performs loan servicing functions in exchange for fees and other remuneration.
The fair value of the MSRs is based upon the present value of the expected future cash flows related to servicing these loans. Nationstar receives a base servicing fee ranging from 0.25% to 0.50% annually on the remaining outstanding principal balances of the loans. The servicing fees are collected from investors. Nationstar determines the fair value of the MSRs by the use of a cash flow model that incorporates prepayment speeds, discount rate, and other assumptions (including servicing costs) that management believes are consistent with the assumptions other major market participants use in valuing the MSRs. Certain of the forward loans underlying the MSRs are prime agency and government conforming residential forward mortgage loans and as such are more interest rate sensitive whereas the remaining MSRs are more credit sensitive. The nature of the forward loans underlying the MSRs affects the assumptions that management believes other major market participants use in valuing the MSRs. Nationstar obtains third-party valuations for a portion of its MSRs to assess the reasonableness of the fair value calculated by the cash flow model.
Certain of the forward loans underlying the mortgage servicing rights carried at fair value that are owned by Nationstar are credit sensitive in nature and the value of these mortgage servicing rights are more likely to be affected from changes in credit losses than from interest rate movement. The remaining forward loans underlying Nationstar’s MSRs held at fair value are prime agency and government conforming residential mortgage loans for which the value of these MSRs are more likely to be affected from interest rate movement than changes in credit losses.
Nationstar used the following weighted average assumptions in estimating the fair value of MSRs for the dates indicated:
 
Credit Sensitive MSRs
September 30, 2012
 
December 31, 2011
Discount rate
17.12
%
 
25.71
%
Total prepayment speeds
20.74
%
 
15.80
%
Expected weighted-average life
4.49 years

 
5.15 years

Credit losses
21.35
%
 
35.42
%
Interest Rate Sensitive MSRs
September 30, 2012
 
December 31, 2011
Discount rate
10.62
%
 
10.46
%
Total prepayment speeds
18.63
%
 
19.02
%
Expected weighted-average life
4.79 years

 
5.04 years

Credit losses
9.59
%
 
9.73
%



The activity of MSRs carried at fair value is as follows for the dates indicated (in thousands): 
 
Nine months ended September 30, 2012
 
Year ended December 31, 2011
Fair value at the beginning of the period
$
251,050

 
$
145,062

Additions:

 

Servicing resulting from transfers of financial assets
37,578

 
36,474

Recognition of servicing assets from derecognition of variable interest entities
—

 
5,714

Purchases of servicing assets
346,874

 
102,800

Changes in fair value:

 

Due to changes in valuation inputs or assumptions used in the valuation model
6,669

 
(14,207
)
Other changes in fair value
(49,479
)
 
(24,793
)
Fair value at the end of the period
$
592,692

 
$
251,050

Unpaid principal balance of forward loans serviced for others
 
 
 
Credit sensitive loans
$
106,076,630

 
$
32,408,623

Interest sensitive loans
14,776,208

 
11,844,831

Total owned loans
$
120,852,838

 
$
44,253,454



The following table shows the hypothetical effect on the fair value of the MSRs using various unfavorable variations of the expected levels of certain key assumptions used in valuing these assets at September 30, 2012 and December 31, 2011 (in thousands):

 
Discount Rate
 
Total Prepayment
Speeds
 
Credit Losses
 
100 bps
Adverse
Change
200 bps
Adverse
Change
 
10%
Adverse
Change
20%
Adverse
Change
 
10%
Adverse
Change
20%
Adverse
Change
September 30, 2012
 
 
 
 
 
 
 
 
 Mortgage servicing rights
$
(17,284
)
$
(32,796
)
 
$
(67,848
)
$
(137,087
)
 
$
(50,922
)
$
(107,768
)
December 31, 2011
 
 
 
 
 
 
 
 
 Mortgage servicing rights
$
(6,640
)
$
(12,929
)
 
$
(13,281
)
$
(25,215
)
 
$
(5,081
)
$
(10,944
)


These sensitivities are hypothetical and should be evaluated with care. The effect on fair value of a 10% variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors (e.g., a decrease in total prepayment speeds may result in an increase in credit losses), which could impact the above hypothetical effects.
MSRs at amortized cost
Additionally, Nationstar has acquired servicing rights for reverse mortgage loans. For this class of servicing rights, Nationstar applies the amortization method (i.e., lower of cost or market) with the capitalized cost of the MSRs amortized in proportion and over the period of the estimated net future servicing income and recognized as an adjustment to servicing fee income. The expected period of the estimated net servicing income is based, in part, on the expected prepayment period of the underlying reverse mortgages. This class of MSRs is periodically evaluated for impairment. For purposes of measuring impairment, MSRs are stratified based on predominant risk characteristics of the underlying serviced loans. These risk characteristics include loan type (fixed or adjustable rate), term and interest rate. Impairment, if any, represents the excess of amortized cost of an individual stratum over its estimated fair value and is recognized through a valuation allowance.
As of September 30, 2012, Nationstar owns the right to service certain reverse mortgage MSRs with an unpaid principal balance of $27.3 billion. The initial carrying amount of these MSRs is based on the relative fair value of the purchased assets and liabilities including reverse mortgage interests. These MSRs are subsequently accounted for using the amortization method. Amortization / accretion is recorded as service fee income on the statement of operations and comprehensive income. Nationstar utilizes a variety of assumptions in assessing the fair value of its servicing assets or liabilities, with the primary assumptions including discount rates and the expected weighted average life. At September 30, 2012, no impairment was identified. Interest and servicing fees collected on reverse mortgage interests are included as a component of either interest or service fee income.

The activity of MSRs carried at amortized cost is as follows for the date indicated (in thousands):
 
 
Nine months Ended
 
September 30, 2012
 
Assets
 
Liabilities
Activity of MSRs at amortized cost
 
 
 
Balance at the beginning of the period
$
—

 
$
—

Additions:
 
 
 
Purchase /Assumptions of servicing rights/obligations
9,000

 
86,553

Deductions:
 
 
 
Amortization/Accretion
(964
)
 
(4,240
)
Balance at end of the period
$
8,036

 
$
82,313


Subserviced loans
In addition to the two classes of MSRs that Nationstar services for others, Nationstar also subservices loans on behalf of owners of MSRs or loans for a fee. Nationstar has no recorded value for its subservicing arrangements. At September 30, 2012 and December 31, 2011, the unpaid principal balances under subservicing arrangements were $46.2 billion and $53.7 billion, respectively.
Total servicing and ancillary fees from Nationstar’s servicing portfolio (including subservicing) of residential mortgage loans are presented in the following table for the periods indicated (in thousands):
 
 
For the three months ended September 30,
 
For the nine months ended September 30,
 
2012
2011
 
2012
2011
Servicing fees
$
95,281

$
48,141

 
$
223,255

$
133,338

Ancillary fees
35,355

25,772

 
84,893

62,848

Total servicing and ancillary fees
$
130,636

$
73,913

 
$
308,148

$
196,186

Other Assets
Other Assets
Other Assets
Other assets consisted of the following (in thousands):
 
 
September 30, 2012
 
December 31, 2011
Interest rate locks (see Note 10)
$
112,628

 
$
11,302

Deposit in escrow for ResCap acquisition
72,000

 
—

Loans subject to repurchase right from Ginnie Mae
58,534

 
35,735

Deferred financing costs
43,501

 
12,059

Margin call deposits
29,784

 
4,518

Equity method investment
8,994

 
6,493

Prepaid expenses
6,445

 
4,286

Unsecured loans
1,803

 
1,827

Deposits pending on mortgage servicing rights acquisitions
1,798

 
28,904

Other
2,872

 
1,057

Total other assets
$
338,359

 
$
106,181


In conjunction with Nationstar's definitive agreement to acquire certain assets from Residential Capital, LLC (see Note 23), Nationstar was required to place in escrow $72.0 million toward the purchase price. Also, as a part of the transaction, Newcastle Investment Corp. (Newcastle) remitted $25.2 million to Nationstar toward the escrow payment. Such amount has been recorded in payables and accrued liabilities in the Company's consolidated balance sheet and would be repaid to Newcastle in the event that the agreement is not consummated.
Deposits pending on mortgage servicing rights acquisitions primarily consist of amounts transferred to third parties for the future acquisition of mortgage servicing. In December 2011, Nationstar entered into an agreement with a financial institution to acquire the rights to service reverse mortgages with an unpaid principal balance of approximately $9.5 billion, of which the underlying reverse mortgages are currently owned by an unaffiliated GSE. The purchase of these servicing rights was completed upon the approval of the GSE which was received in June 2012 . Upon execution of the purchase, Nationstar assumed responsibility for advance obligations on the underlying reverse mortgage loans. Nationstar paid $9.0 million for the purchase of these servicing rights which had previously been deposited with the financial institution. Also, as of December 31, 2011, Nationstar had placed in escrow $17.9 million relating to the purchase of the mortgage servicing rights and related outstanding advance balances with the same financial institution. Such purchase was completed in January 2012 and these escrow amounts were released. In addition, Nationstar has entered into separate agreements to purchase forward mortgage servicing rights. These amounts are carried as deposits on acquired servicing rights acquisitions until the underlying forward residential mortgage loan balances are transferred to Nationstar. Nationstar has deposits with a counterparty for servicing rights on forward mortgages for $1.8 million as of September 30, 2012 that are substantially expected to be originated and transferred to Nationstar during the fourth quarter of 2012, and $2.0 million as of December 31, 2011 that were originated and transferred to Nationstar during the first quarter of 2012.
For certain loans sold to GNMA (Ginnie Mae), Nationstar as the servicer has the unilateral right to repurchase without Ginnie Mae’s prior authorization any individual loan in a Ginnie Mae securitization pool if that loan meets certain criteria, including being delinquent greater than 90 days. Once Nationstar has the unilateral right to repurchase the delinquent loan, Nationstar has effectively regained control over the loan, and under GAAP, must re-recognize the loan on its balance sheet and establish a corresponding repurchase liability regardless of Nationstar’s intention to repurchase the loan. Nationstar’s re-recognized loans included in other assets and the corresponding liability in payables and accrued liabilities was $58.5 million at September 30, 2012 and $35.7 million at December 31, 2011.
In March 2011, Nationstar acquired a 22% interest in ANC Acquisition LLC (ANC) for an initial investment of $6.6 million. ANC is the parent company of National Real Estate Information Services, LP (NREIS), a real estate services company. In March 2012, FIF contributed its 13% investment in ANC to Nationstar, increasing the overall investment to 35%. As Nationstar is able to exercise significant influence, but not control, over the policies and procedures of the entity, and Nationstar owns less than 50% of the voting interests, Nationstar applies the equity method of accounting. NREIS, an ancillary real estate services and vendor management company, offers comprehensive settlement and property valuation services for both originations and default management channels. Direct or indirect product offerings include title insurance agency, tax searches, flood certification, default valuations, full appraisals and broker price opinions.

A summary of the assets, liabilities, and operations of ANC as of the following periods are presented in the following tables (in thousands):
 
September 30, 2012
 
December 31, 2011
ASSETS
 
 
 
Cash
$
3,259

 
$
2,486

Accounts receivable
3,837

 
5,296

Receivables from affiliates
388

 
92

Equity method investments
1,482

 
2,788

Property and equipment, net
2,092

 
1,995

Goodwill and other intangible assets
33,548

 
33,876

Other assets
820

 
590

Total assets
$
45,426

 
$
47,123

LIABILITIES
 
 
 
Notes payable
$
4,724

 
$
4,724

Payables and accrued liabilities
16,049

 
13,236

Total liabilities
$
20,773

 
$
17,960

 
 
Three months ended September 30,
 
Nine months ended September 30,
 
From Acquisition through September 30,
 
2012
 
2011
 
2012
 
2011
REVENUES
 
 
 
 
 
 
 
Sales
$
12,917

 
$
13,181

 
$
41,296

 
$
25,382

Cost of sales
(10,447
)
 
(10,871
)
 
(31,878
)
 
(21,593
)
Net sales revenues
2,470

 
2,310

 
9,418

 
3,789

OTHER (EXPENSE)/INCOME
 
 
 
 
 
 
 
Operating costs
(4,841
)
 
(5,054
)
 
(13,903
)
 
(9,004
)
Income from equity method investments
675

 
771

 
1,930

 
1,176

Depreciation and amortization
(377
)
 
(180
)
 
(1,138
)
 
(359
)
Other (expense)/income
(42
)
 
136

 
(111
)
 
39

Gain/(loss) from discontinued operations
21

 
(27
)
 
(14
)
 
(54
)
Total expense
(4,564
)
 
(4,354
)
 
(13,236
)
 
(8,202
)
Net loss
$
(2,094
)
 
$
(2,044
)
 
$
(3,818
)
 
$
(4,413
)

Nationstar recorded a net charge to earnings related to loss on equity method investments of $0.7 million and $1.3 million for the three and nine months ended September 30, 2012, respectively, a $0.5 million loss related to the three months ended September 30, 2011 and a $1.0 million loss related to the period from acquisition through September 30, 2011, which is included as a component of other fee income in Nationstar’s consolidated statement of operations.
Payables and Accrued Liabilities
Payables and Accrued Liabilities
Payables and Accrued Liabilities

Payables and accrued liabilities consist of the following (in thousands):

 
September 30, 2012

 
December 31, 2011

MSR purchases payable including advances
$
310,609

 
$
8,204

Mortgage insurance premiums and reserves
70,344

 
19,162

Loans subject to repurchase from Ginnie Mae
58,534

 
35,735

Payables to securitization trusts
37,607

 
10,665

Reverse mortgage payables
46,000

 
—

Accrued bonus and payroll
43,511

 
21,236

Accrued interest
39,902

 
10,225

Government sponsored entities
26,797

 
18,728

Deposit from MSR co-investor for ResCap
25,200

 
—

Taxes
14,544

 
154

Repurchase reserves
15,055

 
10,026

Legal and professional fees
12,076

 
5,931

Cancelled lease reserves
7,319

 
9,160

Servicing Payables
6,628

 
—

Other
48,142

 
34,563

Total payables and accrued liabilities
$
762,268

 
$
183,789

Derivative Financial Instruments
Derivative Financial Instruments
Derivative Financial Instruments
Nationstar enters into interest rate lock commitments (IRLCs) with prospective borrowers. These commitments are carried at fair value in accordance with ASC 815, Derivatives and Hedging. ASC 815 clarifies that the expected net future cash flows related to the associated servicing of a loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. The estimated fair values of IRLCs are based on quoted market values and are recorded in other assets in the consolidated balance sheets. The initial and subsequent changes in the value of IRLCs are a component of gain on mortgage loans held for sale.
Nationstar actively manages the risk profiles of its IRLCs and mortgage loans held for sale on a daily basis. To manage the price risk associated with IRLCs, Nationstar enters into forward sales of MBS in an amount equal to the portion of the IRLC expected to close, assuming no change in mortgage interest rates. In addition, to manage the interest rate risk associated with mortgage loans held for sale, Nationstar enters into forward sale commitments to deliver mortgage loan inventory to investors. The estimated fair values of forward sales of MBS and forward sale commitments are based on quoted market values and are recorded as a component of other assets or liabilities and mortgage loans held for sale, respectively, in the consolidated balance sheets. The initial and subsequent changes in value on forward sales of MBS and forward sale commitments are a component of gain on mortgage loans held for sale.
Periodically, Nationstar enters into interest rate swap agreements to hedge the interest payment on the warehouse debt. These interest rate swap agreements generally require Nationstar to pay a fixed interest rate and receive a variable interest rate based on LIBOR. Unless designated as an accounting hedge, Nationstar records losses on interest rate swaps as a component of gain/(loss) on interest rate swaps and caps in Nationstar’s consolidated statements of operations. Unrealized losses on undesignated interest rate derivatives are separately disclosed under operating activities in the consolidated statements of cash flows. Interest rate swaps designated as cash flow hedges under ASC 815 are recorded at fair value on the Company’s consolidated balance sheet, with any changes in fair value related to the effective portion of the hedge being recorded as an adjustment to other comprehensive income. To qualify as a cash flow hedge, the hedge must be highly effective at reducing the risk associated with the exposure being hedged and must be formally designated at hedge inception. Nationstar considers a hedge to be highly effective if the change in fair value of the derivative hedging instrument is within 80% to 125% of the change in the fair value of the hedged item attributable to the hedged risk. Ineffective portions of the cash flow hedge are reflected in earnings as they occur as a component of interest expense.
Historically, Nationstar has entered into interest rate swap agreements to hedge the interest payments associated with its outstanding floating rate financing servicer advance facilities. Prior to September 30, 2012, certain of these derivatives were designated as cash flow hedges and were recorded at fair value on Nationstar's balance sheet, with any change in fair value being recorded as an adjustment to other comprehensive income. On September 30, 2012, the Company dedesignated the remainder of the interest rate swap agreements, with any further changes in fair value being recorded as a charge to gain or loss in interest rate swaps and caps in Nationstar's consolidated statement of operations.
In conjunction with the Reorganization, FIF contributed outstanding interest rate swaps in March 2012 to Nationstar. These interest rate swaps on ABS debt generally require Nationstar to pay a fixed interest rate and receive a variable interest rate based on LIBOR. The outstanding interest rate swaps have not been designated as accounting hedges during the nine months ended September 30, 2012. Any changes in fair value are recorded as a component of gains or losses on interest rate swaps and caps in Nationstar’s consolidated statement of operations.
Associated with the Company's derivatives is $29.8 million in margin call deposits recorded in other assets on the Company's balance sheet as of September 30, 2012.

The following table shows the effect of derivative financial instruments that were designated as accounting hedges for the three and nine months ended September 30, 2012 and 2011.
The Effect of Derivative Instruments on the Statement of Operations
(in thousands)
Derivatives in ASC 815 Cash Flow Hedging Relationships
 
Amount of
Gain (Loss)
Recognized
in OCI on
Derivative
(Effective
Portion)
 
Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
 
Amount of
Gain (Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
 
Location of Gain
(Loss) Recognized
in Income on
Derivative
(Ineffective
Portion and
Amount Excluded
from
Effectiveness
Testing)
 
Amount of  Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion)
For the three months ended September 30, 2012
Interest Rate Swap
 
$
—

 
Interest Expense
 
$
—

 
Interest Expense
 
$
423

For the three months ended September 30, 2011
Interest Rate Swap
 
$
—

 
Interest Expense
 
$
—

 
Interest Expense
 
$
617

For the nine months ended September 30, 2012
Interest Rate Swap
 
$
—

 
Interest Expense
 
$
—

 
Interest Expense
 
$
—

For the nine months ended September 30, 2011
Interest Rate Swap
 
$
(1,071
)
 
Interest Expense
 
$
582

 
Interest Expense
 
$
2,032


As of September 30, 2012, there was no credit risk related to contingent features in any of the Company's derivative agreements.
The following tables provide the outstanding notional balances and fair values of outstanding positions for the dates indicated, and recorded gains/(losses) during the periods indicated (in thousands):
 
 
Expiration
Dates
 
Outstanding
Notional
 
Fair
Value
 
Recorded
Gains /
(Losses)
For the nine months ended September 30, 2012
 
 
 
 
 
 
 
MORTGAGE LOANS HELD FOR SALE
 
 
 
 
 
 
 
Loan sale commitments
2012
 
$
4,175

 
$
212

 
$
(422
)
OTHER ASSETS
 
 
 
 
 
 
 
IRLCs
2012
 
4,353,327

 
112,628

 
101,326

LIABILITIES
 
 
 
 
 
 
 
 Interest rate swaps and caps
2012-2015
 
648,940

 
7,041

 
(501
)
Interest rate swaps on ABS debt (1) 
2012-2017
 
894,363

 
1,632

 
(1,201
)
        Forward MBS trades
2012
 
2,838,185

 
29,162

 
(23,332
)
 
 
 
 
 
 
 
 
For the year ending December 31, 2011
 
 
 
 
 
 
 
MORTGAGE LOANS HELD FOR SALE
 
 
 
 
 
 
 
Loan sale commitments
2012
 
$
28,047

 
$
634

 
$
592

OTHER ASSETS
 
 
 
 
 
 
 
IRLCs
2012
 
736,377

 
11,302

 
6,598

LIABILITIES
 
 
 
 
 
 
 
Interest rate swaps and caps
2012-2015
 
193,500

 
6,540

 
1,261

Forward MBS trades
2012
 
691,725

 
5,830

 
(9,792
)
Interest rate swap, subject to ABS nonrecourse debt (2) 
—
 
—

 
—

 
(8,058
)
 
(1)
In March 2012, Nationstar received interest rate swaps from FIF as a part of the reorganization.
(2)
In December 2011, Nationstar sold its remaining variable interest in a securitization trust that had been a consolidated VIE since January 1, 2010 and deconsolidated the VIE. Upon deconsolidation of this VIE, Nationstar derecognized the related ABS nonrecourse debt and therefore the underlying interest rate swap, subject to ABS nonrecourse debt.
Indebtedness
Indebtedness
Indebtedness
Notes Payable
A summary of the balances of notes payable for the dates indicated is presented below (in thousands).
 
 
September 30, 2012
 
December 31, 2011
 
Outstanding
 
Collateral
Pledged
 
Outstanding
 
Collateral
Pledged
Servicing Segment Notes Payable
 
 
 
 
 
 
 
MBS advance financing facility
$
178,455

 
$
197,934

 
$
179,904

 
$
182,096

Securities repurchase facility (2011)
11,774

 
55,603

 
11,774

 
55,603

2010-ABS advance financing facility
189,038

 
228,898

 
219,563

 
249,499

2011-1 Agency advance financing facility
159,945

 
181,803

 
25,011

 
28,811

MSR note
6,015

 
13,296

 
10,180

 
16,230

2012-AW Agency advance financing facility
100,000

 
124,551

 
—

 
—

2012-C ABS advance financing facility
562,366

 
692,635

 
—

 
—

2012-R ABS advance financing facility
328,793

 
392,360

 
—

 
—

2012-W ABS advance financing facility
367,797

 
454,402

 
—

 
—

Reverse participations financing facility
18,801

 
21,298

 
—

 
—

Originations Segment Notes Payable

 

 

 

$375 million warehouse facility
195,703

 
211,820

 
46,810

 
51,040

$150 million warehouse facility
155,323

 
162,705

 
251,722

 
265,083

$250 million warehouse facility (2011)
141,204

 
147,941

 
7,310

 
7,672

$100 million warehouse facility (2009)
87,659

 
91,311

 
16,047

 
16,715

ASAP+ facility
29,443

 
28,800

 
104,858

 
104,006

Total notes payable
$
2,532,316

 
$
3,005,357

 
$
873,179

 
$
976,755


Servicing Segment Notes Payable
MBS advance financing facility - Nationstar has a one-year committed facility agreement with a GSE, under which Nationstar may transfer to the GSE certain servicing advance receivables against the transfer of funds by the GSE. This facility has the capacity to purchase up to $325 million in eligible servicing advance receivables. The interest rate is based on LIBOR plus a spread of 2.50%. The maturity date of this facility is currently December 2012.
Securities repurchase facility (2011) - In December 2011, Nationstar entered into a securities repurchase facility with a financial services company that was amended in February 2012 to extend the expiration to February 22, 2013. The MRA states that Nationstar may from time to time transfer to the financial services company eligible securities against the transfer of funds by the financial services company, with a simultaneous agreement by the financial services company to transfer such securities to Nationstar at a certain date, or on demand by Nationstar, against the transfer of funds from Nationstar. Additionally, the financial services company may elect to extend the transfer date for an additional 90 days at mutually agreed upon terms. The interest rate is based on LIBOR plus a margin of 3.50%. As of September 30, 2012, Nationstar has pledged the Company’s $55.6 million outstanding retained interest in the outstanding Nonrecourse debt—Legacy Assets securitization which was structured as a financing.
2010-ABS advance financing facility - In December 2010, Nationstar executed the 2010-ABS Advance Financing Facility with a financial institution. This facility has the capacity to purchase up to $300 million of advance receivables. The interest rate is based on LIBOR plus a spread of 3.00%. This facility matures in May 2014. This debt is nonrecourse to Nationstar.
2011-1 Agency advance financing facility - In October 2011, Nationstar executed the 2011-1 Agency Advance Financing Facility with a financial institution. This facility has the capacity to borrow up to $300 million and the interest rate is based on LIBOR plus a spread ranging from 2.5% to 6.50% depending upon class of the note. In October 2012, Nationstar amended the agreement to increase the borrowing capacity to $600 million. The maturity date of this facility is October 2013. This facility is secured by servicing advance receivables and is nonrecourse to Nationstar.
MSR note - In connection with the October 2009 MSR acquisition, Nationstar executed a four-year note agreement with a GSE. As collateral for this note, Nationstar has pledged Nationstar’s rights, title, and interest in the acquired servicing portfolio. The interest rate is based on LIBOR plus 2.50%. The maturity date of this facility is October 2013.
2012-AW Agency advance financing facility - In June 2012, Nationstar executed the 2012-AW Agency Advance Financing Facility with a financial institution. This facility has the capacity to borrow up to $100 million and the interest rate is based on LIBOR plus a spread of 2.50%. The maturity date of this facility is June 2013. This facility is secured by servicing advance receivables and is nonrecourse to Nationstar.
2012-C ABS advance financing facility - In June 2012, Nationstar executed the 2012-C ABS Advance Financing Facility with a financial institution. This facility has the capacity to borrow up to $600 million and the interest rate is based on LIBOR plus a spread ranging from 3.50% to 4.50%. The maturity date of this facility is June 2014. This facility is secured by servicing advance receivables and is nonrecourse to Nationstar.
2012-R ABS advance financing facility - In June 2012, Nationstar executed the 2012-R ABS Advance Financing Facility with a financial institution. This facility has the capacity to borrow up to $350 million and the interest rate is based on LIBOR plus a spread ranging from 3.37% to 8.00%. The maturity date of this facility is June 2014. This facility is secured by servicing advance receivables and is nonrecourse to Nationstar.
2012-W ABS advance financing facility - In June 2012, Nationstar executed the 2012-W ABS Advance Financing Facility with a financial institution. This facility has the capacity to borrow up to $450 million and the interest rate is based on LIBOR plus a spread of 3.75%. The maturity date of this facility is June 2013. This facility is secured by servicing advance receivables and is nonrecourse to Nationstar.
Reverse participations and max claim buyouts financing facility - In June 2012, Nationstar executed a reverse participations and max claim buyouts financing facility with a financial institution. This facility has capacity to borrow up to $150 million and the interest rate is based on LIBOR plus a spread of 4.00%. The maturity date of this facility is June 2014. This facility is partially secured by reverse mortgage loans.

Originations Segment Notes Payable
$375M warehouse facility - In February 2010, Nationstar executed a Master Repurchase Agreement (MRA) with a financial institution, which will expire in January 2013. The MRA states that from time to time Nationstar may enter into transactions, for an aggregate amount of $375 million, in which Nationstar agrees to transfer to the same financial institution certain mortgage loans against the transfer of funds by the same financial institution, with a simultaneous agreement by the same financial institution to transfer such mortgage loans to Nationstar at a date certain, or on demand by Nationstar, against the transfer of funds from Nationstar. In June 2012, Nationstar amended the agreement to increase the borrowing capacity from $175 million to $375 million. The interest rate is based on LIBOR plus a spread ranging from 1.75% to 2.50%.
$150M warehouse facility - Nationstar has an MRA with a financial services company, which was amended in February 2012 to expire in August 2013 and reduce the committed amount from $300 million to $150 million. The MRA states that from time to time Nationstar may enter into transactions in which Nationstar agrees to transfer to the financial services company certain mortgage loans or MBS against the transfer of funds by the financial services company, with a simultaneous agreement by the financial services company to transfer such mortgage loans or MBS to Nationstar at a certain date, or on demand by Nationstar, against the transfer of funds from Nationstar. The interest rate is based on LIBOR plus a margin of 3.25%.
$250M warehouse facility (2011) - In March 2011, as amended, Nationstar executed an MRA with a financial institution, under which Nationstar may enter into transactions, for an aggregate amount of $250 million in which Nationstar agrees to transfer to the same financial institution certain mortgage loans and certain securities against the transfer of funds by the same financial institution, with a simultaneous agreement by the same financial institution to transfer such mortgage loans and securities to Nationstar at a date certain, or on demand by Nationstar, against the transfer of funds from Nationstar. The maturity is August 2013 with the interest rate based on LIBOR plus a spread of 2.25% to 3.00%, which varies based on the underlying transferred collateral.
$100M warehouse facility (2009) - In October 2009, Nationstar executed a MRA with a financial institution. This MRA states that from time to time Nationstar may enter into transactions, for an aggregate amount of $100 million, in which Nationstar agrees to transfer to the financial institution certain mortgage loans against the transfer of funds by the financial institution, with a simultaneous agreement by the financial institution to transfer such mortgage loans to Nationstar at a certain date, or on demand by Nationstar, against the transfer of funds from Nationstar. The interest rate is based on LIBOR plus a spread of 3.25%. The maturity date of this MRA with the financial institution is January 2013.
ASAP + facility - During 2009, Nationstar began executing As Soon As Pooled Plus agreements with a GSE, under which Nationstar transfers to the GSE eligible mortgage loans that are to be pooled into the GSE MBS against the transfer of funds by the GSE. The interest rate is based on LIBOR plus a spread of 1.50%. These agreements typically have a maturity of up to 45 days.
Unsecured Senior Notes
A summary of the balances of unsecured senior notes is presented below (in thousands):
 
September 30, 2012
 
December 31, 2011

$285 million face value, 10.875% interest rate payable semi-annually, due April 2015
$
281,307

 
$
280,199

$375 million face value, 9.625% interest rate payable semi-annually, due May 2019
380,366

 
—

$400 million face value, 7.875% interest rate payable semi-annually, due October 2020
$
400,750

 
$
—

Total
$
1,062,423

 
$
280,199


In March 2010, Nationstar completed the offering of $250.0 million of unsecured senior notes, which were issued with an issue discount of $7.0 million for net cash proceeds of $243.0 million, with a maturity date of April 2015. In December 2011, Nationstar completed an additional offering of $35.0 million of unsecured senior notes under the same indenture. The additional offering was issued with an issue discount of $0.3 million for net cash proceeds of $34.7 million. These unsecured senior notes pay interest semi-annually at an interest rate of 10.875%. These unsecured notes were issued in a private placement and were subsequently exchanged for an equal principal amount of notes registered under the Securities Act of 1933 with substantially identical terms.
In April 2012 and in July 2012, Nationstar completed an offering of $275.0 million and $100.0 million, respectively, in senior unsecured notes, the proceeds of these offerings were $269.5 million and $103.3 million respectively, with a maturity of May 2019. These unsecured senior notes pay interest semi-annually at an interest rate of 9.625%. These unsecured notes were issued in a private placement and have not been registered under the Securities Act of 1933.
In September 2012, Nationstar completed two offerings of $300.0 million and $100.0 million of senior unsecured notes, the proceeds of these offerings were $295.5 million and $99.3 million, respectively, with a maturity of October 2020. These unsecured senior notes pay interest semi-annually at an interest rate of 7.875%. These unsecured notes were issued in a private placement and have not been registered under the Securities Act of 1933.
The indentures for the unsecured senior notes contain various covenants and restrictions that limit the Company's, Nationstar's, or certain of its 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 expected maturities of Nationstar's senior unsecured notes based on contractual maturities are as follows (in thousands).
Year
Amount
2013
$
—

2014
—

2015
285,000

2016
—

2017
—

Thereafter
775,000

Total
$
1,060,000


Legacy Asset and Other Financing
Nonrecourse Debt–Legacy Assets
In November 2009, Nationstar completed the securitization of approximately $222 million of ABS, which was structured as a secured borrowing. This structure resulted in Nationstar carrying the securitized loans as mortgages on Nationstar’s consolidated balance sheet and recognizing the asset-backed certificates acquired by third parties as nonrecourse debt, totaling approximately $101.9 million and $112.5 million at September 30, 2012, and December 31, 2011, respectively. The principal and interest on these notes are paid using the cash flows from the underlying mortgage loans, which serve as collateral for the debt. The interest rate paid on the outstanding securities is 7.50%, which is subject to an available funds cap. The total outstanding principal balance on the underlying mortgage loans serving as collateral for the debt was approximately $344.2 million and $373.1 million at September 30, 2012 and December 31, 2011, respectively. Accordingly, the timing of the principal payments on this nonrecourse debt is dependent on the payments received on the underlying mortgage loans. The unpaid principal balance on the outstanding notes was $118.6 million and $130.8 million at September 30, 2012 and December 31, 2011, respectively.
Excess Spread Financing Debt at Fair Value
In conjunction with Nationstar's acquisition of certain mortgage servicing rights on various pools of residential mortgage loans (the Portfolios), Nationstar has entered into sale and assignment agreements which are treated as financings with an indirect wholly-owned subsidiary of Newcastle. Nationstar is an affiliate of Newcastle’s manager. Nationstar, in transactions accounted for as financing arrangements, sold to Newcastle the right to receive 65% of the excess cash flow generated from the Portfolios after receipt of a fixed basic servicing fee per loan.
Nationstar retains all ancillary income associated with servicing the Portfolios and 35% of the excess cash flow after receipt of the fixed basic servicing fee. Nationstar continues to be the servicer of the Portfolios and provides all servicing and advancing functions. Newcastle has no prior or ongoing obligations associated with the Portfolios.
Contemporaneous with the above, Nationstar entered into refinanced loan agreements with Newcastle. Should Nationstar refinance any loan in the Portfolios, subject to certain limitations, Nationstar will be required to transfer the new loan or a replacement loan of similar economic characteristics into the Portfolios. The new or replacement loan will be governed by the same terms set forth in the sale and assignment agreement described above.

The total carrying amount of the outstanding excess spread financing agreements was $255.5 million and $44.6 million at September 30, 2012 and December 31, 2011, respectively.
Participating Interest Financing
Participating interest financing represent the issuance of pools of Home Equity Conversion Mortgage Backed Securities (HMBS) to third-party security holders which are guaranteed by certain GSEs. Nationstar has accounted for the transfer of these advances in the related Home Equity Conversion Mortgages (HECM) loans as secured borrowings, retaining the initial Reverse mortgage interests on its balance sheet, and recording the pooled HMBS as participating interest financing liabilities on the Company’s balance sheet. Monthly cash flows generated from the HECM loans are used to service the HMBS. The interest rate is based on the underlying HMBS rate with a range of 0.53% to 7.17%. The participating interest financing was $415.4 million at September 30, 2012. There was none outstanding at December 31, 2011.
Financial Covenants
As of September 30, 2012, Nationstar was in compliance with its covenants on its borrowing arrangements and credit facilities. These covenants generally relate to Nationstar’s tangible net worth, liquidity reserves, and leverage requirements.
General and Administrative Expenses
General and Administrative Expenses
General and Administrative Expenses
General and administrative expenses consist of the following for the dates indicated (in thousands):
 
 
For the three months ended
 
For the nine months ended
 
September 30,
2012
September 30,
2011
 
September 30,
2012
September 30,
2011
Servicing
$
13,893

$
7,106

 
$
50,530

$
16,101

Legal and professional fees
18,251

8,508

 
32,818

13,145

Depreciation and amortization
2,973

991

 
6,358

2,551

Equipment
2,450

1,251

 
5,569

3,245

Postage
2,395

1,522

 
5,056

3,937

Travel
2,043

871

 
4,730

2,383

Other
9,580

5,148

 
22,046

15,345

Total general and administrative expenses
$
51,585

$
25,397

 
$
127,107

$
56,707

Income Taxes
Income Taxes
Income Taxes
The financial statements through December 31, 2011 and for the period January 1, 2012 up to Reorganization do not include income tax expense or benefit or any current or deferred income tax assets or liabilities. Nationstar Inc.'s corporate subsidiaries were subject to income taxes prior to the Reorganization, however, income tax expense (primarily state) and related tax liabilities were not material for presentation purposes.
As a result of the Reorganization, Nationstar Inc. and its subsidiaries, including Nationstar, became a new corporate consolidated group for income tax purposes. As a result of the change in income tax status, the Company is required to record deferred taxes on the difference between book and tax bases in assets and liabilities as of the Reorganization date. The net deferred tax asset or liability is recorded through the consolidated statement of operations as a component of income tax expense. As of the Reorganization date, the Company recorded a $70.8 million deferred tax asset for net operating and other loss carryforwards inherited as a result of the Reorganization, and a $16.5 million deferred tax liability related to basis differences in Nationstar's assets and liabilities. In addition, the Company recorded a $54.3 million valuation allowance for deferred tax assets that management concluded will likely not be realized.
The Company recorded an income tax provision of $24.7 million on pretax income for the three months ended September 30, 2012. For the nine months ended September 30, 2012, income tax expense was $40.6 million.
Fair Value Measurements
Fair Value Measurements
Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, provides a definition of fair value, establishes a framework for measuring fair value, and requires expanded disclosures about fair value measurements. The standard applies when GAAP requires or allows assets or liabilities to be measured at fair value and, therefore, does not expand the use of fair value in any new circumstance.
ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tiered fair value hierarchy based on the level of observable inputs used in the measurement of fair value (e.g., Level 1 representing quoted prices for identical assets or liabilities in an active market; Level 2 representing values using observable inputs other than quoted prices included within Level 1; and Level 3 representing estimated values based on significant unobservable inputs). In addition, ASC 820 requires an entity to consider all aspects of nonperformance risk, including its own credit standing, when measuring the fair value of a liability. Under ASC 820, related disclosures are segregated for assets and liabilities measured at fair value based on the level used within the hierarchy to determine their fair values.
The following describes the methods and assumptions used by Nationstar in estimating fair values:
Cash and Cash Equivalents, Restricted Cash – The carrying amount reported in the consolidated balance sheets approximates fair value.
Mortgage Loans Held for Sale – Nationstar originates mortgage loans in the U.S. that it intends to sell to Fannie Mae, Freddie Mac, and Ginnie Mae (collectively, the Agencies). Additionally, Nationstar holds mortgage loans that it intends to sell into the secondary markets via whole loan sales or securitizations. Nationstar measures newly originated prime residential mortgage loans held for sale at fair value.
Mortgage loans held for sale are typically pooled together and sold into certain exit markets, depending upon underlying attributes of the loan, such as agency eligibility, product type, interest rate, and credit quality. Mortgage loans held for sale are valued using a market approach by utilizing either: (i) the fair value of securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk, (ii) current commitments to purchase loans or (iii) recent observable market trades for similar loans, adjusted for credit risk and other individual loan characteristics. As these prices are derived from quoted market prices, Nationstar classifies these valuations as Level 2 in the fair value disclosures.
Mortgage Loans Held for Investment, subject to nonrecourse debt – Legacy Assets – Nationstar determines the fair value of loans held for investment, subject to nonrecourse debt – Legacy Assets using internally developed valuation models. These valuation models estimate the exit price Nationstar expects to receive in the loan’s principal market. Although Nationstar utilizes and gives priority to observable market inputs such as interest rates and market spreads within these models, Nationstar typically is required to utilize internal inputs, such as prepayment speeds, credit losses, and discount rates. These internal inputs require the use of judgment by Nationstar and can have a significant impact on the determination of the loan’s fair value. As these prices are derived from a combination of internally developed valuation models and quoted market prices, Nationstar classifies these valuations as Level 3 in the fair value disclosures.
Mortgage Servicing Rights – Fair Value – Nationstar recognizes MSRs related to all existing residential mortgage loans transferred to a third party in a transfer that meets the requirements for sale accounting and for which the servicing rights are retained. Additionally, Nationstar may acquire the rights to service residential mortgage loans that do not relate to assets transferred by Nationstar through the purchase of these rights from third parties. Nationstar estimates the fair value of its forward MSRs using a process that combines the use of a discounted cash flow model and analysis of current market data to arrive at an estimate of fair value. The cash flow assumptions and prepayment assumptions used in the model are based on various factors, with the key assumptions being mortgage prepayment speeds and discount rates. These assumptions are generated and applied based on collateral stratifications including product type, remittance type, geography, delinquency and coupon dispersion. These assumptions require the use of judgment by Nationstar and can have a significant impact on the determination of the MSR’s fair value. Periodically, management obtains third party valuations of a portion of the portfolio to assess the reasonableness of the fair value calculations provided by the cash flow model. Because of the nature of the valuation inputs, Nationstar classifies these valuations as Level 3 in the fair value disclosures.
Reverse Mortgage Interests – Nationstar’s reverse mortgage advances consist of fees paid to taxing authorities for borrowers' unpaid taxes and insurance, and payments made to borrowers for line of credit draws on reverse mortgages. These advances include due and payable advances, which are recovered upon the foreclosure and sale of the subject property, and defaulted advances that can be securitized. Nationstar estimates the fair value using a market approach by utilizing the fair value of securities backed by similar advances on reverse mortgage loans, adjusted for certain factors. Nationstar classifies these valuations as Level 2 in the fair value disclosures.

REO – Nationstar determines the fair value of REO properties through the use of third-party appraisals and broker price opinions, adjusted for estimated selling costs. Such estimated selling costs include realtor fees and other anticipated closing costs. These values are adjusted to take into account factors that could cause the actual liquidation value of foreclosed properties to be different than the appraised values. This valuation adjustment is based upon Nationstar’s historical experience with REO. REO is classified as Level 3 in the fair value disclosures.
Derivative Instruments – Nationstar enters into a variety of derivative financial instruments as part of its hedging strategy. The majority of these derivatives are exchange-traded or traded within highly active dealer markets. In order to determine the fair value of these instruments, Nationstar utilizes the exchange price or dealer market price for the particular derivative contract; therefore, these contracts are classified as Level 2. In addition, Nationstar enters into IRLCs with prospective borrowers. These commitments are carried at fair value based on fair value of related mortgage loans which is based on observable market data. Nationstar adjusts the outstanding IRLCs with prospective borrowers based on an expectation that it will be exercised and the loan will be funded. IRLCs are recorded in other assets in the consolidated balance sheets. These IRLCs are classified as Level 2 in the fair value disclosures.
Notes Payable – Notes payable consists of outstanding borrowing on Nationstar's warehouse and advance financing facilities. As the underlying warehouse and advance finance facilities bear interest at a rate that is periodically adjusted based on a market index, the carrying amount reported on the consolidated balance sheet approximates fair value. Nationstar classifies these valuations as Level 3 in the fair value disclosures.
Unsecured Senior Notes – The fair value of unsecured senior notes is based on quoted market prices and is considered Level 1 from the market observable inputs used to determine fair value.
Nonrecourse Debt – Legacy Assets – Nationstar estimates fair value based on the present value of future expected discounted cash flows with the discount rate approximating current market value for similar financial instruments. These prices are derived from a combination of internally developed valuation models and quoted market prices, and are classified as Level 3.
Excess Spread Financing – Nationstar estimates fair value based on the present value of future expected discounted cash flows with the discount rate approximating current market value for similar financial instruments. The cash flow assumptions and prepayment assumptions used in the model are based on various factors, with the key assumptions at September 30, 2012 being mortgage prepayment speeds of 12.8%, average life of 4.5 years, and discount rate of 14.4%. Changes in fair value to the excess spread financing are recorded as a component of service fee income in Nationstar's consolidated statement of operations. As these prices are derived from a combination of internally developed valuation models and quoted market prices based on the value of the underlying MSRs, Nationstar classifies these valuations as Level 3 in the fair value disclosures.
Participating Interest Financing – Nationstar estimates the fair value using a market approach by utilizing the fair value of securities backed by similar participating interests in reverse mortgage loans. Nationstar classifies these valuations as Level 2 in the fair value disclosures.

The estimated carrying amount and fair value of Nationstar’s financial instruments and other assets and liabilities measured at fair value on a recurring basis is as follows for the dates indicated (in thousands):
 
 
 
September 30, 2012
 
 
 
Recurring Fair Value Measurements
 
Total Fair Value
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Mortgage loans held for sale(1)
$
703,214

 
$
—

 
$
703,214

 
$
—

Mortgage servicing rights – fair value(1)
592,692

 
—

 
—

 
592,692

Other assets:
 
 
 
 
 
 
 
IRLCs
112,628

 
—

 
112,628

 
—

Total assets
$
1,408,534

 
$
—

 
$
815,842

 
$
592,692

LIABILITIES
 
 
 
 
 
 
 
Derivative financial instruments
 
 
 
 
 
 
 
Interest rate swaps and caps
$
7,041

 
$
—

 
$
7,041

 
$
—

Interest rate swaps on ABS debt
1,632

 
—

 
1,632

 
—

       Forward MBS trades
29,162

 
—

 
29,162

 
—

Excess spread financing (at fair value)
255,484

 
—

 
—

 
255,484

Total liabilities
$
293,319

 
$
—

 
$
37,835

 
$
255,484

 
 
 
December 31, 2011
 
 
 
Recurring Fair Value Measurements
 
Total Fair Value
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Mortgage loans held for sale(1)
$
458,626

 
$
—

 
$
458,626

 
$
—

Mortgage servicing rights – fair value(1)
251,050

 
—

 
—

 
251,050

Other assets:

 

 

 

IRLCs
11,302

 
—

 
11,302

 
—

Total assets
$
720,978

 
$
—

 
$
469,928

 
$
251,050

LIABILITIES
 
 
 
 
 
 
 
Derivative financial instruments
 
 
 
 
 
 
 
Interest rate swaps and caps
$
6,540

 
$
—

 
$
6,540

 
$
—

Forward MBS trades
5,830

 
—

 
5,830

 
—

Excess spread financing (at fair value)
44,595

 
—

 
—

 
44,595

Total liabilities
$
56,965

 
$
—

 
$
12,370

 
$
44,595

(1)
Based on the nature and risks of these assets and liabilities, the Company has determined that presenting them as a single class is appropriate.

The table below presents a reconciliation for all of Nationstar’s Level 3 assets and liabilities measured at fair value on a recurring basis for the dates indicated (in thousands):
 
 
 
ASSETS
 
LIABILITIES
For the three months ended September 30, 2012
 
Mortgage
servicing rights
 
Excess spread
financing
Beginning balance
 
$
596,462

 
$
266,693

Transfers into Level 3
 
—

 
—

Transfers out of Level 3
 
—

 
—

Total gains or losses
 
 
 
 
Included in earnings
 
(22,430
)
 
(2,213
)
Included in other comprehensive income
 
—

 
—

Purchases, issuances, sales and settlements
 
 
 
 
Purchases
 
5,210

 
—

Issuances
 
13,450

 
(1,522
)
Sales
 
—

 
—

Settlements
 
—

 
(7,474
)
Ending balance
 
$
592,692

 
$
255,484

 
 
ASSETS
 
LIABILITIES
For the nine months ended September 30, 2012
 
Mortgage
servicing rights
 
Excess spread
financing
Beginning balance
 
$
251,050

 
$
44,595

Transfers into Level 3
 
—

 
—

Transfers out of Level 3
 
—

 
—

Total gains or losses
 
 
 
 
Included in earnings
 
(42,810
)
 
5,050

Included in other comprehensive income
 
—

 
—

Purchases, issuances, sales and settlements
 
 
 
 
Purchases
 
346,874

 
—

Issuances
 
37,578

 
218,820

Sales
 
—

 
—

Settlements
 
—

 
(12,981
)
Ending balance
 
$
592,692

 
$
255,484

 
 
ASSETS
 
LIABILITIES
For the year ending December 31, 2011
 
Mortgage
servicing rights
 
Excess spread
financing
Beginning balance
 
$
145,062

 
$
—

Transfers into Level 3
 
—

 
—

Transfers out of Level 3
 
—

 
—

Total gains or losses
 
 
 
 
Included in earnings
 
(39,000
)
 
3,060

Included in other comprehensive income
 
—

 
—

Purchases, issuances, sales and settlements
 
 
 
 
Purchases
 
102,800

 
—

Issuances
 
36,474

 
43,742

Sales
 
—

 
—

Settlements
 
5,714

 
(2,207
)
Ending balance
 
$
251,050

 
$
44,595



The table below presents the items which Nationstar measures at fair value on a nonrecurring basis (in thousands).
 
 
Nonrecurring Fair Value
Measurements
 
Total Estimated
Fair Value
 
Total Gain
(Loss) Included
in Earnings
 
Level 1
 
Level 2
 
Level 3
 
 
Three months ended September 30, 2012
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
REO(1)
$
—

 
$
—

 
$
3,193

 
$
3,193

 
$
2,050

Total assets
$
—

 
$
—

 
$
3,193

 
$
3,193

 
$
2,050

Nine months ended September 30, 2012
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
REO(1)
$
—

 
$
—

 
$
3,193

 
$
3,193

 
$
(1,705
)
Total assets
$
—

 
$
—

 
$
3,193

 
$
3,193

 
$
(1,705
)
Year ended December 31, 2011
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
REO(1)
$
—

 
$
—

 
$
3,668

 
$
3,668

 
$
(6,833
)
Total assets
$
—

 
$
—

 
$
3,668

 
$
3,668

 
$
(6,833
)
(1)
Based on the nature and risks of these assets and liabilities, the Company has determined that presenting them as a single class is appropriate.
The table below presents a summary of the estimated carrying amount and fair value of Nationstar’s financial instruments (in thousands).

 
September 30, 2012
 
Carrying
Amount
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Financial assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
430,815

 
$
430,815

 
$
—

 
$
—

Restricted cash
258,858

 
258,858

 
—

 
—

Mortgage loans held for sale
703,214

 
—

 
703,214

 
—

Mortgage loans held for investment, subject to nonrecourse debt – Legacy assets
238,178

 
—

 
—

 
221,852

Reverse mortgage interests
452,886

 
—

 
492,765

 
—

Derivative instruments
112,628

 
—

 
112,628

 
—

Financial liabilities:
 
 
 
 
 
 
 
Notes payable
2,532,216

 
—

 
—

 
2,532,216

Unsecured senior notes
1,062,423

 
1,129,060

 
—

 
—

Derivative financial instruments
37,835

 
—

 
37,835

 
—

Nonrecourse debt - Legacy assets
101,898

 
—

 
—

 
103,727

Excess spread financing
255,484

 
—

 
—

 
255,484

Participating interest financing
415,448

 
—

 
417,650

 
—

 
December 31, 2011
 
Carrying
Amount
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Financial assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
62,445

 
$
62,445

 
$
—

 
$
—

Restricted cash
71,499

 
71,499

 
—

 
—

Mortgage loans held for sale
458,626

 
—

 
458,626

 
—

Mortgage loans held for investment, subject to nonrecourse debt – Legacy assets
243,480

 
—

 
—

 
226,890

Derivative instruments
11,302

 
—

 
11,302

 
—

Financial liabilities:
 
 
 
 
 
 
 
Notes payable
873,179

 
—

 
—

 
873,179

Unsecured senior notes
280,199

 
282,150

 
—

 
—

Derivative financial instruments
12,370

 
—

 
12,370

 
—

Nonrecourse debt - Legacy assets
112,490

 
—

 
—

 
114,037

Excess spread financing
44,595

 
—

 
—

 
44,595

Shareholders' Equity
Shareholders' Equity
Shareholders’ Equity
Share-based compensation is recognized in accordance with ASC 718, Compensation-Stock Compensation. This guidance requires all share-based payments to employees, including grants of employee stock options, to be recognized as an expense in the consolidated statements of operations, based on the fair values. The amount of compensation is measured at the fair value of the awards when granted and this cost is expensed over the required service period, which is normally the vesting period of the award.
Nationstar Inc. has adopted the 2012 Incentive Compensation Plan (the “2012 Plan”), that offers certain key employees of Nationstar, consultants and non-employee directors equity-based awards. In connection with the initial public offering, on March 7, 2012, Nationstar Inc. made grants of restricted stock to management in the total amount of 1,191,117 shares and also to members of the Board in the total amount of 85,716 shares.
The restricted stock, net of forfeitures, is scheduled to vest over 3 years with 405,269 shares vesting in March 2013, 405,269 shares vesting in March 2014, and 406,486 shares vesting in March 2015. The weighted average grant date fair value of the restricted stock was $14.00.
The following table summarizes information about our restricted stock as of September 30, 2012 under the 2012 Plan (restricted stock in thousands):
 
Shares
 
Grant Date Fair Value
 
Remaining Contractual Term
Restricted Stock outstanding at March 31, 2012
1,277
 
$14.00
 
2.4
Granted
6
 
$28.17
 
1.0
Forfeited
(32)
 
 
 
 
Restricted Stock outstanding at September 30, 2012
1,251
 
 
 
 
Restricted Stock unvested and expected to vest
1,223
 
 
 
 
Restricted Stock vested and payable at September 30, 2012
—
 
 
 
 

In addition to the 2012 Plan, Nationstar management also had interests in certain of the predecessor parent company FIF’s restricted preferred units which fully vested on June 30, 2012. The weighted average grant date fair value of these units was $4.23. In conjunction with the final vesting under this plan, certain participants remitted a portion of their Nationstar Inc. common stock to Nationstar Mortgage LLC in payment of a portion of their federal tax withholdings on their vested shares. The participants paid the remainder of their required tax payments with cash. As a result of the above activity, Nationstar Mortgage LLC holds 212,156 shares of Nationstar Inc. common shares at their cost of $4.6 million. These shares are reflected in Nationstar's consolidated balance sheet as common shares held by subsidiary, a contra equity account. The shares are expected to be held by Nationstar Mortgage LLC until they can be distributed to Nationstar Inc. and retired.
Total compensation expense, net of forfeitures, for both the 2012 Plan and the predecessor plan recognized for the three and nine months ended September 30, 2012 was $2.6 million and $10.7 million, respectively. Total compensation expense for the three and nine months ended September 30, 2011 was $1.7 million and $12.2 million, respectively. Total compensation expenses, net of forfeitures, for the predecessor plan for the three and nine months ended September 30, 2012, was $0.0 million and $4.6 million, respectively. Nationstar expects to recognize $2.5 million of compensation expense in the last three months of 2012, $5.7 million in 2013, $2.4 million in 2014, and $0.4 million in 2015.
Earnings Per Share
Earnings Per Share
Earnings Per Share

Net income per share is computed under the provisions of ASC 260, Earnings Per Share. Basic net income per share is computed based on the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed based on the weighted-average number of common shares plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares represent outstanding restricted stock.
Capital Requirements
Capital Requirements
Capital Requirements
Certain of Nationstar’s secondary market investors require various capital adequacy requirements, as specified in the respective selling and servicing agreements. To the extent that these mandatory, imposed capital requirements are not met, Nationstar’s secondary market investors may ultimately terminate Nationstar’s selling and servicing agreements, which would prohibit Nationstar from further originating or securitizing these specific types of mortgage loans. In addition, these secondary market investors may impose additional net worth or financial condition requirements based on an assessment of market conditions or other relevant factors.
Among Nationstar’s various capital requirements related to its outstanding selling and servicing agreements, the most restrictive of these requires Nationstar to maintain a minimum adjusted net worth balance of $356.5 million. As of September 30, 2012, Nationstar was in compliance with all of its selling and servicing capital requirements.
Additionally, Nationstar is required to maintain a minimum tangible net worth of at least $175.0 million as of each quarter-end related to its outstanding Master Repurchase Agreements on its outstanding repurchase facilities. As of September 30, 2012, Nationstar was in compliance with these minimum tangible net worth requirements.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Litigation and Regulatory Matters
In the ordinary course of business, Nationstar Inc. and its subsidiaries and current and former officers and employees are routinely named as defendants in various legal actions, including class actions and other litigation, arising in connection with activities related to a national mortgage servicer and lender. Certain of the actual or threatened legal actions include claims for substantial compensatory, punitive and/or, statutory damages or claims for an indeterminate amount of damages. Further, in the ordinary course of business the Company and certain related parties can be or are involved in governmental and regulatory examinations, information gathering requests, investigations and proceedings (both formal and informal), regarding the Company’s business, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief.
The Company seeks to resolve all litigation and regulatory matters in the manner management believes is in the best interest of the Company and contests liability, allegations of wrongdoing and, where applicable, the amount of damages or scope of any penalties or other relief sought as appropriate in each pending matter. On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with outstanding legal and regulatory proceedings utilizing the latest information available. Where available information indicates that it is probable a liability has been incurred and the Company can reasonably estimate the amount of that loss an accrued liability is established. The actual costs of resolving these proceedings may be substantially higher or lower than the amounts accrued.
A 50 state task force of attorneys general as well as certain federal agencies are investigating issues related to the conduct of certain mortgage servicing companies and related service providers, in connection with mortgage foreclosures. While the Company is not involved in the investigation or negotiations regarding a settlement, the ultimate outcome could have a material impact on other mortgage servicers, including the Company.
When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. Once the matter is deemed to be both probable and estimable, the Company will establish an accrued liability and record a corresponding amount to litigation related expense. The Company will continue to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established. Litigation related expense, which includes the fees paid to external legal providers, of $3.5 million and $9.7 million were included in general and administrative expense on the consolidated statements of operations for the three and nine months ended September 30, 2012, respectively, and $6.3 million and $7.8 million for the three and nine months ended September 30, 2011, respectively.
Based on current knowledge, and after consultation with counsel, management believes that the current legal accrued liability is appropriate, and the amount of any incremental liability arising from these matters is not expected to have a material adverse effect on the consolidated financial condition of the Company, although the outcome of such proceedings could be material to the Company’s operating results and cash flows for a particular period depending on among other things, the level of the Company’s revenues or income for such period. However, in the event of significant developments on existing cases, it is possible that the ultimate resolution, if unfavorable, may be material to the Company’s consolidated financial statements.

Loan and Other Commitments
Nationstar enters into IRLCs with prospective borrowers whereby the Company commits to lend a certain loan amount under specific terms and interest rates to the borrower. These IRLCs are treated as derivatives and are carried at fair value (See Note 10, Derivative Financial Instruments).

In 2012, Nationstar completed its acquisitions of certain MSRs related to approximately $27.2 billion of unpaid principal balance in reverse mortgage loans from financial services companies. As servicer for these reverse mortgage loans, among other things, the Company is obligated to make advances to the loan customers as required. At September 30, 2012, the Company’s maximum unfunded advance obligation related to these MSRs was approximately $4.3 billion. Upon funding any portion of these advances, the Company expects to securitize and sell the advances in transactions that will be accounted for as financing arrangements.

Other Contingencies
In June 2011, Nationstar entered into an agreement to subservice loans for a financial services company. Nationstar began to subservice these loans in July and August 2011. This subservicing agreement included, among other things, a loss incentive and sharing arrangement. Under this arrangement, Nationstar can earn incentive fees of up to $2.5 million for successfully mitigating losses within a specific subserviced population of loans. This incentive fee would be recognized when earned. For this same population of loans, Nationstar is subject to loss sharing under certain conditions. Should losses in this population of loans exceed a specified level, Nationstar would be required to share a portion of the losses on such loans up to a maximum of $10.0 million. Losses under this arrangement would be recognized at the point at which Nationstar determines that a liability is expected to be incurred. At September 30, 2012, Nationstar has estimated no liability under this agreement.

During December 2009, Nationstar entered into a strategic relationship with a major mortgage market participant, which
contemplates, among other things, significant mortgage servicing rights and subservicing transfers to Nationstar upon terms to be determined. Under this arrangement, if certain delivery thresholds have been met, the market participant may require Nationstar to establish an operating division or newly created subsidiary with separate, dedicated employees within a specified timeline to service such mortgage servicing rights and subservicing. After a specified time period, this market participant may purchase the subsidiary at an agreed upon price. Since December 2010, all of the required delivery thresholds with this market participant have been met, but the market participant has not required the Company to establish an operating division or newly created subsidiary with separate, dedicated employees.
Business Segment Reporting
Business Segment Reporting
Business Segment Reporting
Nationstar currently conducts business in two separate operating segments: Servicing and Originations. The Servicing segment provides loan servicing on Nationstar’s total servicing portfolio, including the collection of principal and interest payments and the assessment of ancillary fees related to the servicing of mortgage loans. The Originations segment involves the origination, packaging, and sale of agency mortgage loans into the secondary markets via whole loan sales or securitizations. Nationstar reports the activity not related to either operating segment in the Legacy Portfolio and Other column. The Legacy Portfolio and Other column includes primarily all subprime mortgage loans originated in the latter portion of 2006 and during 2007 or acquired from Nationstar’s predecessor and consolidated VIEs which were consolidated pursuant to consolidation guidance related to VIEs adopted on January 1, 2010.
Nationstar’s segments are based upon Nationstar’s organizational structure which focuses primarily on the services offered. The accounting policies of each reportable segment are the same as those of Nationstar except for 1) expenses for consolidated back-office operations and general overhead-type expenses such as executive administration and accounting and 2) revenues generated on inter-segment services performed. Expenses are allocated to individual segments based on the estimated value of services performed, including total revenue contributions, personnel headcount, and the equity invested in each segment. Revenues generated or inter-segment services performed are valued based on similar services provided to external parties.
To reconcile to Nationstar’s consolidated results, certain inter-segment revenues and expenses are eliminated in the “Elimination” column in the following tables.
The following tables are a presentation of financial information by segment for the periods indicated (in thousands):
 
Three months ended September 30, 2012
 
Servicing
 
Originations
 
Operating
Segments
 
Legacy
Portfolio
and Other
 
Eliminations
 
Consolidated
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
Servicing fee income
$
135,398

 
$
—

 
$
135,398

 
$
548

 
$
(442
)
 
$
135,504

Other fee income
6,457

 
(4,055
)
 
2,402

 
(6
)
 
 
 
2,396

Total fee income
141,855

 
(4,055
)
 
137,800

 
542

 
(442
)
 
137,900

Gain/(loss) on mortgage loans held for sale
—

 
139,259

 
139,259

 
—

 
—

 
139,259

Total revenues
141,855

 
135,204

 
277,059

 
542

 
(442
)
 
277,159

Total expenses and impairments
95,296

 
56,481

 
151,777

 
3,051

 
—

 
154,828

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
12,544

 
6,161

 
18,705

 
4,395

 
442

 
23,542

Interest expense
(53,830
)
 
(7,738
)
 
(61,568
)
 
(3,447
)
 
—

 
(65,015
)
Gain (loss) on interest rate swaps and caps
236

 
—

 
236

 
(1,313
)
 
—

 
(1,077
)
Total other income (expense)
(41,050
)
 
(1,577
)
 
(42,627
)
 
(365
)
 
442

 
(42,550
)
Income (loss) before taxes
$
5,509

 
$
77,146

 
$
82,655

 
$
(2,874
)
 
$
—

 
$
79,781

Depreciation and amortization
$
2,006

 
$
766

 
$
2,772

 
$
201

 
$
—

 
$
2,973

Total assets
4,470,896

 
1,079,521

 
5,550,417

 
390,814

 
—

 
5,941,231


 
 
Three months ended September 30, 2011
 
Servicing
 
Originations
 
Operating
Segments
 
Legacy
Portfolio
and Other
 
Eliminations
 
Consolidated
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
Servicing fee income
$
54,220

 
$
—

 
$
54,220

 
$
519

 
$
(1,708
)
 
$
53,031

Other fee income
3,772

 
3,114

 
6,886

 
774

 
—

 
7,660

Total fee income
57,992

 
3,114

 
61,106

 
1,293

 
(1,708
)
 
60,691

Gain/(loss) on mortgage loans held for sale
—

 
30,352

 
30,352

 
—

 
(120
)
 
30,232

Total revenues
57,992

 
33,466

 
91,458

 
1,293

 
(1,828
)
 
90,923

Total expenses and impairments
47,874

 
25,890

 
73,764

 
9,550

 
(120
)
 
83,194

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
907

 
3,056

 
3,963

 
10,530

 
1,708

 
16,201

Interest expense
(14,161
)
 
(2,989
)
 
(17,150
)
 
(9,226
)
 
—

 
(26,376
)
Fair value changes ABS securitizations
—

 
—

 
—

 
(654
)
 
—

 
(654
)
Total other income (expense)
(13,254
)
 
67

 
(13,187
)
 
650

 
1,708

 
(10,829
)
Income before taxes
$
(3,136
)
 
$
7,643

 
$
4,507

 
$
(7,607
)
 
$
—

 
$
(3,100
)
Depreciation and amortization
$
525

 
$
327

 
$
852

 
$
139

 
$
—

 
$
991

Total assets
810,157

 
429,661

 
1,239,818

 
764,507

 
—

 
2,004,325

 
Nine months ended September 30, 2012
 
Servicing
 
Originations
 
Operating
Segments
 
Legacy
Portfolio
and Other
 
Eliminations
 
Consolidated
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
Servicing fee income
$
305,124

 
$
—

 
$
305,124

 
$
1,785

 
$
(1,363
)
 
$
305,546

Other fee income
19,728

 
1,665

 
21,393

 
(134
)
 
 
 
21,259

Total fee income
324,852

 
1,665

 
326,517

 
1,651

 
(1,363
)
 
326,805

Gain (loss) on mortgage loans held for sale
—

 
312,094

 
312,094

 
—

 
22

 
312,116

Total revenues
324,852

 
313,759

 
638,611

 
1,651

 
(1,341
)
 
638,921

Total expenses and impairments
228,182

 
132,935

 
361,117

 
20,660

 
—

 
381,777

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
22,406

 
14,719

 
37,125

 
14,145

 
1,363

 
52,633

Interest expense
(99,053
)
 
(15,529
)
 
(114,582
)
 
(11,304
)
 
(22
)
 
(125,908
)
Gain (loss) on interest rate swaps and caps
424

 
—

 
424

 
(2,126
)
 
—

 
(1,702
)
Total other income (expense)
(76,223
)
 
(810
)
 
(77,033
)
 
715

 
1,341

 
(74,977
)
Income before taxes
$
20,447

 
$
180,014

 
$
200,461

 
$
(18,294
)
 
$
—

 
$
182,167

Depreciation and amortization
$
4,104

 
$
1,669

 
$
5,773

 
$
585

 
$
—

 
$
6,358

Total assets
4,470,896

 
1,079,521

 
5,550,417

 
390,814

 
—

 
5,941,231



 
Nine months ended September 30, 2011
 
Servicing
 
Originations
 
Operating
Segments
 
Legacy
Portfolio
and Other
 
Eliminations
 
Consolidated
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
Servicing fee income
$
164,804

 
$
—

 
$
164,804

 
$
1,257

 
$
(5,306
)
 
$
160,755

Other fee income
10,437

 
10,983

 
21,420

 
2,579

 
—

 
23,999

Total fee income
175,241

 
10,983

 
186,224

 
3,836

 
(5,306
)
 
184,754

Gain (loss) on mortgage loans held for sale
—

 
73,832

 
73,832

 
—

 
(272
)
 
73,560

Total revenues
175,241

 
84,815

 
260,056

 
3,836

 
(5,578
)
 
258,314

Total expenses and impairments
128,177

 
71,404

 
199,581

 
20,408

 
(272
)
 
219,717

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
2,529

 
8,560

 
11,089

 
34,851

 
5,306

 
51,246

Interest expense
(41,109
)
 
(7,480
)
 
(48,589
)
 
(28,340
)
 
—

 
(76,929
)
Fair value changes - ABS securitizations
—

 
—

 
—

 
(6,919
)
 
—

 
(6,919
)
Total other income (expense)
(38,580
)
 
1,080

 
(37,500
)
 
(408
)
 
5,306

 
(32,602
)
Income before taxes
$
8,484

 
$
14,491

 
$
22,975

 
$
(16,980
)
 
$
—

 
$
5,995

Depreciation and amortization
$
1,293

 
$
894

 
$
2,187

 
$
364

 
$
—

 
$
2,551

Total assets
810,157

 
429,661

 
1,239,818

 
764,507

 
—

 
2,004,325

Guarantor Financial Statement Information
Guarantor Financial Statement Information
Guarantor Financial Statement Information
Nationstar has $1.1 billion aggregate principal amount of unsecured senior notes which mature on various dates through October 1, 2020. The notes are jointly and severally guaranteed on an unsecured senior basis by all of Nationstar’s existing and future wholly-owned domestic restricted subsidiaries with certain exceptions. All guarantor subsidiaries are 100% owned by Nationstar. Effective June 30, 2012, Nationstar Inc. and its two direct wholly-owned subsidiaries became guarantors of the unsecured senior notes as well. Presented below are consolidating financial statements of Nationstar Inc., Nationstar, and the guarantor subsidiaries for the periods indicated.

NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2012
(IN THOUSANDS)
Assets
Nationstar Inc.
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Cash and cash equivalents
$
—

 
$
430,497

 
$
318

 
$
—

 
$
—

 
$
430,815

Restricted cash
—

 
132,854

 
3

 
126,001

 
—

 
258,858

Accounts receivable, net
—

 
2,851,007

 
—

 
1,978

 
—

 
2,852,985

Mortgage loans held for sale
—

 
703,214

 
—

 
—

 
—

 
703,214

Mortgage loans held for investment, subject to nonrecourse debt–Legacy Asset, net
—

 
10,137

 
—

 
228,041

 
—

 
238,178

Participating interest in reverse mortgages
—

 
452,886

 
—

 
—

 
—

 
452,886

Receivables from affiliates
—

 
(1,605,564
)
 
82,229

 
1,536,636

 
—

 
13,301

Mortgage servicing rights – fair value
—

 
592,692

 
—

 
—

 
—

 
592,692

Investment in subsidiaries
661,463

 
157,812

 
—

 
—

 
(819,275
)
 
—

Mortgage servicing rights – amortized cost
—

 
8,036

 
—

 
—

 
—

 
8,036

Property and equipment, net
—

 
47,879

 
835

 
—

 
—

 
48,714

REO, net
—

 
1,363

 
—

 
1,830

 
—

 
3,193

Other assets
29,783

 
338,359

 
—

 
—

 
(29,783
)
 
338,359

Total assets
$
691,246

 
$
4,121,172

 
$
83,385

 
$
1,894,486

 
$
(849,058
)
 
$
5,941,231

Liabilities and shareholders’ equity
 
 
 
 
 
 
 
 
 
 
 
Notes payable
$
—

 
$
823,608

 
$
—

 
$
1,708,708

 
$
—

 
$
2,532,316

Unsecured senior notes
—

 
1,062,423

 
—

 
—

 
—

 
1,062,423

Payables and accrued liabilities
—

 
789,639

 
—

 
2,412

 
(29,783
)
 
762,268

Payables to affiliates
—

 
—

 
—

 
—

 
—

 
—

Derivative financial instruments
—

 
30,794

 
—

 
7,041

 
—

 
37,835

Mortgage Servicing Liability
—

 
82,313

 
—

 
—

 
—

 
82,313

Nonrecourse debt–Legacy Assets
—

 
—

 
—

 
101,898

 
—

 
101,898

Excess spread financing - at fair value
—

 
255,484

 
—

 
—

 
—

 
255,484

Participating interest financing
—

 
415,448

 
—

 
—

 
—

 
415,448

Total liabilities
—

 
3,459,709

 
—

 
1,820,059

 
(29,783
)
 
5,249,985

Total shareholders’ equity
691,246

 
661,463

 
83,385

 
74,427

 
(819,275
)
 
691,246

Total liabilities and shareholders’ equity
$
691,246

 
$
4,121,172

 
$
83,385

 
$
1,894,486

 
$
(849,058
)
 
$
5,941,231




NATIONSTAR MORTGAGE INC
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012
(IN THOUSANDS)
 
Nationstar Inc.
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Servicing fee income
$
—

 
$
135,339

 
$
—

 
$
607

 
$
(442
)
 
$
135,504

Other fee income
—

 
(4,672
)
 
6,947

 
121

 
—

 
2,396

Total fee income
—

 
130,667

 
6,947

 
728

 
(442
)
 
137,900

Gain on mortgage loans held for sale
—

 
139,259

 
—

 
—

 
—

 
139,259

Total Revenues
—

 
269,926

 
6,947

 
728

 
(442
)
 
277,159

Expenses and impairments:
 
 
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
—

 
96,121

 
1,986

 
—

 
—

 
98,107

General and administrative
—

 
50,573

 
401

 
611

 
—

 
51,585

Provision for loan losses
—

 
—

 
—

 
1,545

 
—

 
1,545

Loss on foreclosed real estate and other
—

 
884

 
—

 
(2,934
)
 
—

 
(2,050
)
Occupancy
—

 
5,641

 
—

 
—

 
—

 
5,641

Total expenses and impairments
—

 
153,219

 
2,387

 
(778
)
 
—

 
154,828

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
18,460

 
—

 
4,640

 
442

 
23,542

Interest expense
—

 
(43,000
)
 
—

 
(22,015
)
 
—

 
(65,015
)
Gain/(Loss) on interest rate swaps and caps
—

 
(389
)
 
—

 
(688
)
 
—

 
(1,077
)
Gain/(loss) from subsidiaries
49,931

 
(11,997
)
 
—

 
—

 
(37,934
)
 
—

Total other income (expense)
49,931

 
(36,926
)
 
—

 
(18,063
)
 
(37,492
)
 
(42,550
)
Income before taxes
49,931

 
79,781

 
4,560

 
(16,557
)
 
(37,934
)
 
79,781

Income tax expense/(benefit)
(5,136
)
 
29,850

 
—

 
—

 
—

 
24,714

Net income/(loss)
55,067

 
49,931

 
4,560

 
(16,557
)
 
(37,934
)
 
55,067

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
Change in value of cash flow hedges
—

 
—

 
—

 
—

 
—

 
—

Reclassification adjustments for gain (loss) included in earnings
$
—

 
$
—

 
$
—

 
$
423

 
$
—

 
$
423

Comprehensive income / (loss)
$
55,067

 
$
49,931

 
$
4,560

 
$
(16,134
)
 
$
(37,934
)
 
$
55,490



NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
(IN THOUSANDS)

 
Nationstar Inc.
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Servicing fee income
$
—

 
$
301,363

 
$
—

 
$
5,546

 
$
(1,363
)
 
$
305,546

Other fee income
—

 
310

 
20,596

 
353

 
—

 
21,259

Total fee income
—

 
301,673

 
20,596

 
5,899

 
(1,363
)
 
326,805

Gain on mortgage loans held for sale
—

 
312,116

 
—

 
—

 
—

 
312,116

Total Revenues
—

 
613,789

 
20,596

 
5,899

 
(1,363
)
 
638,921

Expenses and impairments:
 
 
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
—

 
231,709

 
6,810

 
—

 
—

 
238,519

General and administrative
—

 
119,772

 
1,778

 
5,557

 
—

 
127,107

Provision for loan losses
—

 
—

 
—

 
3,153

 
—

 
3,153

Loss on foreclosed real estate and other
—

 
1,008

 
—

 
697

 
—

 
1,705

Occupancy
—

 
11,293

 
—

 
—

 
—

 
11,293

Total expenses and impairments
—

 
363,782

 
8,588

 
9,407

 
—

 
381,777

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
36,489

 
—

 
14,781

 
1,363

 
52,633

Interest expense
—

 
(89,832
)
 
—

 
(36,076
)
 
—

 
(125,908
)
Gain/(Loss) on interest rate swaps and caps
—

 
(1,201
)
 
—

 
(501
)
 
—

 
(1,702
)
Gain/(loss) from subsidiaries
114,591

 
(13,331
)
 
—

 
—

 
(101,260
)
 
—

Total other income (expense)
114,591

 
(67,875
)
 
—

 
(21,796
)
 
(99,897
)
 
(74,977
)
Income before taxes
114,591

 
182,132

 
12,008

 
(25,304
)
 
(101,260
)
 
182,167

Income tax expense/(benefit)
(26,937
)
 
67,541

 
5

 
30

 
—

 
40,639

Net income/(loss)
141,528

 
114,591

 
12,003

 
(25,334
)
 
(101,260
)
 
141,528

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
Change in value of cash flow hedges
—

 
—

 
—

 
(423
)
 
—

 
(423
)
Reclassification adjustments for gain (loss) included in earnings
—

 
—

 
—

 
423

 
—

 
423

Comprehensive income / (loss)
$
141,528

 
$
114,591

 
$
12,003

 
$
(25,334
)
 
$
(101,260
)
 
$
141,528




NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
(IN THOUSANDS)

 
Nationstar Inc.
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Operating activities:
 
 
 
 
 
 
 
 
 
 
 
Net income/(loss)
$
141,528

 
$
114,591

 
$
12,003

 
$
(25,334
)
 
$
(101,260
)
 
$
141,528

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

 

 

 

 

 
 
(Gain)/loss from subsidiaries
(114,591
)
 
13,331

 
—

 
—

 
101,260

 
—

Share-based compensation
—

 
10,665

 
—

 
—

 
—

 
10,665

Gain on mortgage loans held for sale
—

 
(312,116
)
 
—

 
—

 
—

 
(312,116
)
Provision for loan losses
—

 
—

 
—

 
3,153

 
—

 
3,153

Loss on foreclosed real estate and other
—

 
1,008

 
—

 
697

 
—

 
1,705

Loss on equity method investments
—

 
1,327

 
—

 
—

 
—

 
1,327

(Gain)/loss on ineffectiveness on interest rate swaps and cap
—

 
1,201

 
—

 
501

 
—

 
1,702

Fair value changes in excess spread financing
—

 
5,050

 
—

 
—

 
—

 
5,050

Depreciation and amortization
—

 
6,315

 
43

 
—

 
—

 
6,358

Change in fair value of mortgage servicing rights
—

 
42,810

 
—

 
—

 
—

 
42,810

Accretion of mortgage servicing liability
—

 
(3,276
)
 
—

 
—

 
—

 
(3,276
)
Amortization of debt discount
—

 
16,387

 
—

 
1,714

 
—

 
18,101

Amortization of premiums/(discounts)
—

 
(125
)
 
—

 
(3,877
)
 
—

 
(4,002
)
Mortgage loans originated and purchased, net of fees
—

 
(4,814,018
)
 
—

 
—

 
—

 
(4,814,018
)
Cost of loans sold and principal payments and prepayments, and other changes in mortgage loans originated as held for sale, net of fees
—

 
4,761,946

 
—

 
7,371

 
—

 
4,769,317

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable
—

 
(546,934
)
 
7

 
278,533

 
—

 
(268,394
)
Receivables from/(payables to) affiliates
—

 
1,626,650

 
(11,979
)
 
(1,614,018
)
 
—

 
653

Reverse funded advances due to securitization
—

 
(317,272
)
 
—

 
—

 
—

 
(317,272
)
Other assets
(29,783
)
 
(135,107
)
 
—

 
—

 
29,783

 
(135,107
)
Accounts payable and accrued liabilities
2,846

 
259,694

 
—

 
(832
)
 
(29,783
)
 
231,925

Net cash provided by/(used in) operating activities
—

 
732,127

 
74

 
(1,352,092
)
 
—

 
(619,891
)
 
Nationstar Inc.
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Investing activities:
 
 
 
 
 
 
 
 
 
 
 
Property and equipment additions, net of disposals
—

 
(20,699
)
 
—

 
—

 
—

 
(20,699
)
Cash Proceeds from assumption of reverse mortgage servicing obligations, net
—

 
(31,169
)
 
—

 
—

 
—

 
(31,169
)
Deposit on / purchase of mortgage servicing rights, net of liabilities incurred
—

 
(2,024,019
)
 
—

 
—

 
—

 
(2,024,019
)
Repurchases of REO from Ginnie Mae
—

 
(6,856
)
 
—

 
—

 
—

 
(6,856
)
Proceeds from sales of REO
—

 
4,485

 
—

 
3,949

 
—

 
8,434

Net cash provided by/(used in) investing activities
—

 
(2,078,258
)
 
—

 
3,949

 
—

 
(2,074,309
)
Financing activities:
 
 
 
 
 
 
 
 
 
 
 
Issuance of Senior Unsecured Notes
—

 
781,196

 
—

 
—

 
—

 
781,196

Transfers to/from restricted cash
—

 
(83,674
)
 
—

 
(103,685
)
 
—

 
(187,359
)
Issuance of common stock, net of IPO issuance costs
246,700

 
—

 
—

 
—

 
—

 
246,700

Issuance of participating interest financing
—

 
416,303

 
—

 
—

 
—

 
416,303

Issuance of excess spread financing
—

 
215,570

 
—

 
—

 
—

 
215,570

Increase (decrease) in notes payable, net
—

 
195,003

 
—

 
1,464,134

 
—

 
1,659,137

Repayment of nonrecourse debt–Legacy assets
—

 
—

 
—

 
(12,306
)
 
—

 
(12,306
)
Repayment of excess servicing spread financing
—

 
(12,981
)
 
—

 
—

 
—

 
(12,981
)
Distribution to subsidiaries
(246,700
)
 
—

 
—

 
—

 
246,700

 
—

Contributions of parent
—

 
246,700

 
—

 
—

 
(246,700
)
 
—

Debt financing costs
—

 
(43,690
)
 
—

 
—

 
—

 
(43,690
)
Net cash provided by/(used in) financing activities
—

 
1,714,427

 
—

 
1,348,143

 
—

 
3,062,570

Net increase/(decrease) in cash
—

 
368,296

 
74

 
—

 
—

 
368,370

Cash and cash equivalents at beginning of period
—

 
62,201

 
244

 
—

 
—

 
62,445

Cash and cash equivalents at end of period
$
—

 
$
430,497

 
$
318

 
$
—

 
$
—

 
$
430,815




NATIONSTAR MORTGAGE LLC
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2011
(IN THOUSANDS)

 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
62,201

 
$
244

 
$
—

 
$
—

 
$
62,445

Restricted cash
49,180

 
3

 
22,316

 
—

 
71,499

Accounts receivable, net
281,782

 
7

 
280,511

 
—

 
562,300

Mortgage loans held for sale
458,626

 
—

 
—

 
—

 
458,626

Mortgage loans held for investment, subject to nonrecourse debt–Legacy Asset, net
5,984

 
—

 
237,496

 
—

 
243,480

Receivables from affiliates
41,961

 
70,541

 
—

 
(107,893
)
 
4,609

Mortgage servicing rights – fair value
251,050

 
—

 
—

 
—

 
251,050

Investment in subsidiaries
140,880

 
—

 
—

 
(140,880
)
 
—

Property and equipment, net
23,238

 
835

 
—

 
—

 
24,073

REO, net
—

 
—

 
3,668

 
—

 
3,668

Other assets
106,181

 
—

 
—

 
—

 
106,181

Total assets
$
1,421,083

 
$
71,630

 
$
543,991

 
$
(248,773
)
 
$
1,787,931

Liabilities and members’ equity
 
 
 
 
 
 
 
 
 
Notes payable
$
628,605

 
$
—

 
$
244,574

 
$
—

 
$
873,179

Unsecured senior notes
280,199

 
—

 
—

 
—

 
280,199

Payables and accrued liabilities
180,545

 
—

 
3,244

 
—

 
183,789

Payables to affiliates
—

 
—

 
107,893

 
(107,893
)
 
—

Derivative financial instruments
5,830

 
—

 
6,540

 
—

 
12,370

Derivative financial instruments, subject to ABS nonrecourse debt
—

 
—

 
—

 
—

 
—

Nonrecourse debt–Legacy Assets
—

 
—

 
112,490

 
—

 
112,490

Excess spread financing – fair value
44,595

 
—

 
—

 
—

 
44,595

ABS nonrecourse – fair value
—

 
—

 
—

 
—

 
—

Total liabilities
1,139,774

 
—

 
474,741

 
(107,893
)
 
1,506,622

Total members’ equity
281,309

 
71,630

 
69,250

 
(140,880
)
 
281,309

Total liabilities and members’ equity
$
1,421,083

 
$
71,630

 
$
543,991

 
$
(248,773
)
 
$
1,787,931



NATIONSTAR MORTGAGE LLC CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011
(IN THOUSANDS)
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
Servicing fee income
$
50,983

 
$
(106
)
 
$
3,862

 
$
(1,708
)
 
$
53,031

Other fee income
3,517

 
3,882

 
261

 
—

 
7,660

Total fee income
54,500

 
3,776

 
4,123

 
(1,708
)
 
60,691

Gain on mortgage loans held for sale
30,232

 
—

 
—

 
—

 
30,232

Total Revenues
84,732

 
3,776

 
4,123

 
(1,708
)
 
90,923

Expenses and impairments:
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
49,989

 
915

 
—

 
—

 
50,904

General and administrative
20,585

 
871

 
3,941

 
—

 
25,397

Provision for loan losses
1,281

 
—

 
(404
)
 
—

 
877

Loss on foreclosed real estate
1,234

 
—

 
1,324

 
—

 
2,558

Occupancy
3,419

 
39

 
—

 
—

 
3,458

Total expenses and impairments
76,508

 
1,825

 
4,861

 
—

 
83,194

Other income / (expense):
 
 
 
 
 
 
 
 
 
Interest income
2,871

 
5

 
11,617

 
1,708

 
16,201

Interest expense
(14,686
)
 
—

 
(11,690
)
 
—

 
(26,376
)
Fair value changes in ABS securitizations
—

 
—

 
(553
)
 
(101
)
 
(654
)
Gain / (loss) from subsidiaries
592

 
—

 
—

 
(592
)
 
—

Total other income / (expense)
(11,223
)
 
5

 
(626
)
 
1,015

 
(10,829
)
Net income / (loss)
(2,999
)
 
1,956

 
(1,364
)
 
(693
)
 
(3,100
)
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
Change in value of cash flow hedges
—

 
—

 
—

 
—

 
—

Comprehensive income / (loss)
$
(2,999
)
 
$
1,956

 
$
(1,364
)
 
$
(693
)
 
$
(3,100
)


 


NATIONSTAR MORTGAGE LLC
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
(IN THOUSANDS)

 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated

Revenues:
 
 
 
 
 
 
 
 
 
Servicing fee income
$
162,741

 
$
(542
)
 
$
3,862

 
$
(5,306
)
 
$
160,755

Other fee income
11,647

 
11,411

 
941

 
—

 
23,999

Total fee income
174,388

 
10,869

 
4,803

 
(5,306
)
 
184,754

Gain on mortgage loans held for sale
73,560

 
—

 
—

 
—

 
73,560

Total Revenues
247,948

 
10,869

 
4,803

 
(5,306
)
 
258,314

Expenses and impairments:
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
143,646

 
2,553

 
—

 
—

 
146,199

General and administrative
50,054

 
2,705

 
3,948

 
—

 
56,707

Provision for loan losses
2,005

 
—

 
—

 
—

 
2,005

Loss on foreclosed real estate
1,436

 
—

 
5,468

 
—

 
6,904

Occupancy
7,765

 
137

 
—

 
—

 
7,902

Total expenses and impairments
204,906

 
5,395

 
9,416

 
—

 
219,717

Other income / (expense):
 
 
 
 
 
 
 
 
 
Interest income
11,070

 
—

 
34,870

 
5,306

 
51,246

Interest expense
(41,411
)
 
—

 
(35,518
)
 
—

 
(76,929
)
Fair value changes in ABS securitizations
—

 
—

 
(6,935
)
 
16

 
(6,919
)
Gain / (loss) from subsidiaries
(6,722
)
 
—

 
—

 
6,722

 
—

Total other income / (expense)
(37,063
)
 
—

 
(7,583
)
 
12,044

 
(32,602
)
Net income / (loss)
$
5,979

 
$
5,474

 
$
(12,196
)
 
$
6,738

 
$
5,995

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
Change in value of cash flow hedges
—

 
—

 
(1,071
)
 
—

 
(1,071
)
Comprehensive income / (loss)
$
5,979

 
$
5,474

 
$
(13,267
)
 
$
6,738

 
$
4,924




NATIONSTAR MORTGAGE LLC
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
(IN THOUSANDS)
 

 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Operating activities:
 
 
 
 
 
 
 
 
 
Net income/(loss)
$
5,979

 
$
5,474

 
$
(12,196
)
 
$
6,738

 
$
5,995

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

 

 

 

 
 
Loss on equity method investments
971

 


 


 


 
971

Share-based compensation
12,201

 
—

 
—

 
—

 
12,201

Gain on mortgage loans held for sale
(73,560
)
 
—

 
—

 
—

 
(73,560
)
Provision for loan losses
2,005

 
—

 
—

 
—

 
2,005

Loss on foreclosed real estate and other
1,436

 
—

 
5,468

 
—

 
6,904

(Gain)/loss on ineffectiveness on interest rate swaps and cap
—

 
—

 
(2,032
)
 
—

 
(2,032
)
Fair value changes in ABS securitizations
—

 
—

 
6,935

 
(16
)
 
6,919

Loss from subsidiaries
6,722

 
—

 
—

 
(6,722
)
 
—

Depreciation and amortization
2,551

 
—

 
—

 
—

 
2,551

Change in fair value of mortgage servicing rights
30,757

 
—

 
—

 
—

 
30,757

Amortization of debt discount
6,667

 
—

 
3,657

 
—

 
10,324

Amortization of premiums/(discounts)
—

 
—

 
(4,001
)
 
—

 
(4,001
)
Mortgage loans originated and purchased, net of fees
(2,285,558
)
 
—

 
—

 
—

 
(2,285,558
)
Cost of loans sold, net of fees
2,287,430

 
—

 
—

 
—

 
2,287,430

Principal payments/prepayments received and other changes in mortgage loans originated as held for sale
37,620

 
—

 
9,757

 
—

 
47,377

Changes in assets and liabilities:

 

 

 

 
 
Accounts receivable
(35,366
)
 
(5
)
 
316

 
—

 
(35,055
)
Receivables from/(payables to) affiliates
(24,356
)
 
(5,031
)
 
32,298

 
—

 
2,911

Other assets
(2,037
)
 
—

 
—

 
—

 
(2,037
)
Accounts payable and accrued liabilities
36,053

 
—

 
(213
)
 
—

 
35,840

Net cash provided by/(used) in operating activities
9,515

 
438

 
39,989

 
—

 
49,942

 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Investing activities:
 
 
 
 
 
 
 
 
 
Principal payments received and other changes on mortgage loans held for investment, subject to ABS nonrecourse debt
—

 
—

 
29,395

 
—

 
29,395

Property and equipment additions, net of disposals
(15,147
)
 
—

 
—

 
—

 
(15,147
)
Acquisition of equity method investment
(6,600
)
 
—

 
—

 
—

 
(6,600
)
Purchase of mortgage servicing rights
(40,305
)

—


—


—

 
(40,305
)
Proceeds from sales of REO
—

 
—

 
22,897

 
—

 
22,897

Net cash provided by/(used) in investing activities
(62,052
)
 
—

 
52,292

 
—

 
(9,760
)
Financing activities:
 
 
 
 
 
 
 
 
 
Transfers to/from restricted cash
4,972

 
(3
)
 
13,343

 
—

 
18,312

Decrease in notes payable, net
62,237

 
—

 
(33,212
)
 
—

 
29,025

Repayment of nonrecourse debt–Legacy assets
—

 
—

 
(26,119
)
 
—

 
(26,119
)
Repayment of ABS nonrecourse debt
—

 
—

 
(47,175
)
 
—

 
(47,175
)
Debt financing costs
(2,734
)
 
—

 
—

 
—

 
(2,734
)
Distribution to parent
(3,900
)
 
—

 
—

 
—

 
(3,900
)
Tax related share-based settlement of units by members
(4,809
)
 
—

 
—

 
—

 
(4,809
)
Net cash provided by/(used) in financing activities
55,766

 
(3
)
 
(93,163
)
 
—

 
(37,400
)
Net increase/(decrease) in cash
3,229

 
435

 
(882
)
 
—

 
2,782

Cash and cash equivalents at beginning of period
20,904

 
319

 
—

 
—

 
21,223

Cash and cash equivalents at end of period
$
24,133

 
$
754

 
$
(882
)
 
$
—

 
$
24,005

Disclosures Related to Transactions with Affiliates of Fortress Investment Group LLC
Disclosures Related to Transactions with Affiliates of Fortress Investment Group LLC
Disclosures Related to Transactions with Affiliates of Fortress Investment Group LLC
Nationstar maintains a marketing agreement with Springleaf Home Equity, Inc., formerly known as American General Home Equity, Inc., Springleaf General Financial Services of Arkansas, Inc., formerly known as American General Financial Services of Arkansas, Inc. and MorEquity, Inc. (collectively “Springleaf”), each of which are indirectly owned by investment funds managed by affiliates of Fortress Investment Group LLC. Pursuant to this agreement, Nationstar markets mortgage originations products to customers of Springleaf, and is compensated by the originations fees of loans that Nationstar refinances.
Additionally, in January 2011, Nationstar entered into three agreements to act as the loan subservicer for Springleaf for a whole loan portfolio and two securitized loan portfolios totaling $4.4 billion for which Nationstar receives a monthly per loan subservicing fee and other performance incentive fees subject to the agreements with Springleaf. For the nine months ended September 30, 2012 and 2011, Nationstar recognized revenue of $7.5 million and $7.4 million, respectively, in additional servicing and other performance incentive fees related to these portfolios. For the three months ended September 30, 2012 and 2011, Nationstar recognized revenue of $2.4 million and $2.5 million , respectively, in additional servicing and other performance incentive fees related to these portfolios. At September 30, 2012 and December 31, 2011, Nationstar had an outstanding receivable from Springleaf of $0.5 million and $0.6 million, respectively, which was included as a component of accounts receivable.
Nationstar is the loan servicer for two securitized loan portfolios managed by Newcastle, which is managed by an affiliate of Fortress Investment Group LLC, for which Nationstar receives a monthly net servicing fee equal to 0.50% per annum on the unpaid principal balance of the portfolios, which was $1.0 billion and $1.1 billion, as of September 30, 2012 and 2011, respectively. For the three months ended September 30, 2012 and 2011, Nationstar received servicing fees and other performance incentive fees of $1.3 million and $1.4 million, respectively. For the nine months ended September 30, 2012 and 2011, Nationstar received servicing fees and other performance incentive fees of $3.9 million and $4.4 million, respectively.
Additionally, from December 2011 through September 2012, Nationstar entered into several agreements with Newcastle, where Nationstar sold to Newcastle the right to receive approximately 65% of the excess cash flow generated from certain acquired MSRs after receipt of a fixed basic servicing fee per loan. Nationstar will retain all ancillary income associated with servicing such MSRs and 35% of the excess cash flow after receipt of the fixed basic servicing fee. Nationstar will continue to be the servicer of the loans and provide all servicing and advancing functions for the portfolio. Newcastle will not have prior or ongoing obligations associated with this MSR portfolio. Furthermore, should Nationstar refinance any loan in such portfolio, subject to certain limitations, Nationstar will be required to transfer the new loan or a replacement loan of similar economic characteristics into the portfolio. The new or replacement loan will be governed by the same terms set forth in the agreement described above.
The fair value on the outstanding liability related to these agreements was $255.5 million at September 30, 2012.
Related Party Disclosures
Related Party Disclosure
Related Party Disclosure
In March 2011, Nationstar entered into a limited partnership agreement with ANC. ANC is the parent company of NREIS, which through the ANC partnership Nationstar holds a non-controlling interest in NREIS, an ancillary real estate services and vendor management company that directly and indirectly provides title agency settlement or valuation services for loan originations and default management. As Nationstar is able to exercise significant influence, but not control, over the policies and procedures of the entity, and Nationstar owns less than 50% of the voting interests, Nationstar applies the equity method of accounting. In March 2012 as part of the initial public offering restructuring, Nationstar assumed FIF’s 13% ownership in NREIS, increasing the total Nationstar investment to 35%. Nationstar disbursed servicing-related advances of $4.6 million and $1.6 million for the three months ended September 30, 2012 and September 30, 2011, respectively. Nationstar disbursed servicing-related advances of $12.4 million and $1.7 million for the nine months ended September 30, 2012 and September 30, 2011, respectively. Additionally, during May 2012, Nationstar advanced NREIS $2.0 million for future services. These amounts are recorded in accounts receivable in our financial statements.
Subsequent Events
Subsequent Events
23. Subsequent Events
Definitive Agreement to Acquire Certain Mortgage Servicing Assets of Residential Capital, LLC
On May 13, 2012, Nationstar signed a definitive agreement (the “Agreement”) which was subsequently amended on June 28, 2012 to acquire certain residential mortgage servicing assets and other assets (collectively, “Mortgage Servicing Assets”) from Residential Capital, LLC and related entities (collectively, “ResCap”) in connection with ResCap’s proceedings before the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”).
On October 23, 2012, an auction was conducted for the related Mortgage Servicing Assets. During the auction, Nationstar did not secure the highest bid. The results of the auction are subject to Bankruptcy Court approval which is scheduled to be heard by the Bankruptcy Court on November 19, 2012. Because Nationstar was originally approved by the Bankruptcy Court as the stalking-horse bidder, if the Agreement is terminated as a result of the Bankruptcy Court's approval of the highest bid in the auction, ResCap will be required to pay Nationstar a $24 million break-up fee in cash (a portion of which will be payable to Newcastle). Under the terms of the Agreement, as the back-up bidder, Nationstar is required to hold open its bid until the earlier of (a) the Bankruptcy Court's approval of the successful bid or (b) 30 calendar days following the auction. If the highest bidder is not approved by the Bankruptcy Court, or is unable to complete the transaction during this time period, Nationstar would be required to purchase the Mortgage Servicing Assets for approximately $2.9 billion (Nationstar's final bid) as required pursuant to the auction terms.

Amendment of 2011-1 agency advance financing facility
In October 2012, Nationstar amended the 2011-1 Agency Advance Financing Facility. This facility has the capacity to borrow up to $600 million and the interest rate is based on LIBOR plus a spread ranging from 2.5% to 6.50% depending upon class of the note. The maturity date of this facility is October 2013. This facility is secured by servicing advance receivables and is nonrecourse to Nationstar.
Nature of Business, Basis of Presentation and Material Transaction (Policies)
Consolidation, Policy 
The consolidated financial statements include the accounts of Nationstar Inc. and its wholly-owned subsidiaries and those variable interest entities (VIEs) where Nationstar Inc.'s wholly-owned subsidiaries are the primary beneficiaries. Nationstar Inc. applies the equity method of accounting to investments when the entity is not a VIE and Nationstar Inc. is able to exercise significant influence, but not control, over the policies and procedures of the entity but owns less than 50% of the voting interests. Intercompany balances and transactions have been eliminated. Results of operations, assets and liabilities of VIEs are included from the date that Nationstar Inc. became the primary beneficiary through the date Nationstar Inc. ceases to be the primary beneficiary.
Basis of Accounting, Policy 
The interim consolidated financial statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results of the interim periods have been included. The consolidated interim financial statements of Nationstar Inc. have been prepared in accordance with generally accepted accounting principles for interim information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (SEC). Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States (GAAP) for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in Nationstar Mortgage LLC's Annual Report on Form 10-K filed on March 15, 2012.
New Accounting Pronouncements, Policy 
Accounting Standards Update No. 2011-03, Reconsideration of Effective Control for Repurchase Agreements (Update No. 2011-03). Update No. 2011-03 is intended to improve the accounting and reporting of repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. This amendment removes the criterion pertaining to an exchange of collateral such that it should not be a determining factor in assessing effective control, including (i) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (ii) the collateral maintenance implementation guidance related to that criterion. Other criteria applicable to the assessment of effective control are not changed by the amendments in the update. The amendments in this update were effective for interim and annual periods beginning after December 15, 2011. The adoption of Update No. 2011-03 did not have a material impact on the Company’s financial condition, liquidity or results of operations.
Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (Update No. 2011-04). Update No. 2011-04 is intended to provide common fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards (IFRS). The changes required in this update include changing the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this update are to be applied prospectively and were effective for interim and annual periods beginning after December 15, 2011. Upon adoption, certain disclosure requirements were added to the Fair Value Measurements footnote. The adoption of Update No. 2011-04 did not have a material impact on the Company’s financial condition, liquidity or results of operations.
Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income (Update No. 2011-05). Update No. 2011-05 is intended to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Update No. 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity and now requires that all non-owner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This update does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this update are to be applied retrospectively and were effective for interim and annual periods beginning after December 15, 2011. The adoption of Update No. 2011-05 did not have a material impact on the Company’s financial statements.
Accounting Standards Update No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No 2011-05 (Update No. 2011-12). Update 2011-12 is intended to temporarily defer the effective date of the requirement to present separate line items on the income statement for reclassification adjustments of items out of accumulated other comprehensive income into net income as required by Update No. 2011-05. All other requirements in Update 2011-05 are not affected by this update. This update does not change the requirement to present reclassifications adjustments within other comprehensive income either on the face of the statement that reports other comprehensive income or in the notes to the financial statements (Update 2011-05). The amendments in this update were effective for interim and annual periods beginning after December 15, 2011. The adoption of Update No. 2011-12 did not have a material impact on the Company's financial statements.
Variable Interest Entities and Securitizations (Tables)
Schedule of Assets and Liabilities of VIEs Included in Financial Statements 
A summary of the assets and liabilities of Nationstar’s transactions with VIEs included in the Company’s consolidated financial statements as of September 30, 2012 and December 31, 2011 is presented in the following tables (in thousands):
 
 
September 30, 2012
 
December 31, 2011
 
Transfers
Accounted for as
Secured
Borrowings
 
Transfers
Accounted for as
Secured
Borrowings
ASSETS
 
 
 
Restricted cash
$
126,002

 
$
22,316

Accounts receivable
2,269,229

 
279,414

Mortgage loans held for investment, subject to nonrecourse debt
228,041

 
237,496

REO
1,830

 
3,668

Total Assets
$
2,625,102

 
$
542,894

LIABILITIES
 
 
 
Notes payable
$
1,707,941

 
$
244,574

Payables and accrued liabilities
2,412

 
977

Derivative financial instruments
7,041

 
—

Nonrecourse debt–Legacy Assets
101,898

 
112,490

Total Liabilities
$
1,819,292

 
$
358,041

Unconsolidated Securitization Trusts 
A summary of mortgage loans transferred to unconsolidated securitization trusts that are 60 days or more past due and the credit losses incurred in the unconsolidated securitization trusts are presented below (in thousands):
 
 
As of or for the nine months ended,
 
September 30, 2012
 
September 30, 2011
 
Principal
Amount
of Loans
60 Days or
More Past Due
 
Credit Losses
 
Principal
Amount
of Loans
60 Days or
More Past Due
 
Credit Losses
Total securitization trusts
$
1,060,797

 
$
208,628

 
$
801,216

 
$
182,991

A summary of the outstanding collateral and certificate balances for securitization trusts, including any retained beneficial interests and MSRs, that were not consolidated by Nationstar for the periods indicated are as follows (in thousands):
 
September 30, 2012
 
December 31, 2011
Total collateral balances
$
4,239,774

 
$
4,579,142

Total certificate balances
4,230,472

 
4,582,598

Total mortgage servicing rights at fair value
23,367

 
28,635

Cash Flow Receieved from Securitization Trusts 
Certain cash flows received from securitization trusts accounted for as sales for the dates indicated were as follows (in thousands):
 
 
For the three months ended
 
For the nine months ended
 
September 30, 2012
 
September 30, 2011
 
September 30, 2012
 
September 30, 2011
 
Servicing Fees
Received
 
Loan
Repurchases
 
Servicing Fees
Received
Loan
Repurchases
 
Servicing Fees
Received
 
Loan
Repurchases
 
Servicing Fees
Received
Loan
Repurchases
Total securitization trusts
$
6,317

 
$
—

 
$
5,870

$
—

 
$
22,149

 
$
—

 
$
21,221

$
—

Accounts Receivable (Tables)
Schedule of Accounts Receivable
Accounts receivable consist of the following (in thousands):
 
 
September 30, 2012
 
December 31, 2011
Delinquent interest advances
$
1,508,429

 
$
213,737

Corporate and escrow advances
1,159,711

 
299,946

Accrued servicing fees
94,214

 
20,865

Reverse mortgage
26,240

 
—

Receivables from trusts
13,175

 
4,664

Accrued interest
3,942

 
1,512

Insurance deposits
1,750

 
1,750

Other
45,524

 
19,826

Total accounts receivable
$
2,852,985

 
$
562,300

Mortgage Loans Held for Sale and Investment (Tables)
Schedule of Mortgage Loans Held-for-Sale 
Mortgage loans held for sale consist of the following (in thousands):
 
 
September 30, 2012
 
December 31, 2011
Mortgage loans held for sale – unpaid principal balance
$
668,345

 
$
442,596

Mark-to-market adjustment
34,869

 
16,030

Total mortgage loans held for sale
$
703,214

 
$
458,626

Reconciliation of Mortgage Loans Held-for-Sale to Cash Flow 
A reconciliation of the changes in mortgage loans held for sale to the amounts presented in the consolidated statements of cash flows for the dates indicated is presented in the following table (in thousands):
 
For the nine months ended September 30,
2012
 
2011
Mortgage loans held for sale – beginning balance
$
458,626

 
$
369,617

Mortgage loans originated and purchased, net of fees
4,814,018

 
2,285,558

Cost of loans sold, net of fees
(4,606,909
)
 
(2,287,430
)
Principal payments received on mortgage loans held for sale and other changes
38,935

 
10,475

Transfer of mortgage loans held for sale to held for investment
(1,456
)
 
(288
)
Mortgage loans held for sale – ending balance
$
703,214

 
$
377,932

Schedule of Loans Held for Investment 
Mortgage loans held for investment, subject to nonrecourse debt—legacy assets, net as of the dates indicated include (in thousands):
 
 
 
September 30, 2012
 
December 31, 2011
Mortgage loans held for investment, subject to nonrecourse debt - legacy assets, net – unpaid principal balance
 
$
361,474

 
$
375,720

Transfer discount
 

 

Accretable
 
(20,828
)
 
(22,392
)
Non-accretable
 
(94,823
)
 
(104,024
)
Allowance for loan losses
 
(7,645)
 
(5,824
)
Total mortgage loans held for investment, subject to nonrecourse debt -legacy assets, net
 
$
238,178

 
$
243,480

Changes in Accretable Yield on Mortgage Loans Held for Investment 
The changes in accretable yield on loans transferred to mortgage loans held for investment, subject to nonrecourse debt- legacy assets were as follows (in thousands):
 
 
Nine months ended September 30, 2012
 
Year ended December 31, 2011
Accretable Yield
 
 
 
Balance at the beginning of the period
$
22,392

 
$
25,219

Additions
—

 
—

Accretion
(2,728
)
 
(4,131
)
Reclassifications from (to) nonaccretable discount
1,164

 
1,304

Disposals
—

 
—

Balance at the end of the period
$
20,828

 
$
22,392

Allowance for Loan Losses 
The changes in the allowance for loan losses on mortgage loans held for investment, subject to nonrecourse debt-legacy assets, net were as follows (in thousands) for the dates indicated:
 
 
Nine months ended September 30, 2012
 
Performing
 
Non-Performing
 
Total
Balance at the beginning of the period
$
1,641

 
$
4,183

 
$
5,824

Provision for loan losses
2,249

 
904

 
3,153

Charge-offs
(978
)
 
(354
)
 
(1,332
)
Balance at the end of the period
$
2,912

 
$
4,733

 
$
7,645

Ending balance – collectively evaluated for impairment
$
278,367

 
$
83,107

 
$
361,474

 
 
Year ended December 31, 2011
 
Performing
 
Non-Performing
 
Total
Balance at the beginning of the period
$
829

 
$
2,469

 
$
3,298

Provision for loan losses
1,346

 
2,191

 
3,537

Recoveries on loans previously charged-off
—

 
—

 
—

Charge-offs
(534
)
 
(477
)
 
(1,011
)
Balance at the end of the period
$
1,641

 
$
4,183

 
$
5,824

Ending balance – Collectively evaluated for impairment
$
283,770

 
$
91,950

 
$
375,720

Mortgage Loans by Credit Quality Indicator 
The following tables provide the outstanding unpaid principal balance of Nationstar’s mortgage loans held for investment by credit quality indicators as of dates indicated.
 
 
September 30, 2012
 
December 31, 2011
 
(in thousands)
Credit Quality by Delinquency Status
 
 
 
Performing
$
278,367

 
$
283,770

Non-Performing
83,107

 
91,950

Total
$
361,474

 
$
375,720

Credit Quality by Loan-to-Value Ratio
 
 
 
Less than 60
$
40,060

 
$
42,438

Less than 70 and more than 60
15,817

 
15,968

Less than 80 and more than 70
22,627

 
25,190

Less than 90 and more than 80
28,863

 
32,620

Less than 100 and more than 90
32,804

 
33,708

Greater than 100
221,303

 
225,796

Total
$
361,474

 
$
375,720

Mortgage Servicing Rights (Tables)
Schedule of Assumptions for Fair Value of Mortgage Service Rights 
Nationstar used the following weighted average assumptions in estimating the fair value of MSRs for the dates indicated:
 
Credit Sensitive MSRs
September 30, 2012
 
December 31, 2011
Discount rate
17.12
%
 
25.71
%
Total prepayment speeds
20.74
%
 
15.80
%
Expected weighted-average life
4.49 years

 
5.15 years

Credit losses
21.35
%
 
35.42
%
Interest Rate Sensitive MSRs
September 30, 2012
 
December 31, 2011
Discount rate
10.62
%
 
10.46
%
Total prepayment speeds
18.63
%
 
19.02
%
Expected weighted-average life
4.79 years

 
5.04 years

Credit losses
9.59
%
 
9.73
%
Schedule of Servicing Assets at Fair Value 
The activity of MSRs carried at fair value is as follows for the dates indicated (in thousands): 
 
Nine months ended September 30, 2012
 
Year ended December 31, 2011
Fair value at the beginning of the period
$
251,050

 
$
145,062

Additions:

 

Servicing resulting from transfers of financial assets
37,578

 
36,474

Recognition of servicing assets from derecognition of variable interest entities
—

 
5,714

Purchases of servicing assets
346,874

 
102,800

Changes in fair value:

 

Due to changes in valuation inputs or assumptions used in the valuation model
6,669

 
(14,207
)
Other changes in fair value
(49,479
)
 
(24,793
)
Fair value at the end of the period
$
592,692

 
$
251,050

Unpaid principal balance of forward loans serviced for others
 
 
 
Credit sensitive loans
$
106,076,630

 
$
32,408,623

Interest sensitive loans
14,776,208

 
11,844,831

Total owned loans
$
120,852,838

 
$
44,253,454

Schedule of Sensitivity Analysis of Fair Value, Transferor's Interests in Transferred Financial Assets [Table Text Block] 
The following table shows the hypothetical effect on the fair value of the MSRs using various unfavorable variations of the expected levels of certain key assumptions used in valuing these assets at September 30, 2012 and December 31, 2011 (in thousands):

 
Discount Rate
 
Total Prepayment
Speeds
 
Credit Losses
 
100 bps
Adverse
Change
200 bps
Adverse
Change
 
10%
Adverse
Change
20%
Adverse
Change
 
10%
Adverse
Change
20%
Adverse
Change
September 30, 2012
 
 
 
 
 
 
 
 
 Mortgage servicing rights
$
(17,284
)
$
(32,796
)
 
$
(67,848
)
$
(137,087
)
 
$
(50,922
)
$
(107,768
)
December 31, 2011
 
 
 
 
 
 
 
 
 Mortgage servicing rights
$
(6,640
)
$
(12,929
)
 
$
(13,281
)
$
(25,215
)
 
$
(5,081
)
$
(10,944
)
Activity of MSRs at Amortized Cost 
The activity of MSRs carried at amortized cost is as follows for the date indicated (in thousands):
 
 
Nine months Ended
 
September 30, 2012
 
Assets
 
Liabilities
Activity of MSRs at amortized cost
 
 
 
Balance at the beginning of the period
$
—

 
$
—

Additions:
 
 
 
Purchase /Assumptions of servicing rights/obligations
9,000

 
86,553

Deductions:
 
 
 
Amortization/Accretion
(964
)
 
(4,240
)
Balance at end of the period
$
8,036

 
$
82,313

Schedule of Fees in Servicing Portfolio 
Total servicing and ancillary fees from Nationstar’s servicing portfolio (including subservicing) of residential mortgage loans are presented in the following table for the periods indicated (in thousands):
 
 
For the three months ended September 30,
 
For the nine months ended September 30,
 
2012
2011
 
2012
2011
Servicing fees
$
95,281

$
48,141

 
$
223,255

$
133,338

Ancillary fees
35,355

25,772

 
84,893

62,848

Total servicing and ancillary fees
$
130,636

$
73,913

 
$
308,148

$
196,186

Other Assets (Tables)
Schedule of Other Assets 
Other assets consisted of the following (in thousands):
 
 
September 30, 2012
 
December 31, 2011
Interest rate locks (see Note 10)
$
112,628

 
$
11,302

Deposit in escrow for ResCap acquisition
72,000

 
—

Loans subject to repurchase right from Ginnie Mae
58,534

 
35,735

Deferred financing costs
43,501

 
12,059

Margin call deposits
29,784

 
4,518

Equity method investment
8,994

 
6,493

Prepaid expenses
6,445

 
4,286

Unsecured loans
1,803

 
1,827

Deposits pending on mortgage servicing rights acquisitions
1,798

 
28,904

Other
2,872

 
1,057

Total other assets
$
338,359

 
$
106,181

Summarized Financial Information of Equity Investment 
A summary of the assets, liabilities, and operations of ANC as of the following periods are presented in the following tables (in thousands):
 
September 30, 2012
 
December 31, 2011
ASSETS
 
 
 
Cash
$
3,259

 
$
2,486

Accounts receivable
3,837

 
5,296

Receivables from affiliates
388

 
92

Equity method investments
1,482

 
2,788

Property and equipment, net
2,092

 
1,995

Goodwill and other intangible assets
33,548

 
33,876

Other assets
820

 
590

Total assets
$
45,426

 
$
47,123

LIABILITIES
 
 
 
Notes payable
$
4,724

 
$
4,724

Payables and accrued liabilities
16,049

 
13,236

Total liabilities
$
20,773

 
$
17,960

 
 
Three months ended September 30,
 
Nine months ended September 30,
 
From Acquisition through September 30,
 
2012
 
2011
 
2012
 
2011
REVENUES
 
 
 
 
 
 
 
Sales
$
12,917

 
$
13,181

 
$
41,296

 
$
25,382

Cost of sales
(10,447
)
 
(10,871
)
 
(31,878
)
 
(21,593
)
Net sales revenues
2,470

 
2,310

 
9,418

 
3,789

OTHER (EXPENSE)/INCOME
 
 
 
 
 
 
 
Operating costs
(4,841
)
 
(5,054
)
 
(13,903
)
 
(9,004
)
Income from equity method investments
675

 
771

 
1,930

 
1,176

Depreciation and amortization
(377
)
 
(180
)
 
(1,138
)
 
(359
)
Other (expense)/income
(42
)
 
136

 
(111
)
 
39

Gain/(loss) from discontinued operations
21

 
(27
)
 
(14
)
 
(54
)
Total expense
(4,564
)
 
(4,354
)
 
(13,236
)
 
(8,202
)
Net loss
$
(2,094
)
 
$
(2,044
)
 
$
(3,818
)
 
$
(4,413
)
Payables and Accrued Liabilities (Tables)
Schedule of Payables and Accrued Liabilities
Payables and accrued liabilities consist of the following (in thousands):

 
September 30, 2012

 
December 31, 2011

MSR purchases payable including advances
$
310,609

 
$
8,204

Mortgage insurance premiums and reserves
70,344

 
19,162

Loans subject to repurchase from Ginnie Mae
58,534

 
35,735

Payables to securitization trusts
37,607

 
10,665

Reverse mortgage payables
46,000

 
—

Accrued bonus and payroll
43,511

 
21,236

Accrued interest
39,902

 
10,225

Government sponsored entities
26,797

 
18,728

Deposit from MSR co-investor for ResCap
25,200

 
—

Taxes
14,544

 
154

Repurchase reserves
15,055

 
10,026

Legal and professional fees
12,076

 
5,931

Cancelled lease reserves
7,319

 
9,160

Servicing Payables
6,628

 
—

Other
48,142

 
34,563

Total payables and accrued liabilities
$
762,268

 
$
183,789

Derivative Financial Instruments (Tables)
Effect of Derivative Instruments on the Statement of Operations 
Derivatives in ASC 815 Cash Flow Hedging Relationships
 
Amount of
Gain (Loss)
Recognized
in OCI on
Derivative
(Effective
Portion)
 
Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
 
Amount of
Gain (Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
 
Location of Gain
(Loss) Recognized
in Income on
Derivative
(Ineffective
Portion and
Amount Excluded
from
Effectiveness
Testing)
 
Amount of  Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion)
For the three months ended September 30, 2012
Interest Rate Swap
 
$
—

 
Interest Expense
 
$
—

 
Interest Expense
 
$
423

For the three months ended September 30, 2011
Interest Rate Swap
 
$
—

 
Interest Expense
 
$
—

 
Interest Expense
 
$
617

For the nine months ended September 30, 2012
Interest Rate Swap
 
$
—

 
Interest Expense
 
$
—

 
Interest Expense
 
$
—

For the nine months ended September 30, 2011
Interest Rate Swap
 
$
(1,071
)
 
Interest Expense
 
$
582

 
Interest Expense
 
$
2,032

Schedule of Derivative Instruments 
The following tables provide the outstanding notional balances and fair values of outstanding positions for the dates indicated, and recorded gains/(losses) during the periods indicated (in thousands):
 
 
Expiration
Dates
 
Outstanding
Notional
 
Fair
Value
 
Recorded
Gains /
(Losses)
For the nine months ended September 30, 2012
 
 
 
 
 
 
 
MORTGAGE LOANS HELD FOR SALE
 
 
 
 
 
 
 
Loan sale commitments
2012
 
$
4,175

 
$
212

 
$
(422
)
OTHER ASSETS
 
 
 
 
 
 
 
IRLCs
2012
 
4,353,327

 
112,628

 
101,326

LIABILITIES
 
 
 
 
 
 
 
 Interest rate swaps and caps
2012-2015
 
648,940

 
7,041

 
(501
)
Interest rate swaps on ABS debt (1) 
2012-2017
 
894,363

 
1,632

 
(1,201
)
        Forward MBS trades
2012
 
2,838,185

 
29,162

 
(23,332
)
 
 
 
 
 
 
 
 
For the year ending December 31, 2011
 
 
 
 
 
 
 
MORTGAGE LOANS HELD FOR SALE
 
 
 
 
 
 
 
Loan sale commitments
2012
 
$
28,047

 
$
634

 
$
592

OTHER ASSETS
 
 
 
 
 
 
 
IRLCs
2012
 
736,377

 
11,302

 
6,598

LIABILITIES
 
 
 
 
 
 
 
Interest rate swaps and caps
2012-2015
 
193,500

 
6,540

 
1,261

Forward MBS trades
2012
 
691,725

 
5,830

 
(9,792
)
Interest rate swap, subject to ABS nonrecourse debt (2) 
—
 
—

 
—

 
(8,058
)
 
(1)
In March 2012, Nationstar received interest rate swaps from FIF as a part of the reorganization.
(2)
In December 2011, Nationstar sold its remaining variable interest in a securitization trust that had been a consolidated VIE since January 1, 2010 and deconsolidated the VIE. Upon deconsolidation of this VIE, Nationstar derecognized the related ABS nonrecourse debt and therefore the underlying interest rate swap, subject to ABS nonrecourse debt.
Indebtedness (Tables)
Schedule of Notes Payable 
A summary of the balances of notes payable for the dates indicated is presented below (in thousands).
 
 
September 30, 2012
 
December 31, 2011
 
Outstanding
 
Collateral
Pledged
 
Outstanding
 
Collateral
Pledged
Servicing Segment Notes Payable
 
 
 
 
 
 
 
MBS advance financing facility
$
178,455

 
$
197,934

 
$
179,904

 
$
182,096

Securities repurchase facility (2011)
11,774

 
55,603

 
11,774

 
55,603

2010-ABS advance financing facility
189,038

 
228,898

 
219,563

 
249,499

2011-1 Agency advance financing facility
159,945

 
181,803

 
25,011

 
28,811

MSR note
6,015

 
13,296

 
10,180

 
16,230

2012-AW Agency advance financing facility
100,000

 
124,551

 
—

 
—

2012-C ABS advance financing facility
562,366

 
692,635

 
—

 
—

2012-R ABS advance financing facility
328,793

 
392,360

 
—

 
—

2012-W ABS advance financing facility
367,797

 
454,402

 
—

 
—

Reverse participations financing facility
18,801

 
21,298

 
—

 
—

Originations Segment Notes Payable

 

 

 

$375 million warehouse facility
195,703

 
211,820

 
46,810

 
51,040

$150 million warehouse facility
155,323

 
162,705

 
251,722

 
265,083

$250 million warehouse facility (2011)
141,204

 
147,941

 
7,310

 
7,672

$100 million warehouse facility (2009)
87,659

 
91,311

 
16,047

 
16,715

ASAP+ facility
29,443

 
28,800

 
104,858

 
104,006

Total notes payable
$
2,532,316

 
$
3,005,357

 
$
873,179

 
$
976,755

A summary of the balances of unsecured senior notes is presented below (in thousands):
 
September 30, 2012
 
December 31, 2011

$285 million face value, 10.875% interest rate payable semi-annually, due April 2015
$
281,307

 
$
280,199

$375 million face value, 9.625% interest rate payable semi-annually, due May 2019
380,366

 
—

$400 million face value, 7.875% interest rate payable semi-annually, due October 2020
$
400,750

 
$
—

Total
$
1,062,423

 
$
280,199

Schedule of Maturities of Long-term Debt 
The expected maturities of Nationstar's senior unsecured notes based on contractual maturities are as follows (in thousands).
Year
Amount
2013
$
—

2014
—

2015
285,000

2016
—

2017
—

Thereafter
775,000

Total
$
1,060,000

General and Administrative Expenses (Tables)
General and Administrative Expenses
General and administrative expenses consist of the following for the dates indicated (in thousands):
 
 
For the three months ended
 
For the nine months ended
 
September 30,
2012
September 30,
2011
 
September 30,
2012
September 30,
2011
Servicing
$
13,893

$
7,106

 
$
50,530

$
16,101

Legal and professional fees
18,251

8,508

 
32,818

13,145

Depreciation and amortization
2,973

991

 
6,358

2,551

Equipment
2,450

1,251

 
5,569

3,245

Postage
2,395

1,522

 
5,056

3,937

Travel
2,043

871

 
4,730

2,383

Other
9,580

5,148

 
22,046

15,345

Total general and administrative expenses
$
51,585

$
25,397

 
$
127,107

$
56,707

Fair Value Measurements (Tables)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis 
The estimated carrying amount and fair value of Nationstar’s financial instruments and other assets and liabilities measured at fair value on a recurring basis is as follows for the dates indicated (in thousands):
 
 
 
September 30, 2012
 
 
 
Recurring Fair Value Measurements
 
Total Fair Value
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Mortgage loans held for sale(1)
$
703,214

 
$
—

 
$
703,214

 
$
—

Mortgage servicing rights – fair value(1)
592,692

 
—

 
—

 
592,692

Other assets:
 
 
 
 
 
 
 
IRLCs
112,628

 
—

 
112,628

 
—

Total assets
$
1,408,534

 
$
—

 
$
815,842

 
$
592,692

LIABILITIES
 
 
 
 
 
 
 
Derivative financial instruments
 
 
 
 
 
 
 
Interest rate swaps and caps
$
7,041

 
$
—

 
$
7,041

 
$
—

Interest rate swaps on ABS debt
1,632

 
—

 
1,632

 
—

       Forward MBS trades
29,162

 
—

 
29,162

 
—

Excess spread financing (at fair value)
255,484

 
—

 
—

 
255,484

Total liabilities
$
293,319

 
$
—

 
$
37,835

 
$
255,484

 
 
 
December 31, 2011
 
 
 
Recurring Fair Value Measurements
 
Total Fair Value
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Mortgage loans held for sale(1)
$
458,626

 
$
—

 
$
458,626

 
$
—

Mortgage servicing rights – fair value(1)
251,050

 
—

 
—

 
251,050

Other assets:

 

 

 

IRLCs
11,302

 
—

 
11,302

 
—

Total assets
$
720,978

 
$
—

 
$
469,928

 
$
251,050

LIABILITIES
 
 
 
 
 
 
 
Derivative financial instruments
 
 
 
 
 
 
 
Interest rate swaps and caps
$
6,540

 
$
—

 
$
6,540

 
$
—

Forward MBS trades
5,830

 
—

 
5,830

 
—

Excess spread financing (at fair value)
44,595

 
—

 
—

 
44,595

Total liabilities
$
56,965

 
$
—

 
$
12,370

 
$
44,595

(1)
Based on the nature and risks of these assets and liabilities, the Company has determined that presenting them as a single class is appropriate.
Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation 
The table below presents a reconciliation for all of Nationstar’s Level 3 assets and liabilities measured at fair value on a recurring basis for the dates indicated (in thousands):
 
 
 
ASSETS
 
LIABILITIES
For the three months ended September 30, 2012
 
Mortgage
servicing rights
 
Excess spread
financing
Beginning balance
 
$
596,462

 
$
266,693

Transfers into Level 3
 
—

 
—

Transfers out of Level 3
 
—

 
—

Total gains or losses
 
 
 
 
Included in earnings
 
(22,430
)
 
(2,213
)
Included in other comprehensive income
 
—

 
—

Purchases, issuances, sales and settlements
 
 
 
 
Purchases
 
5,210

 
—

Issuances
 
13,450

 
(1,522
)
Sales
 
—

 
—

Settlements
 
—

 
(7,474
)
Ending balance
 
$
592,692

 
$
255,484

 
 
ASSETS
 
LIABILITIES
For the nine months ended September 30, 2012
 
Mortgage
servicing rights
 
Excess spread
financing
Beginning balance
 
$
251,050

 
$
44,595

Transfers into Level 3
 
—

 
—

Transfers out of Level 3
 
—

 
—

Total gains or losses
 
 
 
 
Included in earnings
 
(42,810
)
 
5,050

Included in other comprehensive income
 
—

 
—

Purchases, issuances, sales and settlements
 
 
 
 
Purchases
 
346,874

 
—

Issuances
 
37,578

 
218,820

Sales
 
—

 
—

Settlements
 
—

 
(12,981
)
Ending balance
 
$
592,692

 
$
255,484

 
 
ASSETS
 
LIABILITIES
For the year ending December 31, 2011
 
Mortgage
servicing rights
 
Excess spread
financing
Beginning balance
 
$
145,062

 
$
—

Transfers into Level 3
 
—

 
—

Transfers out of Level 3
 
—

 
—

Total gains or losses
 
 
 
 
Included in earnings
 
(39,000
)
 
3,060

Included in other comprehensive income
 
—

 
—

Purchases, issuances, sales and settlements
 
 
 
 
Purchases
 
102,800

 
—

Issuances
 
36,474

 
43,742

Sales
 
—

 
—

Settlements
 
5,714

 
(2,207
)
Ending balance
 
$
251,050

 
$
44,595


Fair Value Measurements, Nonrecurring 
The table below presents the items which Nationstar measures at fair value on a nonrecurring basis (in thousands).
 
 
Nonrecurring Fair Value
Measurements
 
Total Estimated
Fair Value
 
Total Gain
(Loss) Included
in Earnings
 
Level 1
 
Level 2
 
Level 3
 
 
Three months ended September 30, 2012
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
REO(1)
$
—

 
$
—

 
$
3,193

 
$
3,193

 
$
2,050

Total assets
$
—

 
$
—

 
$
3,193

 
$
3,193

 
$
2,050

Nine months ended September 30, 2012
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
REO(1)
$
—

 
$
—

 
$
3,193

 
$
3,193

 
$
(1,705
)
Total assets
$
—

 
$
—

 
$
3,193

 
$
3,193

 
$
(1,705
)
Year ended December 31, 2011
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
REO(1)
$
—

 
$
—

 
$
3,668

 
$
3,668

 
$
(6,833
)
Total assets
$
—

 
$
—

 
$
3,668

 
$
3,668

 
$
(6,833
)
(1)
Based on the nature and risks of these assets and liabilities, the Company has determined that presenting them as a single class is appropriate
Fair Value, by Balance Sheet Grouping 
The table below presents a summary of the estimated carrying amount and fair value of Nationstar’s financial instruments (in thousands).

 
September 30, 2012
 
Carrying
Amount
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Financial assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
430,815

 
$
430,815

 
$
—

 
$
—

Restricted cash
258,858

 
258,858

 
—

 
—

Mortgage loans held for sale
703,214

 
—

 
703,214

 
—

Mortgage loans held for investment, subject to nonrecourse debt – Legacy assets
238,178

 
—

 
—

 
221,852

Reverse mortgage interests
452,886

 
—

 
492,765

 
—

Derivative instruments
112,628

 
—

 
112,628

 
—

Financial liabilities:
 
 
 
 
 
 
 
Notes payable
2,532,216

 
—

 
—

 
2,532,216

Unsecured senior notes
1,062,423

 
1,129,060

 
—

 
—

Derivative financial instruments
37,835

 
—

 
37,835

 
—

Nonrecourse debt - Legacy assets
101,898

 
—

 
—

 
103,727

Excess spread financing
255,484

 
—

 
—

 
255,484

Participating interest financing
415,448

 
—

 
417,650

 
—

 
December 31, 2011
 
Carrying
Amount
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Financial assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
62,445

 
$
62,445

 
$
—

 
$
—

Restricted cash
71,499

 
71,499

 
—

 
—

Mortgage loans held for sale
458,626

 
—

 
458,626

 
—

Mortgage loans held for investment, subject to nonrecourse debt – Legacy assets
243,480

 
—

 
—

 
226,890

Derivative instruments
11,302

 
—

 
11,302

 
—

Financial liabilities:
 
 
 
 
 
 
 
Notes payable
873,179

 
—

 
—

 
873,179

Unsecured senior notes
280,199

 
282,150

 
—

 
—

Derivative financial instruments
12,370

 
—

 
12,370

 
—

Nonrecourse debt - Legacy assets
112,490

 
—

 
—

 
114,037

Excess spread financing
44,595

 
—

 
—

 
44,595


Shareholders' Equity (Tables)
Restricted Stock Information
The following table summarizes information about our restricted stock as of September 30, 2012 under the 2012 Plan (restricted stock in thousands):
 
Shares
 
Grant Date Fair Value
 
Remaining Contractual Term
Restricted Stock outstanding at March 31, 2012
1,277
 
$14.00
 
2.4
Granted
6
 
$28.17
 
1.0
Forfeited
(32)
 
 
 
 
Restricted Stock outstanding at September 30, 2012
1,251
 
 
 
 
Restricted Stock unvested and expected to vest
1,223
 
 
 
 
Restricted Stock vested and payable at September 30, 2012
—
 
 
 
 
Commitments and Contingencies (Tables)
Minimum Annual Rental Commitments

Business Segment Reporting (Tables)
Schedule of Segment Reporting Information
The following tables are a presentation of financial information by segment for the periods indicated (in thousands):
 
Three months ended September 30, 2012
 
Servicing
 
Originations
 
Operating
Segments
 
Legacy
Portfolio
and Other
 
Eliminations
 
Consolidated
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
Servicing fee income
$
135,398

 
$
—

 
$
135,398

 
$
548

 
$
(442
)
 
$
135,504

Other fee income
6,457

 
(4,055
)
 
2,402

 
(6
)
 
 
 
2,396

Total fee income
141,855

 
(4,055
)
 
137,800

 
542

 
(442
)
 
137,900

Gain/(loss) on mortgage loans held for sale
—

 
139,259

 
139,259

 
—

 
—

 
139,259

Total revenues
141,855

 
135,204

 
277,059

 
542

 
(442
)
 
277,159

Total expenses and impairments
95,296

 
56,481

 
151,777

 
3,051

 
—

 
154,828

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
12,544

 
6,161

 
18,705

 
4,395

 
442

 
23,542

Interest expense
(53,830
)
 
(7,738
)
 
(61,568
)
 
(3,447
)
 
—

 
(65,015
)
Gain (loss) on interest rate swaps and caps
236

 
—

 
236

 
(1,313
)
 
—

 
(1,077
)
Total other income (expense)
(41,050
)
 
(1,577
)
 
(42,627
)
 
(365
)
 
442

 
(42,550
)
Income (loss) before taxes
$
5,509

 
$
77,146

 
$
82,655

 
$
(2,874
)
 
$
—

 
$
79,781

Depreciation and amortization
$
2,006

 
$
766

 
$
2,772

 
$
201

 
$
—

 
$
2,973

Total assets
4,470,896

 
1,079,521

 
5,550,417

 
390,814

 
—

 
5,941,231


 
 
Three months ended September 30, 2011
 
Servicing
 
Originations
 
Operating
Segments
 
Legacy
Portfolio
and Other
 
Eliminations
 
Consolidated
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
Servicing fee income
$
54,220

 
$
—

 
$
54,220

 
$
519

 
$
(1,708
)
 
$
53,031

Other fee income
3,772

 
3,114

 
6,886

 
774

 
—

 
7,660

Total fee income
57,992

 
3,114

 
61,106

 
1,293

 
(1,708
)
 
60,691

Gain/(loss) on mortgage loans held for sale
—

 
30,352

 
30,352

 
—

 
(120
)
 
30,232

Total revenues
57,992

 
33,466

 
91,458

 
1,293

 
(1,828
)
 
90,923

Total expenses and impairments
47,874

 
25,890

 
73,764

 
9,550

 
(120
)
 
83,194

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
907

 
3,056

 
3,963

 
10,530

 
1,708

 
16,201

Interest expense
(14,161
)
 
(2,989
)
 
(17,150
)
 
(9,226
)
 
—

 
(26,376
)
Fair value changes ABS securitizations
—

 
—

 
—

 
(654
)
 
—

 
(654
)
Total other income (expense)
(13,254
)
 
67

 
(13,187
)
 
650

 
1,708

 
(10,829
)
Income before taxes
$
(3,136
)
 
$
7,643

 
$
4,507

 
$
(7,607
)
 
$
—

 
$
(3,100
)
Depreciation and amortization
$
525

 
$
327

 
$
852

 
$
139

 
$
—

 
$
991

Total assets
810,157

 
429,661

 
1,239,818

 
764,507

 
—

 
2,004,325

 
Nine months ended September 30, 2012
 
Servicing
 
Originations
 
Operating
Segments
 
Legacy
Portfolio
and Other
 
Eliminations
 
Consolidated
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
Servicing fee income
$
305,124

 
$
—

 
$
305,124

 
$
1,785

 
$
(1,363
)
 
$
305,546

Other fee income
19,728

 
1,665

 
21,393

 
(134
)
 
 
 
21,259

Total fee income
324,852

 
1,665

 
326,517

 
1,651

 
(1,363
)
 
326,805

Gain (loss) on mortgage loans held for sale
—

 
312,094

 
312,094

 
—

 
22

 
312,116

Total revenues
324,852

 
313,759

 
638,611

 
1,651

 
(1,341
)
 
638,921

Total expenses and impairments
228,182

 
132,935

 
361,117

 
20,660

 
—

 
381,777

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
22,406

 
14,719

 
37,125

 
14,145

 
1,363

 
52,633

Interest expense
(99,053
)
 
(15,529
)
 
(114,582
)
 
(11,304
)
 
(22
)
 
(125,908
)
Gain (loss) on interest rate swaps and caps
424

 
—

 
424

 
(2,126
)
 
—

 
(1,702
)
Total other income (expense)
(76,223
)
 
(810
)
 
(77,033
)
 
715

 
1,341

 
(74,977
)
Income before taxes
$
20,447

 
$
180,014

 
$
200,461

 
$
(18,294
)
 
$
—

 
$
182,167

Depreciation and amortization
$
4,104

 
$
1,669

 
$
5,773

 
$
585

 
$
—

 
$
6,358

Total assets
4,470,896

 
1,079,521

 
5,550,417

 
390,814

 
—

 
5,941,231



 
Nine months ended September 30, 2011
 
Servicing
 
Originations
 
Operating
Segments
 
Legacy
Portfolio
and Other
 
Eliminations
 
Consolidated
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
Servicing fee income
$
164,804

 
$
—

 
$
164,804

 
$
1,257

 
$
(5,306
)
 
$
160,755

Other fee income
10,437

 
10,983

 
21,420

 
2,579

 
—

 
23,999

Total fee income
175,241

 
10,983

 
186,224

 
3,836

 
(5,306
)
 
184,754

Gain (loss) on mortgage loans held for sale
—

 
73,832

 
73,832

 
—

 
(272
)
 
73,560

Total revenues
175,241

 
84,815

 
260,056

 
3,836

 
(5,578
)
 
258,314

Total expenses and impairments
128,177

 
71,404

 
199,581

 
20,408

 
(272
)
 
219,717

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
2,529

 
8,560

 
11,089

 
34,851

 
5,306

 
51,246

Interest expense
(41,109
)
 
(7,480
)
 
(48,589
)
 
(28,340
)
 
—

 
(76,929
)
Fair value changes - ABS securitizations
—

 
—

 
—

 
(6,919
)
 
—

 
(6,919
)
Total other income (expense)
(38,580
)
 
1,080

 
(37,500
)
 
(408
)
 
5,306

 
(32,602
)
Income before taxes
$
8,484

 
$
14,491

 
$
22,975

 
$
(16,980
)
 
$
—

 
$
5,995

Depreciation and amortization
$
1,293

 
$
894

 
$
2,187

 
$
364

 
$
—

 
$
2,551

Total assets
810,157

 
429,661

 
1,239,818

 
764,507

 
—

 
2,004,325

Guarantor Financial Statement Information (Tables)
Consolidating Balance Sheets 
NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2012
(IN THOUSANDS)
Assets
Nationstar Inc.
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Cash and cash equivalents
$
—

 
$
430,497

 
$
318

 
$
—

 
$
—

 
$
430,815

Restricted cash
—

 
132,854

 
3

 
126,001

 
—

 
258,858

Accounts receivable, net
—

 
2,851,007

 
—

 
1,978

 
—

 
2,852,985

Mortgage loans held for sale
—

 
703,214

 
—

 
—

 
—

 
703,214

Mortgage loans held for investment, subject to nonrecourse debt–Legacy Asset, net
—

 
10,137

 
—

 
228,041

 
—

 
238,178

Participating interest in reverse mortgages
—

 
452,886

 
—

 
—

 
—

 
452,886

Receivables from affiliates
—

 
(1,605,564
)
 
82,229

 
1,536,636

 
—

 
13,301

Mortgage servicing rights – fair value
—

 
592,692

 
—

 
—

 
—

 
592,692

Investment in subsidiaries
661,463

 
157,812

 
—

 
—

 
(819,275
)
 
—

Mortgage servicing rights – amortized cost
—

 
8,036

 
—

 
—

 
—

 
8,036

Property and equipment, net
—

 
47,879

 
835

 
—

 
—

 
48,714

REO, net
—

 
1,363

 
—

 
1,830

 
—

 
3,193

Other assets
29,783

 
338,359

 
—

 
—

 
(29,783
)
 
338,359

Total assets
$
691,246

 
$
4,121,172

 
$
83,385

 
$
1,894,486

 
$
(849,058
)
 
$
5,941,231

Liabilities and shareholders’ equity
 
 
 
 
 
 
 
 
 
 
 
Notes payable
$
—

 
$
823,608

 
$
—

 
$
1,708,708

 
$
—

 
$
2,532,316

Unsecured senior notes
—

 
1,062,423

 
—

 
—

 
—

 
1,062,423

Payables and accrued liabilities
—

 
789,639

 
—

 
2,412

 
(29,783
)
 
762,268

Payables to affiliates
—

 
—

 
—

 
—

 
—

 
—

Derivative financial instruments
—

 
30,794

 
—

 
7,041

 
—

 
37,835

Mortgage Servicing Liability
—

 
82,313

 
—

 
—

 
—

 
82,313

Nonrecourse debt–Legacy Assets
—

 
—

 
—

 
101,898

 
—

 
101,898

Excess spread financing - at fair value
—

 
255,484

 
—

 
—

 
—

 
255,484

Participating interest financing
—

 
415,448

 
—

 
—

 
—

 
415,448

Total liabilities
—

 
3,459,709

 
—

 
1,820,059

 
(29,783
)
 
5,249,985

Total shareholders’ equity
691,246

 
661,463

 
83,385

 
74,427

 
(819,275
)
 
691,246

Total liabilities and shareholders’ equity
$
691,246

 
$
4,121,172

 
$
83,385

 
$
1,894,486

 
$
(849,058
)
 
$
5,941,231

NATIONSTAR MORTGAGE LLC
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2011
(IN THOUSANDS)

 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
62,201

 
$
244

 
$
—

 
$
—

 
$
62,445

Restricted cash
49,180

 
3

 
22,316

 
—

 
71,499

Accounts receivable, net
281,782

 
7

 
280,511

 
—

 
562,300

Mortgage loans held for sale
458,626

 
—

 
—

 
—

 
458,626

Mortgage loans held for investment, subject to nonrecourse debt–Legacy Asset, net
5,984

 
—

 
237,496

 
—

 
243,480

Receivables from affiliates
41,961

 
70,541

 
—

 
(107,893
)
 
4,609

Mortgage servicing rights – fair value
251,050

 
—

 
—

 
—

 
251,050

Investment in subsidiaries
140,880

 
—

 
—

 
(140,880
)
 
—

Property and equipment, net
23,238

 
835

 
—

 
—

 
24,073

REO, net
—

 
—

 
3,668

 
—

 
3,668

Other assets
106,181

 
—

 
—

 
—

 
106,181

Total assets
$
1,421,083

 
$
71,630

 
$
543,991

 
$
(248,773
)
 
$
1,787,931

Liabilities and members’ equity
 
 
 
 
 
 
 
 
 
Notes payable
$
628,605

 
$
—

 
$
244,574

 
$
—

 
$
873,179

Unsecured senior notes
280,199

 
—

 
—

 
—

 
280,199

Payables and accrued liabilities
180,545

 
—

 
3,244

 
—

 
183,789

Payables to affiliates
—

 
—

 
107,893

 
(107,893
)
 
—

Derivative financial instruments
5,830

 
—

 
6,540

 
—

 
12,370

Derivative financial instruments, subject to ABS nonrecourse debt
—

 
—

 
—

 
—

 
—

Nonrecourse debt–Legacy Assets
—

 
—

 
112,490

 
—

 
112,490

Excess spread financing – fair value
44,595

 
—

 
—

 
—

 
44,595

ABS nonrecourse – fair value
—

 
—

 
—

 
—

 
—

Total liabilities
1,139,774

 
—

 
474,741

 
(107,893
)
 
1,506,622

Total members’ equity
281,309

 
71,630

 
69,250

 
(140,880
)
 
281,309

Total liabilities and members’ equity
$
1,421,083

 
$
71,630

 
$
543,991

 
$
(248,773
)
 
$
1,787,931

Consolidating Statements of Operations 
NATIONSTAR MORTGAGE LLC CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011
(IN THOUSANDS)
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
Servicing fee income
$
50,983

 
$
(106
)
 
$
3,862

 
$
(1,708
)
 
$
53,031

Other fee income
3,517

 
3,882

 
261

 
—

 
7,660

Total fee income
54,500

 
3,776

 
4,123

 
(1,708
)
 
60,691

Gain on mortgage loans held for sale
30,232

 
—

 
—

 
—

 
30,232

Total Revenues
84,732

 
3,776

 
4,123

 
(1,708
)
 
90,923

Expenses and impairments:
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
49,989

 
915

 
—

 
—

 
50,904

General and administrative
20,585

 
871

 
3,941

 
—

 
25,397

Provision for loan losses
1,281

 
—

 
(404
)
 
—

 
877

Loss on foreclosed real estate
1,234

 
—

 
1,324

 
—

 
2,558

Occupancy
3,419

 
39

 
—

 
—

 
3,458

Total expenses and impairments
76,508

 
1,825

 
4,861

 
—

 
83,194

Other income / (expense):
 
 
 
 
 
 
 
 
 
Interest income
2,871

 
5

 
11,617

 
1,708

 
16,201

Interest expense
(14,686
)
 
—

 
(11,690
)
 
—

 
(26,376
)
Fair value changes in ABS securitizations
—

 
—

 
(553
)
 
(101
)
 
(654
)
Gain / (loss) from subsidiaries
592

 
—

 
—

 
(592
)
 
—

Total other income / (expense)
(11,223
)
 
5

 
(626
)
 
1,015

 
(10,829
)
Net income / (loss)
(2,999
)
 
1,956

 
(1,364
)
 
(693
)
 
(3,100
)
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
Change in value of cash flow hedges
—

 
—

 
—

 
—

 
—

Comprehensive income / (loss)
$
(2,999
)
 
$
1,956

 
$
(1,364
)
 
$
(693
)
 
$
(3,100
)


 


NATIONSTAR MORTGAGE LLC
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
(IN THOUSANDS)

 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated

Revenues:
 
 
 
 
 
 
 
 
 
Servicing fee income
$
162,741

 
$
(542
)
 
$
3,862

 
$
(5,306
)
 
$
160,755

Other fee income
11,647

 
11,411

 
941

 
—

 
23,999

Total fee income
174,388

 
10,869

 
4,803

 
(5,306
)
 
184,754

Gain on mortgage loans held for sale
73,560

 
—

 
—

 
—

 
73,560

Total Revenues
247,948

 
10,869

 
4,803

 
(5,306
)
 
258,314

Expenses and impairments:
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
143,646

 
2,553

 
—

 
—

 
146,199

General and administrative
50,054

 
2,705

 
3,948

 
—

 
56,707

Provision for loan losses
2,005

 
—

 
—

 
—

 
2,005

Loss on foreclosed real estate
1,436

 
—

 
5,468

 
—

 
6,904

Occupancy
7,765

 
137

 
—

 
—

 
7,902

Total expenses and impairments
204,906

 
5,395

 
9,416

 
—

 
219,717

Other income / (expense):
 
 
 
 
 
 
 
 
 
Interest income
11,070

 
—

 
34,870

 
5,306

 
51,246

Interest expense
(41,411
)
 
—

 
(35,518
)
 
—

 
(76,929
)
Fair value changes in ABS securitizations
—

 
—

 
(6,935
)
 
16

 
(6,919
)
Gain / (loss) from subsidiaries
(6,722
)
 
—

 
—

 
6,722

 
—

Total other income / (expense)
(37,063
)
 
—

 
(7,583
)
 
12,044

 
(32,602
)
Net income / (loss)
$
5,979

 
$
5,474

 
$
(12,196
)
 
$
6,738

 
$
5,995

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
Change in value of cash flow hedges
—

 
—

 
(1,071
)
 
—

 
(1,071
)
Comprehensive income / (loss)
$
5,979

 
$
5,474

 
$
(13,267
)
 
$
6,738

 
$
4,924

NATIONSTAR MORTGAGE INC
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012
(IN THOUSANDS)
 
Nationstar Inc.
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Servicing fee income
$
—

 
$
135,339

 
$
—

 
$
607

 
$
(442
)
 
$
135,504

Other fee income
—

 
(4,672
)
 
6,947

 
121

 
—

 
2,396

Total fee income
—

 
130,667

 
6,947

 
728

 
(442
)
 
137,900

Gain on mortgage loans held for sale
—

 
139,259

 
—

 
—

 
—

 
139,259

Total Revenues
—

 
269,926

 
6,947

 
728

 
(442
)
 
277,159

Expenses and impairments:
 
 
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
—

 
96,121

 
1,986

 
—

 
—

 
98,107

General and administrative
—

 
50,573

 
401

 
611

 
—

 
51,585

Provision for loan losses
—

 
—

 
—

 
1,545

 
—

 
1,545

Loss on foreclosed real estate and other
—

 
884

 
—

 
(2,934
)
 
—

 
(2,050
)
Occupancy
—

 
5,641

 
—

 
—

 
—

 
5,641

Total expenses and impairments
—

 
153,219

 
2,387

 
(778
)
 
—

 
154,828

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
18,460

 
—

 
4,640

 
442

 
23,542

Interest expense
—

 
(43,000
)
 
—

 
(22,015
)
 
—

 
(65,015
)
Gain/(Loss) on interest rate swaps and caps
—

 
(389
)
 
—

 
(688
)
 
—

 
(1,077
)
Gain/(loss) from subsidiaries
49,931

 
(11,997
)
 
—

 
—

 
(37,934
)
 
—

Total other income (expense)
49,931

 
(36,926
)
 
—

 
(18,063
)
 
(37,492
)
 
(42,550
)
Income before taxes
49,931

 
79,781

 
4,560

 
(16,557
)
 
(37,934
)
 
79,781

Income tax expense/(benefit)
(5,136
)
 
29,850

 
—

 
—

 
—

 
24,714

Net income/(loss)
55,067

 
49,931

 
4,560

 
(16,557
)
 
(37,934
)
 
55,067

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
Change in value of cash flow hedges
—

 
—

 
—

 
—

 
—

 
—

Reclassification adjustments for gain (loss) included in earnings
$
—

 
$
—

 
$
—

 
$
423

 
$
—

 
$
423

Comprehensive income / (loss)
$
55,067

 
$
49,931

 
$
4,560

 
$
(16,134
)
 
$
(37,934
)
 
$
55,490



NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
(IN THOUSANDS)

 
Nationstar Inc.
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Servicing fee income
$
—

 
$
301,363

 
$
—

 
$
5,546

 
$
(1,363
)
 
$
305,546

Other fee income
—

 
310

 
20,596

 
353

 
—

 
21,259

Total fee income
—

 
301,673

 
20,596

 
5,899

 
(1,363
)
 
326,805

Gain on mortgage loans held for sale
—

 
312,116

 
—

 
—

 
—

 
312,116

Total Revenues
—

 
613,789

 
20,596

 
5,899

 
(1,363
)
 
638,921

Expenses and impairments:
 
 
 
 
 
 
 
 
 
 
 
Salaries, wages and benefits
—

 
231,709

 
6,810

 
—

 
—

 
238,519

General and administrative
—

 
119,772

 
1,778

 
5,557

 
—

 
127,107

Provision for loan losses
—

 
—

 
—

 
3,153

 
—

 
3,153

Loss on foreclosed real estate and other
—

 
1,008

 
—

 
697

 
—

 
1,705

Occupancy
—

 
11,293

 
—

 
—

 
—

 
11,293

Total expenses and impairments
—

 
363,782

 
8,588

 
9,407

 
—

 
381,777

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
36,489

 
—

 
14,781

 
1,363

 
52,633

Interest expense
—

 
(89,832
)
 
—

 
(36,076
)
 
—

 
(125,908
)
Gain/(Loss) on interest rate swaps and caps
—

 
(1,201
)
 
—

 
(501
)
 
—

 
(1,702
)
Gain/(loss) from subsidiaries
114,591

 
(13,331
)
 
—

 
—

 
(101,260
)
 
—

Total other income (expense)
114,591

 
(67,875
)
 
—

 
(21,796
)
 
(99,897
)
 
(74,977
)
Income before taxes
114,591

 
182,132

 
12,008

 
(25,304
)
 
(101,260
)
 
182,167

Income tax expense/(benefit)
(26,937
)
 
67,541

 
5

 
30

 
—

 
40,639

Net income/(loss)
141,528

 
114,591

 
12,003

 
(25,334
)
 
(101,260
)
 
141,528

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
Change in value of cash flow hedges
—

 
—

 
—

 
(423
)
 
—

 
(423
)
Reclassification adjustments for gain (loss) included in earnings
—

 
—

 
—

 
423

 
—

 
423

Comprehensive income / (loss)
$
141,528

 
$
114,591

 
$
12,003

 
$
(25,334
)
 
$
(101,260
)
 
$
141,528

Consolidating Statements of Cash Flows 
NATIONSTAR MORTGAGE HOLDINGS INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
(IN THOUSANDS)

 
Nationstar Inc.
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Operating activities:
 
 
 
 
 
 
 
 
 
 
 
Net income/(loss)
$
141,528

 
$
114,591

 
$
12,003

 
$
(25,334
)
 
$
(101,260
)
 
$
141,528

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

 

 

 

 

 
 
(Gain)/loss from subsidiaries
(114,591
)
 
13,331

 
—

 
—

 
101,260

 
—

Share-based compensation
—

 
10,665

 
—

 
—

 
—

 
10,665

Gain on mortgage loans held for sale
—

 
(312,116
)
 
—

 
—

 
—

 
(312,116
)
Provision for loan losses
—

 
—

 
—

 
3,153

 
—

 
3,153

Loss on foreclosed real estate and other
—

 
1,008

 
—

 
697

 
—

 
1,705

Loss on equity method investments
—

 
1,327

 
—

 
—

 
—

 
1,327

(Gain)/loss on ineffectiveness on interest rate swaps and cap
—

 
1,201

 
—

 
501

 
—

 
1,702

Fair value changes in excess spread financing
—

 
5,050

 
—

 
—

 
—

 
5,050

Depreciation and amortization
—

 
6,315

 
43

 
—

 
—

 
6,358

Change in fair value of mortgage servicing rights
—

 
42,810

 
—

 
—

 
—

 
42,810

Accretion of mortgage servicing liability
—

 
(3,276
)
 
—

 
—

 
—

 
(3,276
)
Amortization of debt discount
—

 
16,387

 
—

 
1,714

 
—

 
18,101

Amortization of premiums/(discounts)
—

 
(125
)
 
—

 
(3,877
)
 
—

 
(4,002
)
Mortgage loans originated and purchased, net of fees
—

 
(4,814,018
)
 
—

 
—

 
—

 
(4,814,018
)
Cost of loans sold and principal payments and prepayments, and other changes in mortgage loans originated as held for sale, net of fees
—

 
4,761,946

 
—

 
7,371

 
—

 
4,769,317

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable
—

 
(546,934
)
 
7

 
278,533

 
—

 
(268,394
)
Receivables from/(payables to) affiliates
—

 
1,626,650

 
(11,979
)
 
(1,614,018
)
 
—

 
653

Reverse funded advances due to securitization
—

 
(317,272
)
 
—

 
—

 
—

 
(317,272
)
Other assets
(29,783
)
 
(135,107
)
 
—

 
—

 
29,783

 
(135,107
)
Accounts payable and accrued liabilities
2,846

 
259,694

 
—

 
(832
)
 
(29,783
)
 
231,925

Net cash provided by/(used in) operating activities
—

 
732,127

 
74

 
(1,352,092
)
 
—

 
(619,891
)
 
Nationstar Inc.
 
Issuer
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Investing activities:
 
 
 
 
 
 
 
 
 
 
 
Property and equipment additions, net of disposals
—

 
(20,699
)
 
—

 
—

 
—

 
(20,699
)
Cash Proceeds from assumption of reverse mortgage servicing obligations, net
—

 
(31,169
)
 
—

 
—

 
—

 
(31,169
)
Deposit on / purchase of mortgage servicing rights, net of liabilities incurred
—

 
(2,024,019
)
 
—

 
—

 
—

 
(2,024,019
)
Repurchases of REO from Ginnie Mae
—

 
(6,856
)
 
—

 
—

 
—

 
(6,856
)
Proceeds from sales of REO
—

 
4,485

 
—

 
3,949

 
—

 
8,434

Net cash provided by/(used in) investing activities
—

 
(2,078,258
)
 
—

 
3,949

 
—

 
(2,074,309
)
Financing activities:
 
 
 
 
 
 
 
 
 
 
 
Issuance of Senior Unsecured Notes
—

 
781,196

 
—

 
—

 
—

 
781,196

Transfers to/from restricted cash
—

 
(83,674
)
 
—

 
(103,685
)
 
—

 
(187,359
)
Issuance of common stock, net of IPO issuance costs
246,700

 
—

 
—

 
—

 
—

 
246,700

Issuance of participating interest financing
—

 
416,303

 
—

 
—

 
—

 
416,303

Issuance of excess spread financing
—

 
215,570

 
—

 
—

 
—

 
215,570

Increase (decrease) in notes payable, net
—

 
195,003

 
—

 
1,464,134

 
—

 
1,659,137

Repayment of nonrecourse debt–Legacy assets
—

 
—

 
—

 
(12,306
)
 
—

 
(12,306
)
Repayment of excess servicing spread financing
—

 
(12,981
)
 
—

 
—

 
—

 
(12,981
)
Distribution to subsidiaries
(246,700
)
 
—

 
—

 
—

 
246,700

 
—

Contributions of parent
—

 
246,700

 
—

 
—

 
(246,700
)
 
—

Debt financing costs
—

 
(43,690
)
 
—

 
—

 
—

 
(43,690
)
Net cash provided by/(used in) financing activities
—

 
1,714,427

 
—

 
1,348,143

 
—

 
3,062,570

Net increase/(decrease) in cash
—

 
368,296

 
74

 
—

 
—

 
368,370

Cash and cash equivalents at beginning of period
—

 
62,201

 
244

 
—

 
—

 
62,445

Cash and cash equivalents at end of period
$
—

 
$
430,497

 
$
318

 
$
—

 
$
—

 
$
430,815

NATIONSTAR MORTGAGE LLC
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
(IN THOUSANDS)
 

 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Operating activities:
 
 
 
 
 
 
 
 
 
Net income/(loss)
$
5,979

 
$
5,474

 
$
(12,196
)
 
$
6,738

 
$
5,995

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

 

 

 

 
 
Loss on equity method investments
971

 


 


 


 
971

Share-based compensation
12,201

 
—

 
—

 
—

 
12,201

Gain on mortgage loans held for sale
(73,560
)
 
—

 
—

 
—

 
(73,560
)
Provision for loan losses
2,005

 
—

 
—

 
—

 
2,005

Loss on foreclosed real estate and other
1,436

 
—

 
5,468

 
—

 
6,904

(Gain)/loss on ineffectiveness on interest rate swaps and cap
—

 
—

 
(2,032
)
 
—

 
(2,032
)
Fair value changes in ABS securitizations
—

 
—

 
6,935

 
(16
)
 
6,919

Loss from subsidiaries
6,722

 
—

 
—

 
(6,722
)
 
—

Depreciation and amortization
2,551

 
—

 
—

 
—

 
2,551

Change in fair value of mortgage servicing rights
30,757

 
—

 
—

 
—

 
30,757

Amortization of debt discount
6,667

 
—

 
3,657

 
—

 
10,324

Amortization of premiums/(discounts)
—

 
—

 
(4,001
)
 
—

 
(4,001
)
Mortgage loans originated and purchased, net of fees
(2,285,558
)
 
—

 
—

 
—

 
(2,285,558
)
Cost of loans sold, net of fees
2,287,430

 
—

 
—

 
—

 
2,287,430

Principal payments/prepayments received and other changes in mortgage loans originated as held for sale
37,620

 
—

 
9,757

 
—

 
47,377

Changes in assets and liabilities:

 

 

 

 
 
Accounts receivable
(35,366
)
 
(5
)
 
316

 
—

 
(35,055
)
Receivables from/(payables to) affiliates
(24,356
)
 
(5,031
)
 
32,298

 
—

 
2,911

Other assets
(2,037
)
 
—

 
—

 
—

 
(2,037
)
Accounts payable and accrued liabilities
36,053

 
—

 
(213
)
 
—

 
35,840

Net cash provided by/(used) in operating activities
9,515

 
438

 
39,989

 
—

 
49,942

 
Issuer
(Parent)
 
Guarantor
(Subsidiaries)
 
Non-Guarantor
(Subsidiaries)
 
Eliminations
 
Consolidated
Investing activities:
 
 
 
 
 
 
 
 
 
Principal payments received and other changes on mortgage loans held for investment, subject to ABS nonrecourse debt
—

 
—

 
29,395

 
—

 
29,395

Property and equipment additions, net of disposals
(15,147
)
 
—

 
—

 
—

 
(15,147
)
Acquisition of equity method investment
(6,600
)
 
—

 
—

 
—

 
(6,600
)
Purchase of mortgage servicing rights
(40,305
)

—


—


—

 
(40,305
)
Proceeds from sales of REO
—

 
—

 
22,897

 
—

 
22,897

Net cash provided by/(used) in investing activities
(62,052
)
 
—

 
52,292

 
—

 
(9,760
)
Financing activities:
 
 
 
 
 
 
 
 
 
Transfers to/from restricted cash
4,972

 
(3
)
 
13,343

 
—

 
18,312

Decrease in notes payable, net
62,237

 
—

 
(33,212
)
 
—

 
29,025

Repayment of nonrecourse debt–Legacy assets
—

 
—

 
(26,119
)
 
—

 
(26,119
)
Repayment of ABS nonrecourse debt
—

 
—

 
(47,175
)
 
—

 
(47,175
)
Debt financing costs
(2,734
)
 
—

 
—

 
—

 
(2,734
)
Distribution to parent
(3,900
)
 
—

 
—

 
—

 
(3,900
)
Tax related share-based settlement of units by members
(4,809
)
 
—

 
—

 
—

 
(4,809
)
Net cash provided by/(used) in financing activities
55,766

 
(3
)
 
(93,163
)
 
—

 
(37,400
)
Net increase/(decrease) in cash
3,229

 
435

 
(882
)
 
—

 
2,782

Cash and cash equivalents at beginning of period
20,904

 
319

 
—

 
—

 
21,223

Cash and cash equivalents at end of period
$
24,133

 
$
754

 
$
(882
)
 
$
—

 
$
24,005

Nature of Business, Basis of Presentation and Material Transaction (Details) (Common Stock)
9 Months Ended
Sep. 30, 2012
Common Stock
 
Schedule of Capitalization, Equity [Line Items]
 
Number of shares issued to FIF as part of Reorganization
70,000,000 
Nature of Business, Basis of Presentation and Material Transaction - Material Transaction (Details) (USD $)
1 Months Ended 9 Months Ended
Jun. 30, 2012
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Mortgaging Servicing Rights
 
 
 
 
Payments to Acquire Mortgage Servicing Rights (MSR)
 
$ 2,024,019,000 
$ 40,305,000 
 
Mortgage servicing rights - fair value
 
592,692,000 
 
251,050,000 
Accounts Receivable, Net
 
2,852,985,000 
 
562,300,000 
Issuance of notes payable
1,300,000,000 
 
 
 
Issuance of excess spread financing
176,500,000 
215,570,000 
0 
 
Aurora
 
 
 
 
Mortgaging Servicing Rights
 
 
 
 
Payments to Acquire Mortgage Servicing Rights (MSR)
2,000,000,000 
 
 
 
Mortgage servicing rights - fair value
 
271,500,000 
 
 
Accounts Receivable, Net
 
1,700,000,000 
 
 
Residential Mortgage |
Aurora
 
 
 
 
Mortgaging Servicing Rights
 
 
 
 
Number of loans covered by mortgage servicing agreement
300,000 
 
 
 
Principal amount outstanding on loans managed and securitized
 
$ 63,000,000,000 
 
 
Variable Interest Entities and Securitizations - Assets and Liabilities of Consolidated VIEs (Details) (Residential Mortgage, USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
 
 
Assets
$ 2,625,102 
$ 542,894 
Liabilities
1,819,292 
358,041 
Restricted Cash
 
 
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
 
 
Assets
126,002 
22,316 
Accounts Receivable
 
 
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
 
 
Assets
2,269,229 
279,414 
Mortgage Loans Held for Investment
 
 
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
 
 
Assets
228,041 
237,496 
Real Estate Owned
 
 
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
 
 
Assets
1,830 
3,668 
Notes Payable
 
 
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
 
 
Liabilities
1,707,941 
244,574 
Payables and Accrued Liabilities
 
 
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
 
 
Liabilities
2,412 
977 
Derivative Financial Instruments
 
 
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
 
 
Liabilities
7,041 
0 
Nonrecourse Debt-Legacy Assets
 
 
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
 
 
Liabilities
$ 101,898 
$ 112,490 
Variable Interest Entities and Securitizations - Securitization Trusts (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
 
 
 
Total mortgage servicing rights at fair value
$ 592,692 
 
$ 251,050 
Variable Interest Entity, Not Primary Beneficiary
 
 
 
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
 
 
 
Total collateral balances
4,239,774 
 
4,579,142 
Total certificate balances
4,230,472 
 
4,582,598 
Total mortgage servicing rights at fair value
23,367 
 
28,635 
Principal Amount of Loans 60 Days or More Past Due
1,060,797 
801,216 
 
Credit Losses
$ 208,628 
$ 182,991 
 
Variable Interest Entities and Securitizations - Cash Flows from Securitization Trust (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Variable Interest Entities and Securitizations [Abstract]
 
 
 
 
Servicing Fees Received
$ 6,317 
$ 5,870 
$ 22,149 
$ 21,221 
Loan Repurchases
$ 0 
$ 0 
$ 0 
$ 0 
Consolidated Statement of Cash Flows-Supplemental Disclosure (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Supplemental Cash Flow Elements [Abstract]
 
 
Interest paid
$ 78.2 
$ 61.8 
Income taxes paid
$ 18.2 
$ 0 
Accounts Receivable (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Receivables [Abstract]
 
 
Delinquent interest advances
$ 1,508,429 
$ 213,737 
Corporate and escrow advances
1,159,711 
299,946 
Accrued servicing fees
94,214 
20,865 
Reverse Mortgage Receivable
26,240 
0 
Accrued interest
3,942 
1,512 
Insurance deposits
1,750 
1,750 
Accounts Receivable from Securitization
13,175 
4,664 
Other
45,524 
19,826 
Total accounts receivable
$ 2,852,985 
$ 562,300 
Mortgage Loans Held for Sale and Investment - Mortgage Loans Held for Sale (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Sep. 30, 2011
Dec. 31, 2010
Mortgage Loans Held for Sale and Investment [Abstract]
 
 
 
 
Mortgage loans held for sale - unpaid principal balance
$ 668,345 
$ 442,596 
 
 
Mark-to-market adjustment
34,869 
16,030 
 
 
Total mortgage loans held for sale
$ 703,214 
$ 458,626 
$ 377,932 
$ 369,617 
Mortgage Loans Held for Sale and Investment - Reconciliation to Cash Flow (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Loans Receivable Held-for-sale, Net, Reconciliation to Cash Flow [Roll Forward]
 
 
Mortgage loans held for sale - beginning balance
$ 458,626 
$ 369,617 
Mortgage loans originated and purchased, net of fees
4,814,018 
2,285,558 
Cost of loans sold, net of fees
(4,606,909)
(2,287,430)
Principal payments received on mortgage loans held for sale and other changes
38,935 
10,475 
Transfer of mortgage loans held for sale to held for investment
(1,456)
(288)
Mortgage loans held for sale - ending balance
$ 703,214 
$ 377,932 
Mortgage Loans Held for Sale and Investment - Mortgage Loans Held for Investment (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Dec. 31, 2010
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
Total mortgage loans held for investment, subject to nonrecourse debt - legacy assets, net
$ 238,178 
$ 243,480 
 
Mortgage Loans Held for Investment
 
 
 
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
Mortgage loans held for investment, subject to nonrecourse debt - legacy assets, net - unpaid principal balance
361,474 
375,720 
 
Transfer discount - accretable
(20,828)
(22,392)
(25,219)
Transfer discount - non-accretable
(94,823)
(104,024)
 
Allowance for loan losses
(7,645)
(5,824)
(3,298)
Total mortgage loans held for investment, subject to nonrecourse debt - legacy assets, net
$ 238,178 
$ 243,480 
 
Mortgage Loans Held for Sale and Investment - Accretable Yield (Details) (Mortgage Loans Held for Investment, USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Mortgage Loans Held for Investment
 
 
Accretable Yield Movement Schedule [Roll Forward]
 
 
Balance at the beginning of the period
$ 22,392 
$ 25,219 
Additions
0 
0 
Accretion
(2,728)
(4,131)
Reclassifications from (to) nonaccretable discount
1,164 
1,304 
Disposals
0 
0 
Balance at the end of the period
$ 20,828 
$ 22,392 
Mortgage Loans Held for Sale and Investment - Allowance (Details) (Mortgage Loans Held for Investment, USD $)
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Financing Receivable, Allowance for Credit Losses
 
 
 
 
 
Transferred loans, provision for loan losses
$ 1,500,000 
$ 877,000 
$ 3,200,000 
$ 2,000,000 
 
Financing Receivable, Allowance for Credit Losses [Roll Forward]
 
 
 
 
 
Balance at the beginning of the period
 
 
5,824,000 
3,298,000 
3,298,000 
Provision for loan losses
 
 
3,153,000 
 
3,537,000 
Recoveries on loans previously charged off
 
 
 
 
0 
Charge-offs
 
 
(1,332,000)
 
(1,011,000)
Balance at the end of the period
7,645,000 
 
7,645,000 
 
5,824,000 
Ending balance - collectively evaluated for impairment
361,474,000 
 
361,474,000 
 
375,720,000 
Performing
 
 
 
 
 
Financing Receivable, Allowance for Credit Losses [Roll Forward]
 
 
 
 
 
Balance at the beginning of the period
 
 
1,641,000 
829,000 
829,000 
Provision for loan losses
 
 
2,249,000 
 
1,346,000 
Recoveries on loans previously charged off
 
 
 
 
0 
Charge-offs
 
 
(978,000)
 
(534,000)
Balance at the end of the period
2,912,000 
 
2,912,000 
 
1,641,000 
Ending balance - collectively evaluated for impairment
278,367,000 
 
278,367,000 
 
283,770,000 
Nonperforming
 
 
 
 
 
Financing Receivable, Allowance for Credit Losses [Roll Forward]
 
 
 
 
 
Balance at the beginning of the period
 
 
4,183,000 
2,469,000 
2,469,000 
Provision for loan losses
 
 
904,000 
 
2,191,000 
Recoveries on loans previously charged off
 
 
 
 
0 
Charge-offs
 
 
(354,000)
 
(477,000)
Balance at the end of the period
4,733,000 
 
4,733,000 
 
4,183,000 
Ending balance - collectively evaluated for impairment
$ 83,107,000 
 
$ 83,107,000 
 
$ 91,950,000 
Mortgage Loans Held for Sale and Investment - Credit Quality (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Minimum |
Loan-to-Value Ratio Between 60 Percent and 70 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Loan-to-value ratio
60.00% 
 
Minimum |
Loan-to-Value Ratio Between 70 Percent and 80 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Loan-to-value ratio
70.00% 
 
Minimum |
Loan-to-Value Ratio Between 80 Percent and 90 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Loan-to-value ratio
80.00% 
 
Minimum |
Loan-to-Value Ratio Between 90 Percent and 100 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Loan-to-value ratio
90.00% 
 
Minimum |
Loan-to-Value Ratio Greater Than 100 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Loan-to-value ratio
100.00% 
 
Maximum |
Loan-to-Value Ratio Less Than 60 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Loan-to-value ratio
60.00% 
 
Maximum |
Loan-to-Value Ratio Between 60 Percent and 70 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Loan-to-value ratio
70.00% 
 
Maximum |
Loan-to-Value Ratio Between 70 Percent and 80 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Loan-to-value ratio
80.00% 
 
Maximum |
Loan-to-Value Ratio Between 80 Percent and 90 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Loan-to-value ratio
90.00% 
 
Maximum |
Loan-to-Value Ratio Between 90 Percent and 100 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Loan-to-value ratio
100.00% 
 
Mortgage Loans Held for Investment
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Unpaid principal balance
$ 361,474 
$ 375,720 
Mortgage Loans Held for Investment |
Performing
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Unpaid principal balance
278,367 
283,770 
Mortgage Loans Held for Investment |
Nonperforming
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Unpaid principal balance
83,107 
91,950 
Mortgage Loans Held for Investment |
Loan-to-Value Ratio Less Than 60 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Unpaid principal balance
40,060 
42,438 
Mortgage Loans Held for Investment |
Loan-to-Value Ratio Between 60 Percent and 70 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Unpaid principal balance
15,817 
15,968 
Mortgage Loans Held for Investment |
Loan-to-Value Ratio Between 70 Percent and 80 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Unpaid principal balance
22,627 
25,190 
Mortgage Loans Held for Investment |
Loan-to-Value Ratio Between 80 Percent and 90 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Unpaid principal balance
28,863 
32,620 
Mortgage Loans Held for Investment |
Loan-to-Value Ratio Between 90 Percent and 100 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Unpaid principal balance
32,804 
33,708 
Mortgage Loans Held for Investment |
Loan-to-Value Ratio Greater Than 100 Percent
 
 
Financing Receivable, Recorded Investment [Line Items]
 
 
Unpaid principal balance
$ 221,303 
$ 225,796 
Mortgage Loans Held for Sale and Investment - Reverse Mortgage Interests (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Mortgage Loans Held for Sale and Investment [Abstract]
 
 
Reverse mortgage interests
$ 452,886 
$ 0 
Mortgage Servicing Rights - Fair Value Assumptions (Details)
6 Months Ended 9 Months Ended 12 Months Ended
Jun. 30, 2011
Sep. 30, 2012
Dec. 31, 2011
Assumption for Fair Value of Mortgage Servicing Rights
 
 
 
Classes of MSRs serviced for others
 
2 
 
Mortgage Servicing Rights |
Credit Sensitive
 
 
 
Assumption for Fair Value of Mortgage Servicing Rights
 
 
 
Discount rate
 
17.12% 
25.71% 
Total prepayment speeds
 
20.74% 
15.80% 
Expected weighted-average life
5 years 1 month 24 days 
4 years 9 months 15 days 
 
Credit losses
 
21.35% 
35.42% 
Mortgage Servicing Rights |
Interest Rate Sensitive
 
 
 
Assumption for Fair Value of Mortgage Servicing Rights
 
 
 
Discount rate
 
10.62% 
10.46% 
Total prepayment speeds
 
18.63% 
19.02% 
Expected weighted-average life
5 years 15 days 
4 years 10 months 28 days 
 
Credit losses
 
9.59% 
9.73% 
Mortgage Servicing Rights - MSR's at Fair Value (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Servicing Asset at Fair Value, Amount [Roll Forward]
 
 
Fair value at the end of the period
$ 592,692 
$ 251,050 
Mortgage Servicing Rights
 
 
Servicing Asset at Fair Value, Amount [Roll Forward]
 
 
Fair value at the beginning of the period
251,050 
145,062 
Servicing resulting from transfers of financial assets
37,578 
36,474 
Recognition of servicing assets from derecognition of variable interest entities
0 
5,714 
Purchases of servicing assets
346,874 
102,800 
Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model
6,669 
(14,207)
Other changes in fair value
(49,479)
(24,793)
Fair value at the end of the period
592,692 
251,050 
Principal Amount Outstanding of Loans Held-in-portfolio [Abstract]
 
 
Principal amount outstanding on loans managed and securitized
120,852,838 
44,253,454 
Mortgage Servicing Rights |
Credit Sensitive
 
 
Principal Amount Outstanding of Loans Held-in-portfolio [Abstract]
 
 
Principal amount outstanding on loans managed and securitized
106,076,630 
32,408,623 
Mortgage Servicing Rights |
Interest Rate Sensitive
 
 
Principal Amount Outstanding of Loans Held-in-portfolio [Abstract]
 
 
Principal amount outstanding on loans managed and securitized
$ 14,776,208 
$ 11,844,831 
Minimum
 
 
Servicing Assets at Fair Value [Line Items]
 
 
Servicing fee, percentage of unpaid principal balance
0.25% 
 
Maximum
 
 
Servicing Assets at Fair Value [Line Items]
 
 
Servicing fee, percentage of unpaid principal balance
0.50% 
 
Mortgage Servicing Rights - Fair Value Sensitivity Analysis (Details) (Mortgage Servicing Rights, USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
 
 
Total Prepayment Speeds, 10% Adverse Change
 
$ (13,281)
Total Prepayment Speeds, 20% Adverse Change
 
(25,215)
Credit Losses, 10% Adverse Change
 
(5,081)
Credit Losses, 20% Adverse Change
 
(10,944)
100 Basis Points
 
 
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
 
 
Percentage change of discount rate
1.00% 
1.00% 
Discount Rate, Adverse Change
 
(6,640)
200 Basis Points
 
 
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
 
 
Percentage change of discount rate
2.00% 
2.00% 
Discount Rate, Adverse Change
 
$ (12,929)
Mortgage Servicing Rights - MSR's at Amortized Cost (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Servicing Asset at Amortized Value, Balance [Roll Forward]
 
 
Balance at the beginning of the period
$ 8,036 
$ 0 
Balance at the end of the period
8,036 
0 
Servicing Liability at Amortized Value [Roll Forward]
 
 
Balance at the beginning of the period
82,313 
0 
Balance at the end of the period
82,313 
0 
Mortgage Servicing Rights
 
 
Servicing Assets at Amortized Value
 
 
Principal amount outstanding on loans managed and securitized
120,852,838 
44,253,454 
Servicing Liability at Amortized Value [Roll Forward]
 
 
Balance at the beginning of the period
82,313 
 
Balance at the end of the period
82,313 
 
Reverse Mortgages
 
 
Servicing Assets at Amortized Value
 
 
Principal amount outstanding on loans managed and securitized
$ 27,300,000 
 
Mortgage Servicing Rights - Subserviced Loans (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Loan Subservicing Agreement
Dec. 31, 2011
Loan Subservicing Agreement
Sep. 30, 2012
Residential Mortgage
Sep. 30, 2011
Residential Mortgage
Sep. 30, 2012
Residential Mortgage
Sep. 30, 2011
Residential Mortgage
Subserviced Loans [Line Items]
 
 
 
 
 
 
Principal amount outstanding on loans managed and securitized
$ 46,200,000 
$ 53,700,000 
 
 
 
 
Servicing and ancillary fees
 
 
 
 
 
 
Servicing fees
 
 
95,281 
48,141 
223,255 
133,338 
Ancillary fees
 
 
35,355 
25,772 
84,893 
62,848 
Total servicing and ancillary fees
 
 
 
$ 73,913 
 
$ 196,186 
Other Assets - Others Assets (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Other Assets
 
 
Interest rate locks
$ 112,628 
$ 11,302 
Deposit in escrow for Rescap Acquisition
72,000 
0 
Loans subject to repurchase right from Ginnie Mae
58,534 
35,735 
Deferred financing costs
43,501 
12,059 
Margin call deposits
29,784 
4,518 
Equity method investment
8,994 
6,493 
Prepaid expenses
6,445 
4,286 
Unsecured loans
1,803 
1,827 
Escrow Deposit
1,798 
28,904 
Other
2,872 
1,057 
Total other assets
338,359 
106,181 
GNMA
 
 
Other Assets
 
 
Loans subject to repurchase right from Ginnie Mae
58,534 
35,735 
Pending Acquisition |
Mortgage Servicing Rights
 
 
Other Assets
 
 
Escrow Deposit
$ 72,000 
 
Other Assets - Mortgage Servicing Rights (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 1 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Jun. 30, 2012
Reverse Mortgages
Sep. 30, 2012
Mortgage Servicing Rights
Dec. 31, 2011
Mortgage Servicing Rights
Dec. 31, 2011
Mortgage Servicing Rights
Reverse Mortgages
Sep. 30, 2012
Mortgage Servicing Rights
Forward Mortgages
Dec. 31, 2011
Mortgage Servicing Rights
Forward Mortgages
Sep. 30, 2012
GNMA
Dec. 31, 2011
GNMA
Sep. 30, 2012
Pending Acquisition
Sep. 30, 2012
Pending Acquisition
Mortgage Servicing Rights
Mortgaging Servicing Rights
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposit for acquisition
$ 1,798 
 
$ 28,904 
 
 
 
$ 17,900 
$ 1,798 
$ 2,000 
 
 
 
$ 72,000 
Loans subject to repurchase right from Ginnie Mae
58,534 
 
35,735 
 
 
 
 
 
 
58,534 
35,735 
 
 
Deposit from MSR co-investor for ResCap
 
 
 
 
 
 
 
 
 
 
 
25,200 
 
Principal amount outstanding on loans managed and securitized
 
 
 
 
120,852,838 
44,253,454 
9,500,000 
 
 
 
 
 
 
Payments to Acquire Mortgage Servicing Rights (MSR)
$ 2,024,019 
$ 40,305 
 
$ 9,000 
 
 
 
 
 
 
 
 
 
Other Assets - Equity Method Investment (Details) (USD $)
In Thousands, unless otherwise specified
1 Months Ended 3 Months Ended 9 Months Ended 1 Months Ended 3 Months Ended 9 Months Ended
Mar. 31, 2012
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Mar. 31, 2012
ANC Acquisition LLC
Mar. 31, 2011
ANC Acquisition LLC
Sep. 30, 2011
ANC Acquisition LLC
Sep. 30, 2012
ANC Acquisition LLC
Sep. 30, 2011
ANC Acquisition LLC
Dec. 31, 2011
ANC Acquisition LLC
Schedule of Equity Method Investments [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Percentage interest in equity investment acquired
13.00% 
 
 
 
 
13.00% 
22.00% 
 
 
 
 
Percentage interest in equity investment
35.00% 
 
 
 
 
35.00% 
 
 
 
 
 
Initial investment in equity investment
 
 
 
 
 
 
$ 6,600 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Cash
 
 
 
 
 
 
 
 
3,259 
 
2,486 
Accounts receivable
 
 
 
 
 
 
 
 
3,837 
 
5,296 
Receivables from affiliates
 
 
 
 
 
 
 
 
388 
 
92 
Equity method investments
 
 
 
 
 
 
 
 
1,482 
 
2,788 
Property and equipment, net
 
 
 
 
 
 
 
 
2,092 
 
1,995 
Goodwill and other intangible assets
 
 
 
 
 
 
 
 
33,548 
 
33,876 
Other assets
 
 
 
 
 
 
 
 
820 
 
590 
Total assets
 
 
 
 
 
 
 
 
45,426 
 
47,123 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
Notes payable
 
 
 
 
 
 
 
 
4,724 
 
4,724 
Payables and accrued liabilities
 
 
 
 
 
 
 
 
16,049 
 
13,236 
Total liabilities
 
 
 
 
 
 
 
 
20,773 
 
17,960 
REVENUES
 
 
 
 
 
 
 
 
 
 
 
Sales
 
 
 
 
 
 
 
13,181 
41,296 
25,382 
 
Cost of sales
 
 
 
 
 
 
 
(10,871)
(31,878)
(21,593)
 
Net sales revenues
 
 
 
 
 
 
 
2,310 
9,418 
3,789 
 
OTHER INCOME/(EXPENSE)
 
 
 
 
 
 
 
 
 
 
 
Operating costs
 
 
 
 
 
 
 
(5,054)
(13,903)
(9,004)
 
Income from equity method investments
 
 
 
 
 
 
 
771 
1,930 
1,176 
 
Depreciation and amortization
 
 
 
 
 
 
 
(180)
(1,138)
(359)
 
Other income/(expense)
 
 
 
 
 
 
 
136 
(111)
39 
 
Loss from discontinued operations
 
 
 
 
 
 
 
(27)
(14)
(54)
 
Total other income/(expense)
 
 
 
 
 
 
 
(4,354)
(13,236)
(8,202)
 
Net loss
 
 
 
 
 
 
 
(2,044)
(3,818)
(4,413)
 
Loss on equity method investments
 
$ 730 
$ (1,000)
$ 1,327 
$ 971 
 
 
 
 
 
 
Payables and Accrued Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Payables and Accruals [Abstract]
 
 
MSR purchases payable
$ 310,609 
$ 8,204 
Mortgage insurance premiums and reserves
70,344 
19,162 
Payables to securitization trusts
37,607 
10,665 
Loans subject to repurchase from Ginnie Mae
58,534 
35,735 
Cancelled lease reserves
7,319 
9,160 
Servicing Liability
6,628 
0 
Legal and professional fees
12,076 
5,931 
Accrued bonus and payroll
43,511 
21,236 
Accrued interest
39,902 
10,225 
Government sponsored entities
26,797 
18,728 
Repurchase reserves
15,055 
10,026 
Deposit from MSR co-investor for ResCap
25,200 
0 
Reverse mortgage payables
46,000 
0 
Taxes
14,544 
154 
Other
48,142 
34,563 
Total payables and accrued liabilities
$ 762,268 
$ 183,789 
Derivative Financial Instruments - Derivative Instruments (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Forward Contracts |
Loans Held-for-sale, Mortgages [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value - Asset
$ 212 
$ 634 
Recorded Gains / (Losses)
(422)
592 
Forward Contracts |
Derivative Financial Instruments
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value - Liability
29,162 
5,830 
Recorded Gains / (Losses)
(23,332)
(9,792)
Forward Contracts |
Designated as Hedging Instrument |
Loans Held-for-sale, Mortgages [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Outstanding Notional - Asset
4,175 
28,047 
Forward Contracts |
Designated as Hedging Instrument |
Derivative Financial Instruments
 
 
Derivatives, Fair Value [Line Items]
 
 
Outstanding Notional - Liability
2,838,185 
691,725 
Interest Rate Lock Commitments |
Other Assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value - Asset
112,628 
11,302 
Recorded Gains / (Losses)
101,326 
6,598 
Interest Rate Lock Commitments |
Designated as Hedging Instrument |
Other Assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Outstanding Notional - Asset
4,353,327 
736,377 
Interest Rate Swaps and Caps |
Derivative Financial Instruments
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value - Liability
7,041 
6,540 
Recorded Gains / (Losses)
(501)
1,261 
Interest Rate Swaps and Caps |
Designated as Hedging Instrument |
Derivative Financial Instruments
 
 
Derivatives, Fair Value [Line Items]
 
 
Outstanding Notional - Liability
648,940 
193,500 
Asset Backed Securities |
Interest Rate Swap |
Derivative Financial Instruments
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value - Liability
1,632 1
0 2
Recorded Gains / (Losses)
(1,201)1
(8,058)2
Asset Backed Securities |
Interest Rate Swap |
Designated as Hedging Instrument |
Derivative Financial Instruments
 
 
Derivatives, Fair Value [Line Items]
 
 
Outstanding Notional - Liability
$ 894,363 1
$ 0 2
Indebtedness - Notes Payable Summary (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Debt Instrument
 
 
Outstanding
$ 2,532,316 
$ 873,179 
Collateral Pledged
3,005,357 
976,755 
Servicing Segment |
Notes Payable, Other |
MBS Advance Financing Facility
 
 
Debt Instrument
 
 
Outstanding
178,455 
179,904 
Collateral Pledged
197,934 
182,096 
Servicing Segment |
Notes Payable, Other |
Securities Repurchase Facility (2011)
 
 
Debt Instrument
 
 
Outstanding
11,774 
11,774 
Collateral Pledged
55,603 
55,603 
Servicing Segment |
Notes Payable, Other |
MSR Note
 
 
Debt Instrument
 
 
Outstanding
6,015 
10,180 
Collateral Pledged
13,296 
16,230 
Servicing Segment |
Notes Payable to Banks |
ABS Advance Financing Facility (2010)
 
 
Debt Instrument
 
 
Outstanding
189,038 
219,563 
Collateral Pledged
228,898 
249,499 
Servicing Segment |
Notes Payable to Banks |
Agency Advance Financing Facility (2011-1)
 
 
Debt Instrument
 
 
Outstanding
159,945 
25,011 
Collateral Pledged
181,803 
28,811 
Servicing Segment |
Notes Payable to Banks |
AW Agency Advance Financing Facility (2012)
 
 
Debt Instrument
 
 
Outstanding
100,000 
0 
Collateral Pledged
124,551 
0 
Servicing Segment |
Notes Payable to Banks |
C ABS Advance Financing Facility (2012)
 
 
Debt Instrument
 
 
Outstanding
562,366 
0 
Collateral Pledged
692,635 
0 
Servicing Segment |
Notes Payable to Banks |
R ABS Advance Financing Facility (2012)
 
 
Debt Instrument
 
 
Outstanding
328,793 
0 
Collateral Pledged
392,360 
0 
Servicing Segment |
Notes Payable to Banks |
W ABS Advance Financing Facility (2012)
 
 
Debt Instrument
 
 
Outstanding
367,797 
0 
Collateral Pledged
454,402 
0 
Servicing Segment |
Notes Payable to Banks |
Reverse Participations Financing Facility
 
 
Debt Instrument
 
 
Outstanding
18,801 
0 
Collateral Pledged
21,298 
0 
Originations Segment |
Notes Payable, Other |
Warehouse Facility $150 Million
 
 
Debt Instrument
 
 
Outstanding
155,323 
251,722 
Collateral Pledged
162,705 
265,083 
Originations Segment |
Notes Payable, Other |
ASAP Plus Facility
 
 
Debt Instrument
 
 
Outstanding
29,443 
104,858 
Collateral Pledged
28,800 
104,006 
Originations Segment |
Notes Payable to Banks |
Warehouse Facility $375 Million
 
 
Debt Instrument
 
 
Outstanding
195,703 
46,810 
Collateral Pledged
211,820 
51,040 
Originations Segment |
Notes Payable to Banks |
Warehouse Facility $250 Million (2011)
 
 
Debt Instrument
 
 
Outstanding
141,204 
7,310 
Collateral Pledged
147,941 
7,672 
Originations Segment |
Notes Payable to Banks |
Warehouse Facility $100 Million (2009)
 
 
Debt Instrument
 
 
Outstanding
87,659 
16,047 
Collateral Pledged
$ 91,311 
$ 16,715 
Indebtedness - Servicing Segment Notes Payable (Details) (USD $)
9 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Sep. 30, 2012
Servicing Segment
Notes Payable, Other
MBS Advance Financing Facility
Dec. 31, 2011
Servicing Segment
Notes Payable, Other
MBS Advance Financing Facility
Sep. 30, 2012
Servicing Segment
Notes Payable, Other
Securities Repurchase Facility (2011)
Dec. 31, 2011
Servicing Segment
Notes Payable, Other
Securities Repurchase Facility (2011)
Oct. 31, 2009
Servicing Segment
Notes Payable, Other
MSR Note
Sep. 30, 2012
Servicing Segment
Notes Payable, Other
MSR Note
Dec. 31, 2011
Servicing Segment
Notes Payable, Other
MSR Note
Sep. 30, 2012
Servicing Segment
Notes Payable to Banks
ABS Advance Financing Facility (2010)
Dec. 31, 2011
Servicing Segment
Notes Payable to Banks
ABS Advance Financing Facility (2010)
Sep. 30, 2012
Servicing Segment
Notes Payable to Banks
Agency Advance Financing Facility (2011-1)
Oct. 31, 2012
Servicing Segment
Notes Payable to Banks
Agency Advance Financing Facility (2011-1)
Dec. 31, 2011
Servicing Segment
Notes Payable to Banks
Agency Advance Financing Facility (2011-1)
Sep. 30, 2012
Servicing Segment
Notes Payable to Banks
AW Agency Advance Financing Facility (2012)
Dec. 31, 2011
Servicing Segment
Notes Payable to Banks
AW Agency Advance Financing Facility (2012)
Sep. 30, 2012
Servicing Segment
Notes Payable to Banks
C ABS Advance Financing Facility (2012)
Dec. 31, 2011
Servicing Segment
Notes Payable to Banks
C ABS Advance Financing Facility (2012)
Sep. 30, 2012
Servicing Segment
Notes Payable to Banks
R ABS Advance Financing Facility (2012)
Dec. 31, 2011
Servicing Segment
Notes Payable to Banks
R ABS Advance Financing Facility (2012)
Sep. 30, 2012
Servicing Segment
Notes Payable to Banks
W ABS Advance Financing Facility (2012)
Dec. 31, 2011
Servicing Segment
Notes Payable to Banks
W ABS Advance Financing Facility (2012)
Sep. 30, 2012
Servicing Segment
Notes Payable to Banks
Reverse Participations Financing Facility
Dec. 31, 2011
Servicing Segment
Notes Payable to Banks
Reverse Participations Financing Facility
Sep. 30, 2012
Minimum
Servicing Segment
Notes Payable to Banks
Agency Advance Financing Facility (2011-1)
Sep. 30, 2012
Minimum
Servicing Segment
Notes Payable to Banks
C ABS Advance Financing Facility (2012)
Sep. 30, 2012
Minimum
Servicing Segment
Notes Payable to Banks
R ABS Advance Financing Facility (2012)
Sep. 30, 2012
Maximum
Servicing Segment
Notes Payable to Banks
Agency Advance Financing Facility (2011-1)
Sep. 30, 2012
Maximum
Servicing Segment
Notes Payable to Banks
C ABS Advance Financing Facility (2012)
Sep. 30, 2012
Maximum
Servicing Segment
Notes Payable to Banks
R ABS Advance Financing Facility (2012)
Debt Instrument
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Term of agreement
 
 
1 year 
 
 
 
4 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
$ 325,000,000 
 
 
 
 
 
 
$ 300,000,000 
 
$ 300,000,000 
$ 600,000,000 
 
$ 100,000,000 
 
$ 600,000,000 
 
$ 350,000,000 
 
$ 450,000,000 
 
$ 150,000,000 
 
 
 
 
 
 
 
Extension period
 
 
 
 
90 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable interest rate basis
 
 
LIBOR 
 
LIBOR 
 
 
LIBOR 
 
LIBOR 
 
LIBOR 
 
 
LIBOR 
 
LIBOR 
 
LIBOR 
 
LIBOR 
 
LIBOR 
 
 
 
 
 
 
 
Interest Rate, LIBOR Plus a spread of
 
 
2.50% 
 
3.50% 
 
 
2.50% 
 
3.00% 
 
 
 
 
2.50% 
 
 
 
 
 
3.75% 
 
4.00% 
 
2.50% 
3.50% 
3.37% 
6.00% 
4.00% 
8.00% 
Collateral Pledged
$ 3,005,357,000 
$ 976,755,000 
$ 197,934,000 
$ 182,096,000 
$ 55,603,000 
$ 55,603,000 
 
$ 13,296,000 
$ 16,230,000 
$ 228,898,000 
$ 249,499,000 
$ 181,803,000 
 
$ 28,811,000 
$ 124,551,000 
$ 0 
$ 692,635,000 
$ 0 
$ 392,360,000 
$ 0 
$ 454,402,000 
$ 0 
$ 21,298,000 
$ 0 
 
 
 
 
 
 
Indebtedness - Originations Segment Notes Payable (Details) (Originations Segment, USD $)
9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended
Sep. 30, 2012
Notes Payable to Banks
Warehouse Facility $375 Million
May 31, 2012
Notes Payable to Banks
Warehouse Facility $375 Million
Sep. 30, 2012
Notes Payable to Banks
Warehouse Facility $250 Million (2011)
Sep. 30, 2012
Notes Payable to Banks
Warehouse Facility $100 Million (2009)
Sep. 30, 2012
Notes Payable, Other
Warehouse Facility $150 Million
Feb. 29, 2012
Notes Payable, Other
Warehouse Facility $150 Million
Jan. 31, 2012
Notes Payable, Other
Warehouse Facility $150 Million
Sep. 30, 2012
Notes Payable, Other
ASAP Plus Facility
Sep. 30, 2012
Minimum
Notes Payable to Banks
Warehouse Facility $375 Million
Sep. 30, 2012
Minimum
Notes Payable to Banks
Warehouse Facility $250 Million (2011)
Sep. 30, 2012
Maximum
Notes Payable to Banks
Warehouse Facility $375 Million
Sep. 30, 2012
Maximum
Notes Payable to Banks
Warehouse Facility $250 Million (2011)
Sep. 30, 2012
Maximum
Notes Payable, Other
ASAP Plus Facility
Debt Instrument
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
$ 375,000,000 
$ 175,000,000 
$ 250,000,000 
$ 100,000,000 
 
$ 150,000,000 
$ 300,000,000 
 
 
 
 
 
 
Variable interest rate basis
LIBOR 
 
LIBOR 
LIBOR 
LIBOR 
 
 
LIBOR 
 
 
 
 
 
Interest Rate, LIBOR Plus a spread of
 
 
 
3.25% 
 
3.25% 
 
1.50% 
1.75% 
2.25% 
2.50% 
3.00% 
 
Maturity length
 
 
 
 
 
 
 
 
 
 
 
 
45 days 
Indebtedness - Unsecured Senior Notes (Details) (USD $)
1 Months Ended 1 Months Ended 1 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Sep. 30, 2012
Unsecured Senior Notes
Sep. 30, 2012
Unsecured Senior Notes
Unsecured Senior Notes 10.875% Due April 2015
Dec. 31, 2011
Unsecured Senior Notes
Unsecured Senior Notes 10.875% Due April 2015
Sep. 30, 2012
Unsecured Senior Notes
Unsecured Senior Notes 9.625% Due May 2019
Dec. 31, 2011
Unsecured Senior Notes
Unsecured Senior Notes 9.625% Due May 2019
Sep. 30, 2012
Unsecured Senior Notes
Unsecured Senior Notes Seven Point Eight Seven Five Percent Due Oct 202 [Member]
Dec. 31, 2011
Unsecured Senior Notes
Unsecured Senior Notes Seven Point Eight Seven Five Percent Due Oct 202 [Member]
Mar. 31, 2010
March 2010 Issuance Period
Unsecured Senior Notes
Unsecured Senior Notes 10.875% Due April 2015
Dec. 31, 2011
March 2010 Issuance Period
Unsecured Senior Notes
Unsecured Senior Notes 10.875% Due April 2015
Dec. 31, 2011
December 2011 Issuance Period
Unsecured Senior Notes
Unsecured Senior Notes 10.875% Due April 2015
Apr. 30, 2012
April 2012 Issuance Period
Unsecured Senior Notes
Unsecured Senior Notes 9.625% Due May 2019
Jul. 31, 2012
Fourth Issuance Period [Member]
Unsecured Senior Notes
Jul. 31, 2012
Fourth Issuance Period [Member]
Unsecured Senior Notes
Unsecured Senior Notes 9.625% Due May 2019
Sep. 30, 2012
Fifth Issuance Period [Member]
Unsecured Senior Notes
Unsecured Senior Notes Seven Point Eight Seven Five Percent Due Oct 202 [Member]
Sep. 30, 2012
Sixth Issuance Period [Member] [Member]
Unsecured Senior Notes
Unsecured Senior Notes Seven Point Eight Seven Five Percent Due Oct 202 [Member]
Debt Instrument
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured senior notes
$ 1,062,423,000 
$ 280,199,000 
 
$ 281,307,000 
$ 280,199,000 
$ 380,366,000 
$ 0 
$ 400,750,000 
$ 0 
 
 
 
 
 
 
 
 
Principal amount
 
 
1,060,000,000 
 
 
 
 
 
 
250,000,000 
285,000,000,000 
35,000,000 
275,000,000 
100,000,000 
 
300,000,000 
100,000,000 
Debt issuance discount
 
 
 
 
 
 
 
 
 
7,000,000 
 
300,000 
 
 
 
 
 
Net cash proceeds
 
 
 
 
 
 
 
 
 
$ 243,000,000 
 
$ 34,700,000 
$ 269,500,000 
 
$ 103,300,000 
$ 99,300,000 
$ 295,500,000 
Interest rate
 
 
 
 
10.875% 
 
 
 
 
 
 
 
9.625% 
 
 
7.875% 
 
Indebtedness - Unsecured Notes Maturity Schedule (Details) (Unsecured Senior Notes, USD $)
Sep. 30, 2012
Unsecured Senior Notes
 
Expected maturities of long-term debt
 
2013
$ 0 
2014
0 
2015
285,000,000 
2016
0 
2017
0 
Thereafter
775,000,000 
Total
$ 1,060,000,000 
Indebtedness - Legacy Assets (Details) (USD $)
Nov. 30, 2009
Sep. 30, 2012
Legacy Asset [Member]
Dec. 31, 2011
Legacy Asset [Member]
Sep. 30, 2012
Nonrecourse Debt-Legacy Assets
Dec. 31, 2011
Nonrecourse Debt-Legacy Assets
Sep. 30, 2012
Secured Debt
Nonrecourse Debt-Legacy Assets
Sep. 30, 2012
Securities Pledged as Collateral [Member]
Dec. 31, 2011
Securities Pledged as Collateral [Member]
Debt Instrument
 
 
 
 
 
 
 
 
Nonrecourse Debt Legacy Assets
 
$ 101,898,000 
$ 112,490,000 
 
 
 
 
 
Interest rate
 
 
 
 
 
7.50% 
 
 
Unpaid principal balance on outstanding notes
222,000,000 
 
 
 
 
 
344,200,000 
373,100,000 
Debt Instrument, Principal Amount Outstanding
 
 
 
$ 118,600,000 
$ 130,800,000 
 
 
 
Indebtedness - Excess Spread Financing Debt (Details) (USD $)
In Thousands, unless otherwise specified
1 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Dec. 31, 2011
Newcastle
Debt Instrument
 
 
 
Percentage interest sold in excess cash flow
 
 
65.00% 
Percentage interest retained of excess cash flow
 
 
35.00% 
Excess spread financing at fair value
$ 255,484 
$ 44,595 
 
Indebtedness - Participating Interest Financing (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Sep. 30, 2012
Participating Interest Financing
Debt Instrument
 
 
 
Interest rate, minimum
 
 
0.53% 
Interest rate, maximum
 
 
7.17% 
Participating Interest Financing
$ 415,448 
 
 
Participating interest financing
$ 415,448 
$ 0 
 
General and Administrative Expenses (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
General and Administrative Expense [Abstract]
 
 
 
 
Servicing
$ 13,893 
$ 7,106 
$ 50,530 
$ 16,101 
Professional Fees
18,251 
8,508 
32,818 
13,145 
Depreciation and amortization
2,973 
991 
6,358 
2,551 
Equipment
2,450 
1,251 
5,569 
3,245 
Postage
2,395 
1,522 
5,056 
3,937 
Travel
2,043 
871 
4,730 
2,383 
Insurance, taxes, and other
9,580 
5,148 
22,046 
15,345 
Total general and administrative expense
$ 51,585 
$ 25,397 
$ 127,107 
$ 56,707 
Income Taxes (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Mar. 7, 2012
Income Tax Disclosure [Abstract]
 
 
 
 
 
Deferred tax asset
 
 
 
 
$ 70,800,000 
Deferred tax liability
 
 
 
 
16,500,000 
Valuation allowance on deferred tax asset
 
 
 
 
54,300,000 
Income tax provision
24,714,000 
0 
40,639,000 
0 
 
Pretax income
$ 79,781,000 
$ (3,100,000)
$ 182,167,000 
$ 5,995,000 
 
Fair Value Measurements - Fair Value Assumptions (Details) (Excess Spread Financing)
9 Months Ended
Sep. 30, 2012
Excess Spread Financing
 
Assumption for Fair Value as of Balance Sheet Date of Assets or Liabilities that relate to Transferor's Continuing Involvement
 
Mortgage prepayment speeds
12.80% 
Average life
3 years 7 months 6 days 
Discount rate
14.40% 
Fair Value Measurements - Measured on a Recurring Basis (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
ASSETS
 
 
Mortgage servicing rights - fair value
$ 592,692 
$ 251,050 
Derivative instruments
112,628 
11,302 
Level 1
 
 
ASSETS
 
 
Mortgages loans held for sale
0 
0 
Derivative instruments
0 
0 
LIABILITIES
 
 
Derivative financial instruments
0 
0 
Level 2
 
 
ASSETS
 
 
Mortgages loans held for sale
703,214 
458,626 
Derivative instruments
112,628 
11,302 
LIABILITIES
 
 
Derivative financial instruments
37,835 
12,370 
Level 3
 
 
ASSETS
 
 
Mortgages loans held for sale
0 
0 
Derivative instruments
0 
0 
LIABILITIES
 
 
Derivative financial instruments
0 
0 
Fair Value, Measurements, Recurring |
Total Fair Value
 
 
ASSETS
 
 
Mortgages loans held for sale
703,214 1
458,626 1
Mortgage servicing rights - fair value
592,692 1
251,050 1
Derivative instruments
 
11,302 
Total assets
1,408,534 
720,978 
LIABILITIES
 
 
Excess spread financing (at fair value)
255,484 
44,595 
Total liabilities
293,319 
56,965 
Fair Value, Measurements, Recurring |
Level 1
 
 
ASSETS
 
 
Mortgages loans held for sale
0 1
0 1
Mortgage servicing rights - fair value
0 1
0 1
Derivative instruments
 
0 
Total assets
0 
0 
LIABILITIES
 
 
Excess spread financing (at fair value)
0 
0 
Total liabilities
0 
0 
Fair Value, Measurements, Recurring |
Level 2
 
 
ASSETS
 
 
Mortgages loans held for sale
703,214 1
458,626 1
Mortgage servicing rights - fair value
0 1
0 1
Derivative instruments
 
11,302 
Total assets
815,842 
469,928 
LIABILITIES
 
 
Excess spread financing (at fair value)
0 
0 
Total liabilities
37,835 
12,370 
Fair Value, Measurements, Recurring |
Level 3
 
 
ASSETS
 
 
Mortgages loans held for sale
0 1
0 1
Mortgage servicing rights - fair value
592,692 1
251,050 1
Derivative instruments
 
0 
Total assets
592,692 
251,050 
LIABILITIES
 
 
Excess spread financing (at fair value)
255,484 
44,595 
Total liabilities
255,484 
44,595 
Interest Rate Lock Commitments |
Fair Value, Measurements, Recurring |
Total Fair Value
 
 
ASSETS
 
 
Derivative instruments
112,628 
 
Interest Rate Lock Commitments |
Fair Value, Measurements, Recurring |
Level 1
 
 
ASSETS
 
 
Derivative instruments
0 
 
Interest Rate Lock Commitments |
Fair Value, Measurements, Recurring |
Level 2
 
 
ASSETS
 
 
Derivative instruments
112,628 
 
Interest Rate Lock Commitments |
Fair Value, Measurements, Recurring |
Level 3
 
 
ASSETS
 
 
Derivative instruments
0 
 
Interest Rate Swaps and Caps |
Fair Value, Measurements, Recurring |
Total Fair Value
 
 
LIABILITIES
 
 
Derivative financial instruments
7,041 
6,540 
Interest Rate Swaps and Caps |
Fair Value, Measurements, Recurring |
Level 1
 
 
LIABILITIES
 
 
Derivative financial instruments
0 
0 
Interest Rate Swaps and Caps |
Fair Value, Measurements, Recurring |
Level 2
 
 
LIABILITIES
 
 
Derivative financial instruments
7,041 
6,540 
Interest Rate Swaps and Caps |
Fair Value, Measurements, Recurring |
Level 3
 
 
LIABILITIES
 
 
Derivative financial instruments
0 
0 
Interest Rate Swap |
Fair Value, Measurements, Recurring |
Total Fair Value
 
 
LIABILITIES
 
 
Derivative financial instruments
1,632 
 
Interest Rate Swap |
Fair Value, Measurements, Recurring |
Level 1
 
 
LIABILITIES
 
 
Derivative financial instruments
0 
 
Interest Rate Swap |
Fair Value, Measurements, Recurring |
Level 2
 
 
LIABILITIES
 
 
Derivative financial instruments
1,632 
 
Interest Rate Swap |
Fair Value, Measurements, Recurring |
Level 3
 
 
LIABILITIES
 
 
Derivative financial instruments
0 
 
Forward Contracts |
Fair Value, Measurements, Recurring |
Total Fair Value
 
 
LIABILITIES
 
 
Derivative financial instruments
29,162 
5,830 
Forward Contracts |
Fair Value, Measurements, Recurring |
Level 1
 
 
LIABILITIES
 
 
Derivative financial instruments
0 
0 
Forward Contracts |
Fair Value, Measurements, Recurring |
Level 2
 
 
LIABILITIES
 
 
Derivative financial instruments
29,162 
5,830 
Forward Contracts |
Fair Value, Measurements, Recurring |
Level 3
 
 
LIABILITIES
 
 
Derivative financial instruments
$ 0 
$ 0 
Fair Value Measurements - Level 3 Reconciliation (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Sep. 30, 2012
Excess Spread Financing
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
Beginning balance
$ 0 
$ 255,484 
Transfers into Level 3
0 
 
Transfers out of Level 3
0 
 
Total gains or losses included in earnings
3,060 
 
Total gains or losses included in other comprehensive income
0 
 
Purchases, issuances, sales and settlements
 
 
Purchases
0 
 
Issuances
43,742 
 
Sales
0 
 
Settlements
(2,207)
 
Ending balance
44,595 
255,484 
Mortgage Servicing Rights
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
Beginning balance
145,062 
592,692 
Transfers into Level 3
0 
 
Transfers out of Level 3
0 
 
Total gains or losses included in earnings
(39,000)
 
Total gains or losses included in other comprehensive income
0 
 
Purchases, issuance, sales and settlements
 
 
Purchases
102,800 
 
Issuances
36,474 
 
Sales
0 
 
Settlements
5,714 
 
Ending balance
$ 251,050 
$ 592,692 
Fair Value Measurements - Measured on a Nonrecurring Basis (Details) (Fair Value, Measurements, Nonrecurring, USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2012
Sep. 30, 2012
Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Total Gains (Losses) Included in Earnings
$ 2,050 
$ (1,705)
$ (6,833)
Level 1
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
REO
0 1
0 1
0 1
Total assets
0 
0 
0 
Level 2
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
REO
0 1
0 1
0 1
Total assets
0 
0 
0 
Level 3
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
REO
3,193 1
3,193 1
3,668 1
Total assets
3,193 
3,193 
3,668 
Total Fair Value
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
REO
3,193 1
3,193 1
3,668 1
Total assets
3,193 
3,193 
3,668 
Real Estate Owned
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Total Gains (Losses) Included in Earnings
$ 2,050 1
$ (1,705)1
$ (6,833)1
Fair Value Measurements - Fair Value by Balance Sheet Line Item (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Financial assets:
 
 
Derivative instruments
$ 112,628 
$ 11,302 
Financial liabilities:
 
 
Excess spread financing at fair value
255,484 
44,595 
Level 1
 
 
Financial assets:
 
 
Cash and cash equivalents
430,815 
62,445 
Restricted cash
258,858 
71,499 
Mortgages loans held for sale
0 
0 
Mortgage loans held for investment, subject to nonrecourse debt - Legacy assets
0 
0 
Reverse mortgage interests
0 
 
Derivative instruments
0 
0 
Financial liabilities:
 
 
Notes payable
0 
0 
Unsecured senior notes
1,129,060 
282,150 
Derivative financial instruments
0 
0 
Nonrecourse debt - Legacy assets
0 
0 
Excess spread financing at fair value
0 
0 
Participating interest financing
0 
 
Level 2
 
 
Financial assets:
 
 
Cash and cash equivalents
0 
0 
Restricted cash
0 
0 
Mortgages loans held for sale
703,214 
458,626 
Mortgage loans held for investment, subject to nonrecourse debt - Legacy assets
0 
0 
Reverse mortgage interests
492,765 
 
Derivative instruments
112,628 
11,302 
Financial liabilities:
 
 
Notes payable
0 
0 
Unsecured senior notes
0 
0 
Derivative financial instruments
37,835 
12,370 
Nonrecourse debt - Legacy assets
0 
0 
Excess spread financing at fair value
0 
0 
Participating interest financing
417,650 
 
Level 3
 
 
Financial assets:
 
 
Cash and cash equivalents
0 
0 
Restricted cash
0 
0 
Mortgages loans held for sale
0 
0 
Mortgage loans held for investment, subject to nonrecourse debt - Legacy assets
221,852 
226,890 
Reverse mortgage interests
0 
 
Derivative instruments
0 
0 
Financial liabilities:
 
 
Notes payable
2,532,216 
873,179 
Unsecured senior notes
0 
0 
Derivative financial instruments
0 
0 
Nonrecourse debt - Legacy assets
103,727 
114,037 
Excess spread financing at fair value
255,484 
44,595 
Participating interest financing
0 
 
Carrying Amount
 
 
Financial assets:
 
 
Cash and cash equivalents
430,815 
62,445 
Restricted cash
258,858 
71,499 
Mortgages loans held for sale
703,214 
458,626 
Mortgage loans held for investment, subject to nonrecourse debt - Legacy assets
238,178 
243,480 
Reverse mortgage interests
452,886 
 
Derivative instruments
112,628 
11,302 
Financial liabilities:
 
 
Notes payable
2,532,216 
873,179 
Unsecured senior notes
1,062,423 
280,199 
Derivative financial instruments
37,835 
12,370 
Nonrecourse debt - Legacy assets
101,898 
112,490 
Excess spread financing at fair value
255,484 
44,595 
Participating interest financing
$ 415,448 
 
Shareholders' Equity (Details) (USD $)
3 Months Ended 9 Months Ended 9 Months Ended 0 Months Ended 6 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Sep. 30, 2012
Restricted Preferred Units
Mar. 9, 2012
2012 Plan
Restricted Stock
Sep. 30, 2012
2012 Plan
Restricted Stock
Sep. 30, 2012
2012 Plan
Restricted Stock
Mar. 9, 2012
2012 Plan
Management
Restricted Stock
Mar. 9, 2012
2012 Plan
Members of the Board
Restricted Stock
Sep. 30, 2012
Predecessor Plan
Sep. 30, 2012
Predecessor Plan
Sep. 30, 2012
Nationstar Mortgage LLC
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grants
 
 
 
 
 
 
 
6,000 
 
1,191,117 
85,716 
 
 
 
Vesting period
 
 
 
 
 
 
 
 
3 years 
 
 
 
 
 
Number vesting in February 2013
 
 
 
 
 
 
 
405,269 
405,269 
 
 
 
 
 
Number vesting in 2014
 
 
 
 
 
 
 
405,269 
405,269 
 
 
 
 
 
Number vesting in 2015
 
 
 
 
 
 
 
406,486 
406,486 
 
 
 
 
 
Weighted average grant date fair value
 
 
 
 
 
$ 4.23 
$ 14.00 
 
 
 
 
 
 
 
Shares of Nationstar Mortgage stock held by Nationstar LLC
 
 
 
 
 
 
 
 
 
 
 
 
 
212,156 
Value of Nationstar Mortgage shares held by Nationstar LLC
$ 4,566,000 
 
$ 4,566,000 
 
$ 0 
 
 
 
 
 
 
 
 
 
Compensation expense, net of forfeitures
2,600,000 
1,700,000 
10,700,000 
12,200,000 
 
 
 
 
 
 
 
0 
4,600,000 
 
Compensation expense to recognize in remaining 2012
2,500,000 
 
2,500,000 
 
 
 
 
 
 
 
 
 
 
 
Compensation expense to recognize in 2013
5,700,000 
 
5,700,000 
 
 
 
 
 
 
 
 
 
 
 
Compensation expense to recognize in 2014
2,400,000 
 
2,400,000 
 
 
 
 
 
 
 
 
 
 
 
Compensation expense to recognize in 2015
$ 400,000 
 
$ 400,000 
 
 
 
 
 
 
 
 
 
 
 
Shareholders' Equity - Restricted Stock Rollforward (Details) (2012 Plan, Restricted Stock, USD $)
3 Months Ended 6 Months Ended
Mar. 31, 2012
Sep. 30, 2012
2012 Plan |
Restricted Stock
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
 
 
Restricted Stock outstanding at March 31, 2012
 
1,277,000 
Restricted Stock outstanding at March 31, 2012, Grant Date Fair Value
$ 14.00 
 
Restricted Stock outstanding at March 31, 2012, Remaining Contractual Term
2 years 8 months 12 days 
 
Granted
 
6,000 
Forfeited
 
(32,000)
Restricted Stock outstanding at September 30, 2012
1,277,000 
1,251,000 
Restricted Stock unvested and expected to vest
 
1,223,000 
Restricted Stock vested and payable at September 30, 2012
 
0 
Capital Requirements (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Mortgage Banking [Abstract]
 
Minimum Net Worth Required for Compliance
$ 356.5 
Minimum Tangible Net Worth Required for Compliance
$ 175.0 
Commitments and Contingencies - Litigation and Regulatory Matters (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Commitments and Contingencies Disclosure [Abstract]
 
 
 
 
Legal Fees
$ 3.5 
$ 6.3 
$ 9.7 
$ 7.8 
Commitments and Contingencies - Loan and Other Commitments (Details) (Reverse Mortgages, USD $)
In Billions, unless otherwise specified
Sep. 30, 2012
Jun. 30, 2012
Reverse Mortgages
 
 
Mortgage Servicing Rights [Line Items]
 
 
Principal amount outstanding on loans managed and securitized
 
$ 27.2 
Unfunded advance obligations
$ 4.3 
 
Commitments and Contingencies - Other Contingencies (Details) (Loan Subservicing Agreement, USD $)
In Millions, unless otherwise specified
Jun. 30, 2011
Maximum
 
Mortgage Servicing Rights [Line Items]
 
Incentive fees
$ 2.5 
Loss Sharing Agreement [Member]
 
Mortgage Servicing Rights [Line Items]
 
Company share under loss sharing agreement
$ 10.0 
Business Segment Reporting - Financial Information (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
segment
Sep. 30, 2011
Dec. 31, 2011
Segment Reporting Information [Line Items]
 
 
 
 
 
Number of operating segments
 
 
2 
 
 
Revenues:
 
 
 
 
 
Servicing fee income
$ 135,504 
$ 53,031 
$ 305,546 
$ 160,755 
 
Other fee income
2,396 
7,660 
21,259 
23,999 
 
Total fee income
137,900 
60,691 
326,805 
184,754 
 
Gain/(loss) on mortgage loans held for sale
139,259 
30,232 
312,116 
73,560 
 
Total revenues
277,159 
90,923 
638,921 
258,314 
 
Total expenses and impairments
154,828 
83,194 
381,777 
219,717 
 
Other income (expense):
 
 
 
 
 
Interest income
23,542 
16,201 
52,633 
51,246 
 
Interest expense
(65,015)
(26,376)
(125,908)
(76,929)
 
Fair value changes in ABS securitizations
0 
(654)
0 
(6,919)
 
Gain / (Loss) on interest rate swaps and caps
(1,077)
0 
(1,702)
0 
 
Total other income (expense)
(42,550)
(10,829)
(74,977)
(32,602)
 
Income before taxes
79,781 
(3,100)
182,167 
5,995 
 
Depreciation and amortization
2,973 
991 
6,358 
2,551 
 
Total assets
5,941,231 
2,004,325 
5,941,231 
2,004,325 
1,787,931 
Operating Segments
 
 
 
 
 
Revenues:
 
 
 
 
 
Servicing fee income
135,398 
54,220 
305,124 
164,804 
 
Other fee income
2,402 
6,886 
21,393 
21,420 
 
Total fee income
137,800 
61,106 
326,517 
186,224 
 
Gain/(loss) on mortgage loans held for sale
139,259 
30,352 
312,094 
73,832 
 
Total revenues
277,059 
91,458 
638,611 
260,056 
 
Total expenses and impairments
151,777 
73,764 
361,117 
199,581 
 
Other income (expense):
 
 
 
 
 
Interest income
18,705 
3,963 
37,125 
11,089 
 
Interest expense
(61,568)
(17,150)
(114,582)
(48,589)
 
Fair value changes in ABS securitizations
 
0 
 
0 
 
Gain / (Loss) on interest rate swaps and caps
236 
 
424 
 
 
Total other income (expense)
(42,627)
(13,187)
(77,033)
(37,500)
 
Income before taxes
82,655 
4,507 
200,461 
22,975 
 
Depreciation and amortization
2,772 
852 
5,773 
2,187 
 
Total assets
5,550,417 
1,239,818 
5,550,417 
1,239,818 
 
Servicing Segment
 
 
 
 
 
Revenues:
 
 
 
 
 
Servicing fee income
135,398 
54,220 
305,124 
164,804 
 
Other fee income
6,457 
3,772 
19,728 
10,437 
 
Total fee income
141,855 
57,992 
324,852 
175,241 
 
Gain/(loss) on mortgage loans held for sale
0 
0 
0 
0 
 
Total revenues
141,855 
57,992 
324,852 
175,241 
 
Total expenses and impairments
95,296 
47,874 
228,182 
128,177 
 
Other income (expense):
 
 
 
 
 
Interest income
12,544 
907 
22,406 
2,529 
 
Interest expense
(53,830)
(14,161)
(99,053)
(41,109)
 
Fair value changes in ABS securitizations
 
0 
 
0 
 
Gain / (Loss) on interest rate swaps and caps
236 
 
424 
 
 
Total other income (expense)
(41,050)
(13,254)
(76,223)
(38,580)
 
Income before taxes
5,509 
(3,136)
20,447 
8,484 
 
Depreciation and amortization
2,006 
525 
4,104 
1,293 
 
Total assets
4,470,896 
810,157 
4,470,896 
810,157 
 
Originations Segment
 
 
 
 
 
Revenues:
 
 
 
 
 
Servicing fee income
0 
0 
0 
0 
 
Other fee income
(4,055)
3,114 
1,665 
10,983 
 
Total fee income
(4,055)
3,114 
1,665 
10,983 
 
Gain/(loss) on mortgage loans held for sale
139,259 
30,352 
312,094 
73,832 
 
Total revenues
135,204 
33,466 
313,759 
84,815 
 
Total expenses and impairments
56,481 
25,890 
132,935 
71,404 
 
Other income (expense):
 
 
 
 
 
Interest income
6,161 
3,056 
14,719 
8,560 
 
Interest expense
(7,738)
(2,989)
(15,529)
(7,480)
 
Fair value changes in ABS securitizations
 
0 
 
0 
 
Gain / (Loss) on interest rate swaps and caps
0 
 
0 
 
 
Total other income (expense)
(1,577)
67 
(810)
1,080 
 
Income before taxes
77,146 
7,643 
180,014 
14,491 
 
Depreciation and amortization
766 
327 
1,669 
894 
 
Total assets
1,079,521 
429,661 
1,079,521 
429,661 
 
Legacy Portfolio and Other
 
 
 
 
 
Revenues:
 
 
 
 
 
Servicing fee income
548 
519 
1,785 
1,257 
 
Other fee income
(6)
774 
(134)
2,579 
 
Total fee income
542 
1,293 
1,651 
3,836 
 
Gain/(loss) on mortgage loans held for sale
0 
0 
0 
0 
 
Total revenues
542 
1,293 
1,651 
3,836 
 
Total expenses and impairments
3,051 
9,550 
20,660 
20,408 
 
Other income (expense):
 
 
 
 
 
Interest income
4,395 
10,530 
14,145 
34,851 
 
Interest expense
(3,447)
(9,226)
(11,304)
(28,340)
 
Fair value changes in ABS securitizations
 
(654)
 
(6,919)
 
Gain / (Loss) on interest rate swaps and caps
(1,313)
 
(2,126)
 
 
Total other income (expense)
(365)
650 
715 
(408)
 
Income before taxes
(2,874)
(7,607)
(18,294)
(16,980)
 
Depreciation and amortization
201 
139 
585 
364 
 
Total assets
390,814 
764,507 
390,814 
764,507 
 
Eliminations
 
 
 
 
 
Revenues:
 
 
 
 
 
Servicing fee income
(442)
(1,708)
(1,363)
(5,306)
 
Other fee income
 
0 
 
0 
 
Total fee income
(442)
(1,708)
(1,363)
(5,306)
 
Gain/(loss) on mortgage loans held for sale
0 
(120)
22 
(272)
 
Total revenues
(442)
(1,828)
(1,341)
(5,578)
 
Total expenses and impairments
0 
(120)
0 
(272)
 
Other income (expense):
 
 
 
 
 
Interest income
442 
1,708 
1,363 
5,306 
 
Interest expense
0 
0 
(22)
0 
 
Fair value changes in ABS securitizations
 
0 
 
0 
 
Gain / (Loss) on interest rate swaps and caps
0 
 
0 
 
 
Total other income (expense)
442 
1,708 
1,341 
5,306 
 
Income before taxes
0 
0 
0 
0 
 
Depreciation and amortization
0 
0 
0 
0 
 
Total assets
$ 0 
$ 0 
$ 0 
$ 0 
 
Guarantor Financial Statement Information - Details (Details) (USD $)
Sep. 30, 2012
subsidiary
Debt Instrument
 
Guarantor Subsidiary, Ownership Percentage
100.00% 
Number of Subsidiaries as Guarantors of Unsecured Debt
2 
Unsecured Senior Notes
 
Debt Instrument
 
Principal amount
$ 1,100,000 
Guarantor Financial Statement Information - Consolidating Balance Sheets (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Sep. 30, 2011
Dec. 31, 2010
Assets
 
 
 
 
Cash and cash equivalents
$ 430,815 
$ 62,445 
$ 24,005 
$ 21,223 
Restricted cash
258,858 
71,499 
 
 
Accounts receivable, net
2,852,985 
562,300 
 
 
Mortgage loans held for sale
703,214 
458,626 
377,932 
369,617 
Mortgage loans held for investment, subject to nonrecourse debt - Legacy Asset, net
238,178 
243,480 
 
 
Participating interest in reverse mortgages
452,886 
0 
 
 
Receivables from affiliates
13,301 
4,609 
 
 
Mortgage servicing rights - fair value
592,692 
251,050 
 
 
Investment in subsidiaries
0 
0 
 
 
Mortgage servicing rights - amortized cost
8,036 
0 
 
 
Property and equipment, net
48,714 
24,073 
 
 
REO, net
3,193 
3,668 
 
 
Other assets
338,359 
106,181 
 
 
Total assets
5,941,231 
1,787,931 
2,004,325 
 
Liabilities and shareholders' equity
 
 
 
 
Notes payable
2,532,316 
873,179 
 
 
Unsecured senior notes
1,062,423 
280,199 
 
 
Payables and accrued liabilities
762,268 
183,789 
 
 
Payables to affiliates
0 
0 
 
 
Derivative financial instruments
37,835 
12,370 
 
 
Mortgage Servicing Liability
82,313 
0 
 
 
Nonrecourse debt-Legacy Assets
101,898 
112,490 
 
 
Excess spread financing - fair value
255,484 
44,595 
 
 
Participating interest financing
415,448 
0 
 
 
Total liabilities
5,249,985 
1,506,622 
 
 
Total shareholders' equity
691,246 
281,309 
 
256,372 
Total liabilities and equity
5,941,231 
1,787,931 
 
 
Parent Company
 
 
 
 
Assets
 
 
 
 
Cash and cash equivalents
0 
0 
 
 
Restricted cash
0 
 
 
 
Accounts receivable, net
0 
 
 
 
Mortgage loans held for sale
0 
 
 
 
Mortgage loans held for investment, subject to nonrecourse debt - Legacy Asset, net
0 
 
 
 
Participating interest in reverse mortgages
0 
 
 
 
Receivables from affiliates
0 
 
 
 
Mortgage servicing rights - fair value
0 
 
 
 
Investment in subsidiaries
661,463 
 
 
 
Mortgage servicing rights - amortized cost
0 
 
 
 
Property and equipment, net
0 
 
 
 
REO, net
0 
 
 
 
Other assets
29,783 
 
 
 
Total assets
691,246 
 
 
 
Liabilities and shareholders' equity
 
 
 
 
Notes payable
0 
 
 
 
Unsecured senior notes
0 
 
 
 
Payables and accrued liabilities
0 
 
 
 
Payables to affiliates
0 
 
 
 
Derivative financial instruments
0 
 
 
 
Mortgage Servicing Liability
0 
 
 
 
Nonrecourse debt-Legacy Assets
0 
 
 
 
Excess spread financing - fair value
0 
 
 
 
Participating interest financing
0 
 
 
 
Total liabilities
0 
 
 
 
Total shareholders' equity
691,246 
 
 
 
Total liabilities and equity
691,246 
 
 
 
Issuer
 
 
 
 
Assets
 
 
 
 
Cash and cash equivalents
 
62,201 
24,133 
20,904 
Restricted cash
 
49,180 
 
 
Accounts receivable, net
 
281,782 
 
 
Mortgage loans held for sale
 
458,626 
 
 
Mortgage loans held for investment, subject to nonrecourse debt - Legacy Asset, net
 
5,984 
 
 
Receivables from affiliates
 
41,961 
 
 
Mortgage servicing rights - fair value
 
251,050 
 
 
Investment in subsidiaries
 
140,880 
 
 
Property and equipment, net
 
23,238 
 
 
REO, net
 
0 
 
 
Other assets
 
106,181 
 
 
Total assets
 
1,421,083 
 
 
Liabilities and shareholders' equity
 
 
 
 
Notes payable
 
628,605 
 
 
Unsecured senior notes
 
280,199 
 
 
Payables and accrued liabilities
 
180,545 
 
 
Payables to affiliates
 
0 
 
 
Derivative financial instruments
 
5,830 
 
 
Nonrecourse debt-Legacy Assets
 
0 
 
 
Excess spread financing - fair value
 
44,595 
 
 
Total liabilities
 
1,139,774 
 
 
Total shareholders' equity
 
281,309 
 
 
Total liabilities and equity
 
1,421,083 
 
 
Issuer
 
 
 
 
Assets
 
 
 
 
Cash and cash equivalents
430,497 
62,201 
 
 
Restricted cash
132,854 
 
 
 
Accounts receivable, net
2,851,007 
 
 
 
Mortgage loans held for sale
703,214 
 
 
 
Mortgage loans held for investment, subject to nonrecourse debt - Legacy Asset, net
10,137 
 
 
 
Participating interest in reverse mortgages
452,886 
 
 
 
Receivables from affiliates
(1,605,564)
 
 
 
Mortgage servicing rights - fair value
592,692 
 
 
 
Investment in subsidiaries
157,812 
 
 
 
Mortgage servicing rights - amortized cost
8,036 
 
 
 
Property and equipment, net
47,879 
 
 
 
REO, net
1,363 
 
 
 
Other assets
338,359 
 
 
 
Total assets
4,121,172 
 
 
 
Liabilities and shareholders' equity
 
 
 
 
Notes payable
823,608 
 
 
 
Unsecured senior notes
1,062,423 
 
 
 
Payables and accrued liabilities
789,639 
 
 
 
Payables to affiliates
0 
 
 
 
Derivative financial instruments
30,794 
 
 
 
Mortgage Servicing Liability
82,313 
 
 
 
Nonrecourse debt-Legacy Assets
0 
 
 
 
Excess spread financing - fair value
255,484 
 
 
 
Participating interest financing
415,448 
 
 
 
Total liabilities
3,459,709 
 
 
 
Total shareholders' equity
661,463 
 
 
 
Total liabilities and equity
4,121,172 
 
 
 
Guarantor (Subsidiaries)
 
 
 
 
Assets
 
 
 
 
Cash and cash equivalents
318 
244 
754 
319 
Restricted cash
3 
3 
 
 
Accounts receivable, net
0 
7 
 
 
Mortgage loans held for sale
0 
0 
 
 
Mortgage loans held for investment, subject to nonrecourse debt - Legacy Asset, net
0 
0 
 
 
Participating interest in reverse mortgages
0 
 
 
 
Receivables from affiliates
82,229 
70,541 
 
 
Mortgage servicing rights - fair value
0 
0 
 
 
Investment in subsidiaries
0 
0 
 
 
Mortgage servicing rights - amortized cost
0 
 
 
 
Property and equipment, net
835 
835 
 
 
REO, net
0 
0 
 
 
Other assets
0 
0 
 
 
Total assets
83,385 
71,630 
 
 
Liabilities and shareholders' equity
 
 
 
 
Notes payable
0 
0 
 
 
Unsecured senior notes
0 
0 
 
 
Payables and accrued liabilities
0 
0 
 
 
Payables to affiliates
0 
0 
 
 
Derivative financial instruments
0 
0 
 
 
Mortgage Servicing Liability
0 
 
 
 
Nonrecourse debt-Legacy Assets
0 
0 
 
 
Excess spread financing - fair value
0 
0 
 
 
Participating interest financing
0 
 
 
 
Total liabilities
0 
0 
 
 
Total shareholders' equity
83,385 
71,630 
 
 
Total liabilities and equity
83,385 
71,630 
 
 
Non-Guarantor (Subsidiaries)
 
 
 
 
Assets
 
 
 
 
Cash and cash equivalents
0 
0 
(882)
0 
Restricted cash
126,001 
22,316 
 
 
Accounts receivable, net
1,978 
280,511 
 
 
Mortgage loans held for sale
0 
0 
 
 
Mortgage loans held for investment, subject to nonrecourse debt - Legacy Asset, net
228,041 
237,496 
 
 
Participating interest in reverse mortgages
0 
 
 
 
Receivables from affiliates
1,536,636 
0 
 
 
Mortgage servicing rights - fair value
0 
0 
 
 
Investment in subsidiaries
0 
0 
 
 
Mortgage servicing rights - amortized cost
0 
 
 
 
Property and equipment, net
0 
0 
 
 
REO, net
1,830 
3,668 
 
 
Other assets
0 
0 
 
 
Total assets
1,894,486 
543,991 
 
 
Liabilities and shareholders' equity
 
 
 
 
Notes payable
1,708,708 
244,574 
 
 
Unsecured senior notes
0 
0 
 
 
Payables and accrued liabilities
2,412 
3,244 
 
 
Payables to affiliates
0 
107,893 
 
 
Derivative financial instruments
7,041 
6,540 
 
 
Mortgage Servicing Liability
0 
 
 
 
Nonrecourse debt-Legacy Assets
101,898 
112,490 
 
 
Excess spread financing - fair value
0 
0 
 
 
Participating interest financing
0 
 
 
 
Total liabilities
1,820,059 
474,741 
 
 
Total shareholders' equity
74,427 
69,250 
 
 
Total liabilities and equity
1,894,486 
543,991 
 
 
Eliminations
 
 
 
 
Assets
 
 
 
 
Cash and cash equivalents
0 
0 
0 
0 
Restricted cash
0 
0 
 
 
Accounts receivable, net
0 
0 
 
 
Mortgage loans held for sale
0 
0 
 
 
Mortgage loans held for investment, subject to nonrecourse debt - Legacy Asset, net
0 
0 
 
 
Participating interest in reverse mortgages
0 
 
 
 
Receivables from affiliates
0 
(107,893)
 
 
Mortgage servicing rights - fair value
0 
0 
 
 
Investment in subsidiaries
(819,275)
(140,880)
 
 
Mortgage servicing rights - amortized cost
0 
 
 
 
Property and equipment, net
0 
0 
 
 
REO, net
0 
0 
 
 
Other assets
(29,783)
0 
 
 
Total assets
(849,058)
(248,773)
 
 
Liabilities and shareholders' equity
 
 
 
 
Notes payable
0 
0 
 
 
Unsecured senior notes
0 
0 
 
 
Payables and accrued liabilities
(29,783)
0 
 
 
Payables to affiliates
0 
(107,893)
 
 
Derivative financial instruments
0 
0 
 
 
Mortgage Servicing Liability
0 
 
 
 
Nonrecourse debt-Legacy Assets
0 
0 
 
 
Excess spread financing - fair value
0 
0 
 
 
Participating interest financing
0 
 
 
 
Total liabilities
(29,783)
(107,893)
 
 
Total shareholders' equity
(819,275)
(140,880)
 
 
Total liabilities and equity
$ (849,058)
$ (248,773)
 
 
Guarantor Financial Statement Information - Consolidating Statements of Operations and Comprehensive Income (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Revenues:
 
 
 
 
 
Servicing fee income
$ 135,504 
$ 53,031 
$ 305,546 
$ 160,755 
 
Other fee income
2,396 
7,660 
21,259 
23,999 
 
Total fee income
137,900 
60,691 
326,805 
184,754 
 
Gain on mortgage loans held for sale
139,259 
30,232 
312,116 
73,560 
 
Total revenues
277,159 
90,923 
638,921 
258,314 
 
Expenses and impairments:
 
 
 
 
 
Salaries, wages and benefits
98,107 
50,904 
238,519 
146,199 
 
General and administrative
51,585 
25,397 
127,107 
56,707 
 
Provision for loan losses
1,545 
877 
3,153 
2,005 
 
Loss on foreclosed real estate and other
(2,050)
2,558 
1,705 
6,904 
 
Occupancy
5,641 
3,458 
11,293 
7,902 
 
Total expenses and impairments
154,828 
83,194 
381,777 
219,717 
 
Other income (expense):
 
 
 
 
 
Interest income
23,542 
16,201 
52,633 
51,246 
 
Interest expense
(65,015)
(26,376)
(125,908)
(76,929)
 
Gain / (Loss) on interest rate swaps and caps
(1,077)
0 
(1,702)
0 
 
Fair value changes in ABS securitizations
0 
(654)
0 
(6,919)
 
Gain / (loss) from subsidiaries
0 
0 
0 
0 
 
Total other income (expense)
(42,550)
(10,829)
(74,977)
(32,602)
 
Income before taxes
79,781 
(3,100)
182,167 
5,995 
 
Income tax expense
(24,714)
0 
(40,639)
0 
 
Net income
55,067 
(3,100)
141,528 
5,995 
20,887 
Other comprehensive income, net of tax:
 
 
 
 
 
Change in value of designated cash flow hedge
0 
0 
(423)
(1,071)
(1,071)
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, before Tax
423 
0 
423 
0 
 
Comprehensive income
55,490 
(3,100)
141,528 
4,924 
 
Parent Company
 
 
 
 
 
Revenues:
 
 
 
 
 
Servicing fee income
0 
 
0 
 
 
Other fee income
0 
 
0 
 
 
Total fee income
0 
 
0 
 
 
Gain on mortgage loans held for sale
0 
 
0 
 
 
Total revenues
0 
 
0 
 
 
Expenses and impairments:
 
 
 
 
 
Salaries, wages and benefits
0 
 
0 
 
 
General and administrative
0 
 
0 
 
 
Provision for loan losses
0 
 
0 
 
 
Loss on foreclosed real estate and other
0 
 
0 
 
 
Occupancy
0 
 
0 
 
 
Total expenses and impairments
0 
 
0 
 
 
Other income (expense):
 
 
 
 
 
Interest income
0 
 
0 
 
 
Interest expense
0 
 
0 
 
 
Gain / (Loss) on interest rate swaps and caps
0 
 
0 
 
 
Gain / (loss) from subsidiaries
49,931 
 
114,591 
 
 
Total other income (expense)
49,931 
 
114,591 
 
 
Income before taxes
49,931 
 
114,591 
 
 
Income tax expense
(5,136)
 
(26,937)
 
 
Net income
55,067 
 
141,528 
 
 
Other comprehensive income, net of tax:
 
 
 
 
 
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, before Tax
0 
 
0 
 
 
Comprehensive income
55,067 
 
141,528 
 
 
Issuer
 
 
 
 
 
Revenues:
 
 
 
 
 
Servicing fee income
 
50,983 
 
162,741 
 
Other fee income
 
3,517 
 
11,647 
 
Total fee income
 
54,500 
 
174,388 
 
Gain on mortgage loans held for sale
 
30,232 
 
73,560 
 
Total revenues
 
84,732 
 
247,948 
 
Expenses and impairments:
 
 
 
 
 
Salaries, wages and benefits
 
49,989 
 
143,646 
 
General and administrative
 
20,585 
 
50,054 
 
Provision for loan losses
 
1,281 
 
2,005 
 
Loss on foreclosed real estate and other
 
1,234 
 
1,436 
 
Occupancy
 
3,419 
 
7,765 
 
Total expenses and impairments
 
76,508 
 
204,906 
 
Other income (expense):
 
 
 
 
 
Interest income
 
2,871 
 
11,070 
 
Interest expense
 
(14,686)
 
(41,411)
 
Fair value changes in ABS securitizations
 
0 
 
0 
 
Gain / (loss) from subsidiaries
 
592 
 
(6,722)
 
Total other income (expense)
 
(11,223)
 
(37,063)
 
Net income
 
(2,999)
 
5,979 
 
Other comprehensive income, net of tax:
 
 
 
 
 
Change in value of designated cash flow hedge
 
0 
 
0 
 
Comprehensive income
 
(2,999)
 
5,979 
 
Issuer
 
 
 
 
 
Revenues:
 
 
 
 
 
Servicing fee income
135,339 
 
301,363 
 
 
Other fee income
(4,672)
 
310 
 
 
Total fee income
130,667 
 
301,673 
 
 
Gain on mortgage loans held for sale
139,259 
 
312,116 
 
 
Total revenues
269,926 
 
613,789 
 
 
Expenses and impairments:
 
 
 
 
 
Salaries, wages and benefits
96,121 
 
231,709 
 
 
General and administrative
50,573 
 
119,772 
 
 
Provision for loan losses
0 
 
0 
 
 
Loss on foreclosed real estate and other
884 
 
1,008 
 
 
Occupancy
5,641 
 
11,293 
 
 
Total expenses and impairments
153,219 
 
363,782 
 
 
Other income (expense):
 
 
 
 
 
Interest income
18,460 
 
36,489 
 
 
Interest expense
(43,000)
 
(89,832)
 
 
Gain / (Loss) on interest rate swaps and caps
(389)
 
(1,201)
 
 
Gain / (loss) from subsidiaries
(11,997)
 
(13,331)
 
 
Total other income (expense)
(36,926)
 
(67,875)
 
 
Income before taxes
79,781 
 
182,132 
 
 
Income tax expense
29,850 
 
67,541 
 
 
Net income
49,931 
 
114,591 
 
 
Other comprehensive income, net of tax:
 
 
 
 
 
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, before Tax
0 
 
0 
 
 
Comprehensive income
49,931 
 
114,591 
 
 
Guarantor (Subsidiaries)
 
 
 
 
 
Revenues:
 
 
 
 
 
Servicing fee income
0 
(106)
0 
(542)
 
Other fee income
6,947 
3,882 
20,596 
11,411 
 
Total fee income
6,947 
3,776 
20,596 
10,869 
 
Gain on mortgage loans held for sale
0 
0 
0 
0 
 
Total revenues
6,947 
3,776 
20,596 
10,869 
 
Expenses and impairments:
 
 
 
 
 
Salaries, wages and benefits
1,986 
915 
6,810 
2,553 
 
General and administrative
401 
871 
1,778 
2,705 
 
Provision for loan losses
0 
0 
0 
0 
 
Loss on foreclosed real estate and other
0 
0 
0 
0 
 
Occupancy
0 
39 
0 
137 
 
Total expenses and impairments
2,387 
1,825 
8,588 
5,395 
 
Other income (expense):
 
 
 
 
 
Interest income
0 
5 
0 
0 
 
Interest expense
0 
0 
0 
0 
 
Gain / (Loss) on interest rate swaps and caps
0 
 
0 
 
 
Fair value changes in ABS securitizations
 
0 
 
0 
 
Gain / (loss) from subsidiaries
0 
0 
0 
0 
 
Total other income (expense)
0 
5 
0 
0 
 
Income before taxes
4,560 
 
12,008 
 
 
Income tax expense
0 
 
5 
 
 
Net income
4,560 
1,956 
12,003 
5,474 
 
Other comprehensive income, net of tax:
 
 
 
 
 
Change in value of designated cash flow hedge
 
0 
 
0 
 
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, before Tax
0 
 
0 
 
 
Comprehensive income
4,560 
1,956 
12,003 
5,474 
 
Non-Guarantor (Subsidiaries)
 
 
 
 
 
Revenues:
 
 
 
 
 
Servicing fee income
607 
3,862 
5,546 
3,862 
 
Other fee income
121 
261 
353 
941 
 
Total fee income
728 
4,123 
5,899 
4,803 
 
Gain on mortgage loans held for sale
0 
0 
0 
0 
 
Total revenues
728 
4,123 
5,899 
4,803 
 
Expenses and impairments:
 
 
 
 
 
Salaries, wages and benefits
0 
0 
0 
0 
 
General and administrative
611 
3,941 
5,557 
3,948 
 
Provision for loan losses
1,545 
(404)
3,153 
0 
 
Loss on foreclosed real estate and other
(2,934)
1,324 
697 
5,468 
 
Occupancy
0 
0 
0 
0 
 
Total expenses and impairments
(778)
4,861 
9,407 
9,416 
 
Other income (expense):
 
 
 
 
 
Interest income
4,640 
11,617 
14,781 
34,870 
 
Interest expense
(22,015)
(11,690)
(36,076)
(35,518)
 
Gain / (Loss) on interest rate swaps and caps
(688)
 
(501)
 
 
Fair value changes in ABS securitizations
 
(553)
 
(6,935)
 
Gain / (loss) from subsidiaries
0 
0 
0 
0 
 
Total other income (expense)
(18,063)
(626)
(21,796)
(7,583)
 
Income before taxes
(16,557)
 
(25,304)
 
 
Income tax expense
0 
 
30 
 
 
Net income
(16,557)
(1,364)
(25,334)
(12,196)
 
Other comprehensive income, net of tax:
 
 
 
 
 
Change in value of designated cash flow hedge
 
0 
 
(1,071)
 
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, before Tax
423 
 
423 
 
 
Comprehensive income
(16,134)
(1,364)
(25,334)
(13,267)
 
Eliminations
 
 
 
 
 
Revenues:
 
 
 
 
 
Servicing fee income
(442)
(1,708)
(1,363)
(5,306)
 
Other fee income
0 
0 
0 
0 
 
Total fee income
(442)
(1,708)
(1,363)
(5,306)
 
Gain on mortgage loans held for sale
0 
0 
0 
0 
 
Total revenues
(442)
(1,708)
(1,363)
(5,306)
 
Expenses and impairments:
 
 
 
 
 
Salaries, wages and benefits
0 
0 
0 
0 
 
General and administrative
0 
0 
0 
0 
 
Provision for loan losses
0 
0 
0 
0 
 
Loss on foreclosed real estate and other
0 
0 
0 
0 
 
Occupancy
0 
0 
0 
0 
 
Total expenses and impairments
0 
0 
0 
0 
 
Other income (expense):
 
 
 
 
 
Interest income
442 
1,708 
1,363 
5,306 
 
Interest expense
0 
0 
0 
0 
 
Gain / (Loss) on interest rate swaps and caps
0 
 
0 
 
 
Fair value changes in ABS securitizations
 
(101)
 
16 
 
Gain / (loss) from subsidiaries
(37,934)
(592)
(101,260)
6,722 
 
Total other income (expense)
(37,492)
1,015 
(99,897)
12,044 
 
Income before taxes
(37,934)
 
(101,260)
 
 
Income tax expense
0 
 
0 
 
 
Net income
(37,934)
(693)
(101,260)
6,738 
 
Other comprehensive income, net of tax:
 
 
 
 
 
Change in value of designated cash flow hedge
 
0 
 
0 
 
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, before Tax
0 
 
0 
 
 
Comprehensive income
$ (37,934)
$ (693)
$ (101,260)
$ 6,738 
 
Guarantor Financial Statement Information - Consolidating Statements of Cash Flow (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Operating activities
 
 
 
Net income/(loss)
$ 141,528 
$ 5,995 
$ 20,887 
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
 
 
 
Gain/(loss) from subsidiaries
0 
0 
 
Share-based compensation
10,665 
12,201 
 
Gain on mortgage loans held for sale
(312,116)
(73,560)
 
Provision for loan losses
3,153 
2,005 
 
Loss on foreclosed real estate and other
1,705 
6,904 
 
Loss on equity method investments
1,327 
971 
 
(Gain) / loss on ineffectiveness on interest rate swaps and cap
1,702 
(2,032)
 
Fair value changes in ABS securitizations
0 
6,919 
 
Fair value changes in excess spread financing
5,050 
0 
 
Depreciation and amortization
6,358 
2,551 
 
Change in fair value on mortgage servicing rights
42,810 
30,757 
 
Accretion of mortgage servicing liability
(3,276)
0 
 
Amortization of debt discount
18,101 
10,324 
 
Amortization of premiums/(discounts)
(4,002)
(4,001)
 
Mortgage loans originated and purchased, net of fees
(4,814,018)
(2,285,558)
 
Cost of loans sold and principal payments and prepayments, and other changes in mortgage loans originated as held for sale, net of fees
4,769,317 
2,334,807 
 
Proceeds from Sale of Loans Held-for-sale
 
2,287,430 
 
Proceeds from Collection of Mortgage Loans Held-for-sale
 
47,377 
 
Changes in assets and liabilities:
 
 
 
Accounts receivable
(268,394)
(35,055)
 
Receivables from/(payables to) affiliates
653 
2,911 
 
Reverse funded advances due to securitization
(317,272)
0 
 
Other assets
(135,107)
(2,037)
 
Payables and accrued liabilities
231,925 
35,840 
 
Net cash (used in)/provided by operating activities
(619,891)
49,942 
 
Investing activities
 
 
 
Principal payments received and other changes on mortgage loans held for investment, subject to ABS nonrecourse debt
0 
29,395 
 
Property and equipment additions, net of disposals
(20,699)
(15,147)
 
Cash Proceeds from assumption of reverse mortgage servicing obligations, net
(31,169)
0 
 
Acquisition of equity method investment
0 
(6,600)
 
Deposit on / purchase of mortgage servicing rights, net of liabilities incurred
(2,024,019)
(40,305)
 
Repurchases of REO from Ginnie Mae
(6,856)
0 
 
Proceeds from sales of REO
8,434 
22,897 
 
Net cash (used in) / provided by investing activities
(2,074,309)
(9,760)
 
Financing activities
 
 
 
Issuance of Senior Unsecured Notes
781,196 
0 
 
Transfers (to) / from restricted cash, net
(187,359)
18,312 
 
Issuance of common stock, net of IPO issuance costs
246,700 
0 
 
Issuance of participating interest financing
416,303 
0 
 
Issuance of excess spread financing
215,570 
0 
 
Increase (decrease) in notes payable
1,659,137 
29,025 
 
Repayment of nonrecourse debt - Legacy assets
(12,306)
(26,119)
 
Repayment of ABS nonrecourse debt
0 
(47,175)
 
Repayment of excess servicing spread financing
(12,981)
0 
 
Distribution to subsidiaries
0 
 
 
Contributions of parent
0 
 
 
Distribution to parent
0 
(3,900)
 
Debt financing costs
(43,690)
(2,734)
 
Tax related share-based settlement of units by members
0 
(4,809)
 
Net cash provided by / (used in) financing activities
3,062,570 
(37,400)
 
Net increase / (decrease) in cash and cash equivalents
368,370 
2,782 
 
Cash and cash equivalents at beginning of period
62,445 
21,223 
21,223 
Cash and cash equivalents at end of period
430,815 
24,005 
62,445 
Parent Company
 
 
 
Operating activities
 
 
 
Net income/(loss)
141,528 
 
 
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
 
 
 
Gain/(loss) from subsidiaries
(114,591)
 
 
Share-based compensation
0 
 
 
Gain on mortgage loans held for sale
0 
 
 
Provision for loan losses
0 
 
 
Loss on foreclosed real estate and other
0 
 
 
Loss on equity method investments
0 
 
 
(Gain) / loss on ineffectiveness on interest rate swaps and cap
0 
 
 
Fair value changes in excess spread financing
0 
 
 
Depreciation and amortization
0 
 
 
Change in fair value on mortgage servicing rights
0 
 
 
Accretion of mortgage servicing liability
0 
 
 
Amortization of debt discount
0 
 
 
Amortization of premiums/(discounts)
0 
 
 
Mortgage loans originated and purchased, net of fees
0 
 
 
Cost of loans sold and principal payments and prepayments, and other changes in mortgage loans originated as held for sale, net of fees
0 
 
 
Changes in assets and liabilities:
 
 
 
Accounts receivable
0 
 
 
Receivables from/(payables to) affiliates
0 
 
 
Reverse funded advances due to securitization
0 
 
 
Other assets
(29,783)
 
 
Payables and accrued liabilities
2,846 
 
 
Net cash (used in)/provided by operating activities
0 
 
 
Investing activities
 
 
 
Property and equipment additions, net of disposals
0 
 
 
Cash Proceeds from assumption of reverse mortgage servicing obligations, net
0 
 
 
Deposit on / purchase of mortgage servicing rights, net of liabilities incurred
0 
 
 
Repurchases of REO from Ginnie Mae
0 
 
 
Proceeds from sales of REO
0 
 
 
Net cash (used in) / provided by investing activities
0 
 
 
Financing activities
 
 
 
Issuance of Senior Unsecured Notes
0 
 
 
Transfers (to) / from restricted cash, net
0 
 
 
Issuance of common stock, net of IPO issuance costs
246,700 
 
 
Issuance of participating interest financing
0 
 
 
Issuance of excess spread financing
0 
 
 
Increase (decrease) in notes payable
0 
 
 
Repayment of nonrecourse debt - Legacy assets
0 
 
 
Repayment of excess servicing spread financing
0 
 
 
Distribution to subsidiaries
(246,700)
 
 
Contributions of parent
0 
 
 
Debt financing costs
0 
 
 
Net cash provided by / (used in) financing activities
0 
 
 
Net increase / (decrease) in cash and cash equivalents
0 
 
 
Cash and cash equivalents at beginning of period
0 
 
 
Cash and cash equivalents at end of period
0 
 
 
Issuer
 
 
 
Operating activities
 
 
 
Net income/(loss)
 
5,979 
 
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
 
 
 
Gain/(loss) from subsidiaries
 
6,722 
 
Share-based compensation
 
12,201 
 
Gain on mortgage loans held for sale
 
(73,560)
 
Provision for loan losses
 
2,005 
 
Loss on foreclosed real estate and other
 
1,436 
 
Loss on equity method investments
 
971 
 
(Gain) / loss on ineffectiveness on interest rate swaps and cap
 
0 
 
Fair value changes in ABS securitizations
 
0 
 
Depreciation and amortization
 
2,551 
 
Change in fair value on mortgage servicing rights
 
30,757 
 
Amortization of debt discount
 
6,667 
 
Amortization of premiums/(discounts)
 
0 
 
Mortgage loans originated and purchased, net of fees
 
(2,285,558)
 
Proceeds from Sale of Loans Held-for-sale
 
2,287,430 
 
Proceeds from Collection of Mortgage Loans Held-for-sale
 
37,620 
 
Changes in assets and liabilities:
 
 
 
Accounts receivable
 
(35,366)
 
Receivables from/(payables to) affiliates
 
(24,356)
 
Other assets
 
(2,037)
 
Payables and accrued liabilities
 
36,053 
 
Net cash (used in)/provided by operating activities
 
9,515 
 
Investing activities
 
 
 
Principal payments received and other changes on mortgage loans held for investment, subject to ABS nonrecourse debt
 
0 
 
Property and equipment additions, net of disposals
 
(15,147)
 
Acquisition of equity method investment
 
(6,600)
 
Deposit on / purchase of mortgage servicing rights, net of liabilities incurred
 
(40,305)
 
Proceeds from sales of REO
 
0 
 
Net cash (used in) / provided by investing activities
 
(62,052)
 
Financing activities
 
 
 
Transfers (to) / from restricted cash, net
 
4,972 
 
Increase (decrease) in notes payable
 
62,237 
 
Repayment of nonrecourse debt - Legacy assets
 
0 
 
Repayment of ABS nonrecourse debt
 
0 
 
Distribution to parent
 
(3,900)
 
Debt financing costs
 
(2,734)
 
Tax related share-based settlement of units by members
 
(4,809)
 
Net cash provided by / (used in) financing activities
 
55,766 
 
Net increase / (decrease) in cash and cash equivalents
 
3,229 
 
Cash and cash equivalents at beginning of period
 
20,904 
20,904 
Cash and cash equivalents at end of period
 
24,133 
62,201 
Issuer
 
 
 
Operating activities
 
 
 
Net income/(loss)
114,591 
 
 
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
 
 
 
Gain/(loss) from subsidiaries
13,331 
 
 
Share-based compensation
10,665 
 
 
Gain on mortgage loans held for sale
(312,116)
 
 
Provision for loan losses
0 
 
 
Loss on foreclosed real estate and other
1,008 
 
 
Loss on equity method investments
1,327 
 
 
(Gain) / loss on ineffectiveness on interest rate swaps and cap
1,201 
 
 
Fair value changes in excess spread financing
5,050 
 
 
Depreciation and amortization
6,315 
 
 
Change in fair value on mortgage servicing rights
42,810 
 
 
Accretion of mortgage servicing liability
(3,276)
 
 
Amortization of debt discount
16,387 
 
 
Amortization of premiums/(discounts)
(125)
 
 
Mortgage loans originated and purchased, net of fees
(4,814,018)
 
 
Cost of loans sold and principal payments and prepayments, and other changes in mortgage loans originated as held for sale, net of fees
4,761,946 
 
 
Changes in assets and liabilities:
 
 
 
Accounts receivable
(546,934)
 
 
Receivables from/(payables to) affiliates
1,626,650 
 
 
Reverse funded advances due to securitization
(317,272)
 
 
Other assets
(135,107)
 
 
Payables and accrued liabilities
259,694 
 
 
Net cash (used in)/provided by operating activities
732,127 
 
 
Investing activities
 
 
 
Property and equipment additions, net of disposals
(20,699)
 
 
Cash Proceeds from assumption of reverse mortgage servicing obligations, net
(31,169)
 
 
Deposit on / purchase of mortgage servicing rights, net of liabilities incurred
(2,024,019)
 
 
Repurchases of REO from Ginnie Mae
(6,856)
 
 
Proceeds from sales of REO
4,485 
 
 
Net cash (used in) / provided by investing activities
(2,078,258)
 
 
Financing activities
 
 
 
Issuance of Senior Unsecured Notes
781,196 
 
 
Transfers (to) / from restricted cash, net
(83,674)
 
 
Issuance of common stock, net of IPO issuance costs
0 
 
 
Issuance of participating interest financing
416,303 
 
 
Issuance of excess spread financing
215,570 
 
 
Increase (decrease) in notes payable
195,003 
 
 
Repayment of nonrecourse debt - Legacy assets
0 
 
 
Repayment of excess servicing spread financing
(12,981)
 
 
Distribution to subsidiaries
0 
 
 
Contributions of parent
246,700 
 
 
Debt financing costs
(43,690)
 
 
Net cash provided by / (used in) financing activities
1,714,427 
 
 
Net increase / (decrease) in cash and cash equivalents
368,296 
 
 
Cash and cash equivalents at beginning of period
62,201 
 
 
Cash and cash equivalents at end of period
430,497 
 
 
Guarantor (Subsidiaries)
 
 
 
Operating activities
 
 
 
Net income/(loss)
12,003 
5,474 
 
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
 
 
 
Gain/(loss) from subsidiaries
0 
0 
 
Share-based compensation
0 
0 
 
Gain on mortgage loans held for sale
0 
0 
 
Provision for loan losses
0 
0 
 
Loss on foreclosed real estate and other
0 
0 
 
Loss on equity method investments
0 
   
 
(Gain) / loss on ineffectiveness on interest rate swaps and cap
0 
0 
 
Fair value changes in ABS securitizations
 
0 
 
Fair value changes in excess spread financing
0 
 
 
Depreciation and amortization
43 
0 
 
Change in fair value on mortgage servicing rights
0 
0 
 
Accretion of mortgage servicing liability
0 
 
 
Amortization of debt discount
0 
0 
 
Amortization of premiums/(discounts)
0 
0 
 
Mortgage loans originated and purchased, net of fees
0 
0 
 
Cost of loans sold and principal payments and prepayments, and other changes in mortgage loans originated as held for sale, net of fees
0 
 
 
Proceeds from Sale of Loans Held-for-sale
 
0 
 
Proceeds from Collection of Mortgage Loans Held-for-sale
 
0 
 
Changes in assets and liabilities:
 
 
 
Accounts receivable
7 
(5)
 
Receivables from/(payables to) affiliates
(11,979)
(5,031)
 
Reverse funded advances due to securitization
0 
 
 
Other assets
0 
0 
 
Payables and accrued liabilities
0 
0 
 
Net cash (used in)/provided by operating activities
74 
438 
 
Investing activities
 
 
 
Principal payments received and other changes on mortgage loans held for investment, subject to ABS nonrecourse debt
 
0 
 
Property and equipment additions, net of disposals
0 
0 
 
Cash Proceeds from assumption of reverse mortgage servicing obligations, net
0 
 
 
Acquisition of equity method investment
 
0 
 
Deposit on / purchase of mortgage servicing rights, net of liabilities incurred
0 
0 
 
Repurchases of REO from Ginnie Mae
0 
 
 
Proceeds from sales of REO
0 
0 
 
Net cash (used in) / provided by investing activities
0 
0 
 
Financing activities
 
 
 
Issuance of Senior Unsecured Notes
0 
 
 
Transfers (to) / from restricted cash, net
0 
(3)
 
Issuance of common stock, net of IPO issuance costs
0 
 
 
Issuance of participating interest financing
0 
 
 
Issuance of excess spread financing
0 
 
 
Increase (decrease) in notes payable
0 
0 
 
Repayment of nonrecourse debt - Legacy assets
0 
0 
 
Repayment of ABS nonrecourse debt
 
0 
 
Repayment of excess servicing spread financing
0 
 
 
Distribution to subsidiaries
0 
 
 
Contributions of parent
0 
 
 
Distribution to parent
 
0 
 
Debt financing costs
0 
0 
 
Tax related share-based settlement of units by members
 
0 
 
Net cash provided by / (used in) financing activities
0 
(3)
 
Net increase / (decrease) in cash and cash equivalents
74 
435 
 
Cash and cash equivalents at beginning of period
244 
319 
319 
Cash and cash equivalents at end of period
318 
754 
 
Non-Guarantor (Subsidiaries)
 
 
 
Operating activities
 
 
 
Net income/(loss)
(25,334)
(12,196)
 
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
 
 
 
Gain/(loss) from subsidiaries
0 
0 
 
Share-based compensation
0 
0 
 
Gain on mortgage loans held for sale
0 
0 
 
Provision for loan losses
3,153 
0 
 
Loss on foreclosed real estate and other
697 
5,468 
 
Loss on equity method investments
0 
   
 
(Gain) / loss on ineffectiveness on interest rate swaps and cap
501 
(2,032)
 
Fair value changes in ABS securitizations
 
6,935 
 
Fair value changes in excess spread financing
0 
 
 
Depreciation and amortization
0 
0 
 
Change in fair value on mortgage servicing rights
0 
0 
 
Accretion of mortgage servicing liability
0 
 
 
Amortization of debt discount
1,714 
3,657 
 
Amortization of premiums/(discounts)
(3,877)
(4,001)
 
Mortgage loans originated and purchased, net of fees
0 
0 
 
Cost of loans sold and principal payments and prepayments, and other changes in mortgage loans originated as held for sale, net of fees
7,371 
 
 
Proceeds from Sale of Loans Held-for-sale
 
0 
 
Proceeds from Collection of Mortgage Loans Held-for-sale
 
9,757 
 
Changes in assets and liabilities:
 
 
 
Accounts receivable
278,533 
316 
 
Receivables from/(payables to) affiliates
(1,614,018)
32,298 
 
Reverse funded advances due to securitization
0 
 
 
Other assets
0 
0 
 
Payables and accrued liabilities
(832)
(213)
 
Net cash (used in)/provided by operating activities
(1,352,092)
39,989 
 
Investing activities
 
 
 
Principal payments received and other changes on mortgage loans held for investment, subject to ABS nonrecourse debt
 
29,395 
 
Property and equipment additions, net of disposals
0 
0 
 
Cash Proceeds from assumption of reverse mortgage servicing obligations, net
0 
 
 
Acquisition of equity method investment
 
0 
 
Deposit on / purchase of mortgage servicing rights, net of liabilities incurred
0 
0 
 
Repurchases of REO from Ginnie Mae
0 
 
 
Proceeds from sales of REO
3,949 
22,897 
 
Net cash (used in) / provided by investing activities
3,949 
52,292 
 
Financing activities
 
 
 
Issuance of Senior Unsecured Notes
0 
 
 
Transfers (to) / from restricted cash, net
(103,685)
13,343 
 
Issuance of common stock, net of IPO issuance costs
0 
 
 
Issuance of participating interest financing
0 
 
 
Issuance of excess spread financing
0 
 
 
Increase (decrease) in notes payable
1,464,134 
(33,212)
 
Repayment of nonrecourse debt - Legacy assets
(12,306)
(26,119)
 
Repayment of ABS nonrecourse debt
 
(47,175)
 
Repayment of excess servicing spread financing
0 
 
 
Distribution to subsidiaries
0 
 
 
Contributions of parent
0 
 
 
Distribution to parent
 
0 
 
Debt financing costs
0 
0 
 
Tax related share-based settlement of units by members
 
0 
 
Net cash provided by / (used in) financing activities
1,348,143 
(93,163)
 
Net increase / (decrease) in cash and cash equivalents
0 
(882)
 
Cash and cash equivalents at beginning of period
0 
0 
0 
Cash and cash equivalents at end of period
0 
(882)
 
Eliminations
 
 
 
Operating activities
 
 
 
Net income/(loss)
(101,260)
6,738 
 
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
 
 
 
Gain/(loss) from subsidiaries
101,260 
(6,722)
 
Share-based compensation
0 
0 
 
Gain on mortgage loans held for sale
0 
0 
 
Provision for loan losses
0 
0 
 
Loss on foreclosed real estate and other
0 
0 
 
Loss on equity method investments
0 
   
 
(Gain) / loss on ineffectiveness on interest rate swaps and cap
0 
0 
 
Fair value changes in ABS securitizations
 
(16)
 
Fair value changes in excess spread financing
0 
 
 
Depreciation and amortization
0 
0 
 
Change in fair value on mortgage servicing rights
0 
0 
 
Accretion of mortgage servicing liability
0 
 
 
Amortization of debt discount
0 
0 
 
Amortization of premiums/(discounts)
0 
0 
 
Mortgage loans originated and purchased, net of fees
0 
0 
 
Cost of loans sold and principal payments and prepayments, and other changes in mortgage loans originated as held for sale, net of fees
0 
 
 
Proceeds from Sale of Loans Held-for-sale
 
0 
 
Proceeds from Collection of Mortgage Loans Held-for-sale
 
0 
 
Changes in assets and liabilities:
 
 
 
Accounts receivable
0 
0 
 
Receivables from/(payables to) affiliates
0 
0 
 
Reverse funded advances due to securitization
0 
 
 
Other assets
29,783 
0 
 
Payables and accrued liabilities
(29,783)
0 
 
Net cash (used in)/provided by operating activities
0 
0 
 
Investing activities
 
 
 
Principal payments received and other changes on mortgage loans held for investment, subject to ABS nonrecourse debt
 
0 
 
Property and equipment additions, net of disposals
0 
0 
 
Cash Proceeds from assumption of reverse mortgage servicing obligations, net
0 
 
 
Acquisition of equity method investment
 
0 
 
Deposit on / purchase of mortgage servicing rights, net of liabilities incurred
0 
0 
 
Repurchases of REO from Ginnie Mae
0 
 
 
Proceeds from sales of REO
0 
0 
 
Net cash (used in) / provided by investing activities
0 
0 
 
Financing activities
 
 
 
Issuance of Senior Unsecured Notes
0 
 
 
Transfers (to) / from restricted cash, net
0 
0 
 
Issuance of common stock, net of IPO issuance costs
0 
 
 
Issuance of participating interest financing
0 
 
 
Issuance of excess spread financing
0 
 
 
Increase (decrease) in notes payable
0 
0 
 
Repayment of nonrecourse debt - Legacy assets
0 
0 
 
Repayment of ABS nonrecourse debt
 
0 
 
Repayment of excess servicing spread financing
0 
 
 
Distribution to subsidiaries
246,700 
 
 
Contributions of parent
(246,700)
 
 
Distribution to parent
 
0 
 
Debt financing costs
0 
0 
 
Tax related share-based settlement of units by members
 
0 
 
Net cash provided by / (used in) financing activities
0 
0 
 
Net increase / (decrease) in cash and cash equivalents
0 
0 
 
Cash and cash equivalents at beginning of period
0 
0 
0 
Cash and cash equivalents at end of period
$ 0 
$ 0 
 
Disclosures Related to Transactions with Affiliates of Fortress Investment Group LLC (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 1 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Sep. 30, 2012
Springleaf
Sep. 30, 2011
Springleaf
Sep. 30, 2012
Springleaf
Sep. 30, 2011
Springleaf
Dec. 31, 2011
Springleaf
Jan. 31, 2011
Springleaf
Dec. 31, 2011
Newcastle
Sep. 30, 2012
Newcastle
Sep. 30, 2011
Newcastle
Sep. 30, 2012
Newcastle
Sep. 30, 2011
Newcastle
Sep. 30, 2012
Loan Subservicing Agreement
Dec. 31, 2011
Loan Subservicing Agreement
Jan. 31, 2011
Loan Subservicing Agreement
Springleaf
agreement
Jan. 31, 2011
Securitized Mortgage Loans
Springleaf
agreement
Sep. 30, 2012
Securitized Mortgage Loans
Newcastle
loan_portfolio
Schedule of Transactions with Affiliates of Fortress Investment Group LLC [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amount outstanding on loans managed and securitized
 
 
 
 
 
 
 
$ 4,400,000 
 
$ 1,000,000 
$ 1,100,000 
$ 1,000,000 
$ 1,100,000 
$ 46,200,000 
$ 53,700,000 
 
 
 
Servicing revenue
 
 
2,400 
2,500 
7,500 
7,400 
 
 
 
1,300 
1,400 
3,900 
4,400 
 
 
 
 
 
Due from Affiliates
13,301 
4,609 
500 
 
500 
 
600 
 
 
 
 
 
 
 
 
 
 
 
Number of Loan Portfolios Covered in Service Contract
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3 
2 
2 
Servicing fee, percentage of unpaid principal balance
 
 
 
 
 
 
 
 
 
 
 
0.50% 
 
 
 
 
 
 
Percentage interest sold in excess cash flow
 
 
 
 
 
 
 
 
65.00% 
 
 
 
 
 
 
 
 
 
Percentage interest retained of excess cash flow
 
 
 
 
 
 
 
 
35.00% 
 
 
 
 
 
 
 
 
 
Excess spread financing at fair value
$ 255,484 
$ 44,595 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Related Party Disclosures (Details) (USD $)
In Millions, unless otherwise specified
1 Months Ended 3 Months Ended 9 Months Ended
Mar. 31, 2012
Sep. 30, 2012
NREIS
Sep. 30, 2011
NREIS
Sep. 30, 2012
NREIS
Sep. 30, 2011
NREIS
May 31, 2012
NREIS
Related Party Transaction [Line Items]
 
 
 
 
 
 
Percentage interest in equity investment acquired
13.00% 
 
 
 
 
 
Percentage interest in equity investment
35.00% 
 
 
 
 
 
Servicing-related advances
 
$ 4.6 
$ 1.6 
$ 12.4 
$ 1.7 
 
Advances to Affiliate
 
 
 
 
 
$ 2.0 
Definitive Agreement to Acquire Certain Mortgage Servicing Assets of Residential Capital, LLC (Details) (USD $)
1 Months Ended 9 Months Ended
Jun. 30, 2012
Sep. 30, 2012
Sep. 30, 2011
Mar. 31, 2013
Scenario, Forecast
Residential Capital, LLC
Mar. 31, 2013
Termination Fee [Member]
Scenario, Forecast
Residential Capital, LLC
Mortgage Servicing Rights [Line Items]
 
 
 
 
 
Purchase price of mortgage servicing rights
 
 
 
$ 2,900,000,000 
 
Issuance of excess spread financing
176,500,000 
215,570,000 
0 
 
 
Termination fee, amount
 
 
 
 
$ 24,000,000 
Subsequent Events (Details) (Unsecured Senior Notes, USD $)
1 Months Ended
Sep. 30, 2012
Apr. 30, 2012
Unsecured Senior Notes 9.625% Due May 2019
April 2012 Issuance Period
Subsequent Event [Line Items]
 
 
Principal amount
$ 1,060,000,000 
$ 275,000,000 
Interest rate
 
9.625% 
Net cash proceeds
 
$ 269,500,000