---

---

•	uncertainty related to legislation, regulations, regulatory agency actions, government programs and policies, industry initiatives and evolving best servicing practices;

•	uncertainty related to claims, litigation and investigations brought by government agencies and private parties regarding our servicing, foreclosure, modification and other practices;

•	the characteristics of our servicing portfolio, including prepayment speeds along with delinquency and advance rates;

•	our ability to grow and adapt our business, including the availability of new loan servicing and other accretive business opportunities;

•	uncertainty related to acquisitions, including our ability to close acquisitions and to integrate the systems, procedures and personnel of acquired assets and businesses;

•	our ability to contain and reduce our operating costs;

•	our ability to successfully modify delinquent loans, manage foreclosures and sell foreclosed properties;

•	our ability to effectively manage our regulatory and contractual compliance obligations;

•	the adequacy of our financial resources, including our sources of liquidity and ability to fund and recover advances, repay borrowings and comply with debt covenants;

•	the loss of the services of our senior managers;

•	uncertainty related to general economic and market conditions, delinquency rates, home prices and disposition timelines on foreclosed properties;

•	uncertainty related to the actions of loan owners, including mortgage-backed securities investors and government sponsored entities (GSEs), regarding loan put-backs, penalties and legal actions;

•	uncertainty related to the processes for judicial and non-judicial foreclosure proceedings, including potential additional costs or delays or moratoria in the future or claims pertaining to past practices;

•	our reserves, valuations, provisions and anticipated realization on assets;

•	our ability to effectively manage our exposure to interest rate changes and foreign exchange fluctuations;

•	our credit and servicer ratings and other actions from various rating agencies;

•	our ability to maintain our technology systems and our ability to adapt such systems for future operating environments;

•	failure of our internal security measures or breach of our privacy protections; and

•	uncertainty related to the political or economic stability of foreign countries in which we have operations.

---

ITEM 1.	BUSINESS

---

•	access to new business opportunities;

•	low operating costs;

•	strong customer service and quality processes;

•	superior default management and loss mitigation;

•	a scalable and compliant servicing platform; and

•	diverse, cost-effective sources of capital.

(1)	Consists of conventional and non-Agency (includes forward mortgage loans originated as Alt-A and subprime) MSRs acquired from Saxon Mortgage Services, Inc. (Saxon).

(2)	Represents the U.S. non-Agency mortgage servicing business (HomeEq) acquired from Barclays Bank PLC.

(3)	Represents the acquisition of the outstanding partnership interests of Litton Loan Servicing LP (Litton), a servicer and subservicer of primarily non-Agency mortgage loans, from The Goldman Sachs Group, Inc.

(4)	Consists of non-Agency MSRs acquired from JP Morgan Chase Bank, N.A. (JPMorgan).

(5)	Consists of conventional MSRs acquired from Bank of America, N.A. (Bank of America).

(6)

On December 27, 2012, completed the merger of O&H Acquisition Corp. (O&H), a wholly-owned subsidiary of Ocwen, and Homeward Residential Holdings, Inc. (Homeward), a servicer and subservicer of conventional, government insured and non-Agency mortgage loans and conventional and government insured loan originator, substantially all of the stock of which was owned by certain private equity funds that were managed by WL Ross & Co. LLC.

---

(7)	Represents the acquisition of the U.S. mortgage servicing business (ResCap) of Residential Capital, LLC, a servicer, subservicer and master servicer of conventional, government insured and non-Agency mortgage loans, pursuant to a plan under Chapter 11 of Title 11 of the U.S. Bankruptcy Code. Residential Capital, LLC is a wholly-owned subsidiary of Ally Financial Inc.

(8)	Consists of conventional MSRs acquired from Ally Bank (Ally), a wholly-owned subsidiary of Ally Financial Inc. Ocwen assumed the subservicing agreement between ResCap and Ally at the time of the ResCap acquisition. Upon completion of the Ally acquisition, the subservicing contract was terminated.

(9)	Consists of conventional and non-Agency MSRs acquired from OneWest Bank, FSB (OneWest). The transaction is closing in tranches with the first closing in August 2013 and the last closing scheduled to take place in the first quarter 2014.

(10)	Consists of primarily non-Agency MSRs from Greenpoint Mortgage Funding, Inc. (Greenpoint), a subsidiary of Capital One Bank, N.A.

---

•

Moody’s Investor Services (January 2013) - Ocwen cured more loans than other subprime servicers and generated more cash-flow comparing the percentage of loans in static pools that started more than 90 days past due or in foreclosure and a year later became current, paid-off in full or were 60 days or less past due. Loans in bankruptcy at the beginning or end of the period were excluded from the Moody’s analysis. The same study also showed that Ocwen moved subprime loans through foreclosure faster than did other subprime servicers.

•	BlackBox Logic (September 2013) - Ocwen’s modifications outstanding as a percentage of the portfolio of subprime securities was 59.2%, the highest across the other large subprime servicers. Ocwen’s re-default rate (more than 60+ days delinquent) outstanding was 26.6%, the lowest across the other large subprime servicers.

•	Moody’s Investor Services (October 2013) - Ocwen’s performance ranked best among the servicers for the performance on over 1.1 million loans which were 60+ days delinquent or in foreclosure at the height of the mortgage crisis in December 2008.

---

---

---

(1)	Non-prime rating.

•	civil and criminal liability;

•	loss of our licenses and approvals to engage in the servicing of residential mortgage loans;

•	damage to our reputation in the industry;

•	inability to raise capital;

•	administrative fines and penalties and litigation, including class action lawsuits;

•	governmental investigations and enforcement actions; and

•	inability to execute on our business strategy, including our growth plans.

---

•	creates an inter-agency body that is responsible for monitoring the activities of the financial system and recommending a framework for substantially increased regulation of large interconnected financial services firms;

•	creates a liquidation framework for the resolution of certain bank holding companies and other large and interconnected nonbank financial companies;

•	strengthens the regulatory oversight of securities and capital markets activities by the SEC; and

•	creates the CFPB, a new federal entity responsible for regulating consumer financial services.

•	force-placing insurance, unless there is a reasonable belief that the borrower has failed to comply with a contractual requirement to maintain insurance;

•	charging a fee for responding to a valid qualified written request;

•	failing to take timely action to respond to the borrower’s request to correct errors related to payment, payoff amounts, or avoiding foreclosure;

•	failing to respond within 10 business days of a request from the borrower to provide contact information about the owner or assignee of their loan; and

•	failing to return an escrow balance or provide a credit within 20 business days of a residential mortgage loan being paid off by the borrower.

•	acknowledging receipt of a qualified written request under RESPA within 5 business days and providing a final response within 30 business days;

---

•	promptly crediting mortgage payments received from the borrower on the date of receipt except where payment does not conform to previously established requirements; and

•	sending an accurate payoff statement within a reasonable period of time but in no case more than 7 business days after receipt of a written request from the borrower.

ITEM 1A.	RISK FACTORS

---

•	loss of our licenses and approvals to engage in our servicing and lending businesses

•	damage to our reputation in the industry

•	governmental investigations and enforcement actions

•	administrative fines and penalties and litigation

•	civil and criminal liability, including class action lawsuits

•	inability to raise capital

•	inability to execute on our business strategy, including our growth plans

---

•	A commitment by Ocwen to service loans in accordance with specified servicing guidelines and to be subject to oversight by an independent national monitor for three years. Ocwen is presently subject to substantially the same guidelines and oversight with respect to the portion of its servicing portfolio acquired from ResCap in early 2013.

•

A payment of $127.3 million, which includes a fixed amount for administrative expenses, to a consumer relief fund to be disbursed by an independent administrator to eligible borrowers. Pursuant to indemnification and loss sharing provisions of applicable acquisition documents, approximately half of this consumer relief fund payment is to be funded by the former owners of certain servicing portfolios previously acquired by Ocwen and integrated into Ocwen’s servicing platform. We established a reserve of $66.9 million with respect to our portion of the payment into the consumer relief fund. This reserve is expected to cover all of Ocwen’s portion of the consumer relief fund payment.

•

A commitment by Ocwen to continue its principal forgiveness modification programs to delinquent and underwater borrowers, including underwater borrowers at imminent risk of default, in an aggregate amount of at least $2 billion over three years. These and all of Ocwen’s other loan modifications are designed to be sustainable for homeowners while providing a net present value for mortgage loan investors that is superior to that of foreclosure. Principal forgiveness as part of a loan modification is determined on a case-by-case basis in accordance with the applicable servicing agreement. Principal forgiveness does not involve an expense to Ocwen other than the operating expense incurred in arranging the modification, which is part of Ocwen’s role as loan servicer.

•	Ocwen and the former owners of certain of the acquired servicing portfolios will receive from the Regulators comprehensive releases, subject to certain exceptions, from liability with respect to residential mortgage servicing, modification and foreclosure practices.

---

---

---

•

Revenue. An increase in delinquencies may delay the timing of revenue recognition because we recognize servicing fees as earned which is generally upon collection of payments from borrowers or proceeds from REO liquidations. An increase in delinquencies also leads to lower float balances and float earnings. Additionally, an increase in delinquencies in our GSE servicing portfolio acquired from Homeward and ResCap will result in lower revenue because we collect servicing fees from GSEs only on performing loans.

•

Expenses. Higher delinquencies increase our cost to service loans, as loans in default require more intensive effort to bring them current or manage the foreclosure process. An increase in advances outstanding relative to the change in the size of the servicing portfolio can result in substantial strain on our financial resources. This occurs because excess growth of advances increases financing costs with no offsetting increase in revenue, thus reducing profitability. If we are unable to fund additional advances, we could breach the requirements of our servicing agreements. Such developments could result in our losing our servicing rights, which would have a substantial negative impact on our financial condition and results of operations and could trigger cross-defaults under our various credit agreements.

•	Valuation of MSRs. Apart from the risk of losing our servicing rights, defaults are involuntary prepayments resulting in a reduction in UPB. This may result in higher amortization and impairment in the value of our MSRs.

•	limitations imposed on us by existing lending and similar agreements that contain restrictive covenants that may limit our ability to raise additional debt

---

•	liquidity in the credit markets

•	the strength of the lenders from whom we borrow

•	limitations on borrowing on advance facilities that are limited by the amount of eligible collateral pledged

•

Revenue. If prepayment speeds increase, our servicing fees will decline more rapidly than anticipated because of the greater than expected decrease in the UPB on which those fees are based. The reduction in servicing fees would be somewhat offset by increased float earnings because the faster repayment of loans will result in higher float balances that generate the float earnings. Conversely, decreases in prepayment speeds result in increased servicing fees but lead to lower float balances and float earnings.

•

Expenses. Amortization of MSRs is one of our largest operating expenses. Since we amortize servicing rights in proportion to total expected income over the life of a portfolio, an increase in prepayment speeds leads to increased amortization expense as we revise downward our estimate of total expected income. Faster prepayment speeds also result in higher compensating interest expense. Decreases in prepayment speeds lead to decreased amortization expense as the period over which we amortize MSRs is extended. Slower prepayment speeds also lead to lower compensating interest expense.

•

Valuation of MSRs. We base the price we pay for MSRs and the rate of amortization of those rights on, among other things, our projection of the cash flows from the related pool of mortgage loans. Our expectation of prepayment speeds is a significant assumption underlying those cash flow projections. If prepayment speeds were significantly greater than expected, the carrying value of our MSRs that we account for using the amortization method could exceed their estimated fair value. When the carrying value of these MSRs exceeds their fair value, we are required to record an impairment charge which has a negative impact on our financial results. Similarly, if prepayment speeds were significantly greater than expected, the fair value of our MSRs which we carry at fair value could decrease. When the fair value of these MSRs decreases, we record a loss on fair value which also has a negative impact on our financial results.

---

---

•	representations and warranties concerning loan quality, contents of the loan file or loan underwriting circumstances are inaccurate

•	adequate mortgage insurance is not secured within a certain period after closing

•	a mortgage insurance provider denies coverage

•

there is a failure to comply, at the individual loan level or otherwise, with regulatory requirements. We believe that, as a result of the current market environment, many purchasers of residential mortgage loans are particularly aware of the conditions under which originators must indemnify or repurchase loans and under which such purchasers would benefit from enforcing any indemnification rights and repurchase remedies they may have.

---

---

---

•	unanticipated issues in integrating servicing, information, communications and other systems

•	unanticipated incompatibility in servicing, lending, purchasing, logistics, marketing and administration methods

•	not retaining key employees

•	the diversion of management’s attention from ongoing business concerns

---

---

---

ITEM 1B.	UNRESOLVED STAFF COMMENTS

---

ITEM 2:	PROPERTIES

(1)	We sublease this space from Altisource through October 2014.

(2)	We assumed the leases in connection with our acquisition of Homeward. We ceased using the Jacksonville, Florida facility in 2013.

(3)	We assumed the leases or acquired the facility in connection with our acquisition of ResCap.

(4)

We assumed the lease in connection with our acquisition of Litton. The lease of the Texas facility expired in August 2012 but was renewed on a temporary basis for approximately one-third of the original space. Ocwen or the lessor could terminate this lease at any time by providing 150 days prior written notice. We gave notice on the lease in September 2013 and entered into a new lease for 36,382 square feet of the facility effective January 2014. We ceased using the Georgia facility in 2012.

(5)	We assumed this lease in connection with our acquisition of Liberty.

(6)

At December 31, 2013, we were in the process of transferring employees from two older facilities to a new facility. The total square footage shown includes only facilities that were occupied at December 31, 2013. In March 2014, employees will relocate from a 23,140 square foot facility, and the transfers will be complete. The leases on the older facilities will be terminated in the first quarter of 2014.

(7)	At December 31, 2013, we were in the process of transferring employees from three older facilities to a new facility. The total square footage shown includes only facilities that were occupied at December 31, 2013. In March 2014, employees

---

ITEM 3.	LEGAL PROCEEDINGS

ITEM 4.	MINE SAFETY DISCLOSURES

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

---

(1)	Excludes the significant value distributed in 2009 to Ocwen investors in the form of Altisource common equity.

---

ITEM 6.	SELECTED FINANCIAL DATA (Dollars in thousands, except per share data and unless otherwise indicated)

---

---

(1)

Includes significant business acquisitions, including ResCap (February 2013), Homeward (December 2012), Litton (September 2011) and HomEq (September 2010). These transactions primarily involved the acquisition of residential MSRs and related servicing advances. The operating results of the acquired businesses have been included in our results since their respective acquisition dates. See Note 3 — Business Acquisitions to the Consolidated Financial Statements for additional information.

(2)

During 2013 and 2012, Ocwen completed sales to HLSS of Rights to MSRs together with the related servicing advances. We accounted for the sales to HLSS of Rights to MSRs as secured financings. As a result, the MSRs were not derecognized, and a liability was established equal to the sales price. Match funded liabilities were reduced in connection with these sales. See Note 4 — Sales of Advances and MSRs to the Consolidated Financial Statements for additional information.

(3)

On August 10, 2009, we completed the Separation by a pro-rata distribution of Altisource common stock to Ocwen shareholders. As a result of the Separation, we eliminated $88.5 million of assets (including goodwill and other intangibles) and $16.3 million of liabilities from our consolidated balance sheet effective at the close of business on August 9, 2009 and recorded a $72.1 million reduction in additional paid-in capital. After the separation, the operating results of Altisource are no longer included in our operating results. As a consequence of the Separation and related transactions, Ocwen recognized $52.0 million of income tax expense in 2009. OS consolidated revenues and expenses for 2009 prior to the Separation were $106.3 million and $91.8 million, respectively.

(4)	During 2010, we liquidated our remaining investment in auction rate securities and used the proceeds to repay the investment line. Net realized and unrealized gains (losses) on auction rate securities were $(7.9) million and $11.9 million during 2010 and 2009 respectively.

(5)

Ocwen paid $162.0 million of the purchase price to acquire Homeward by issuing 162,000 shares of Series A Perpetual Convertible Preferred stock (Preferred Shares). On September 23, 2013, Ocwen paid $157.9 million to repurchase from the holders of the Preferred Shares all 3,145,640 shares of Ocwen common stock that were issued upon their election to convert 100,000 of the Preferred Shares into shares of Ocwen common stock. See Note 17 — Mezzanine Equity and Note 26 — Related Party Transactions to the Consolidated Financial Statements for additional information.

(6)	On March 28, 2012, Ocwen issued 4,635,159 shares of its common stock upon redemption and conversion of the remaining balance of our 3.25% Convertible Notes due 2024. On November 9, 2011, Ocwen completed the public offering of 28,750,000 shares of common stock at a per share price of $13.00 and received net proceeds of $354.4 million.

(7)	On December 3, 2009, we completed the sale of our investment in Bankhaus Oswald Kruber GmbH & Co. KG (BOK), a wholly owned German banking subsidiary. We have reported the results of operations of BOK in the consolidated financial statements as discontinued operations. Income from discontinued operations for 2010 represents a true-up of Ocwen’s income tax expense on the sale of BOK.

(8)

Prior to the redemption of the 3.25% Convertible Notes, we computed their effect on diluted EPS using the if-converted method. We did not assume conversion of the 3.25% Convertible Notes to common stock for 2009 because the effect was anti-dilutive. We also use the if-converted method to compute the effect on EPS of the Preferred Shares; however, we assumed no conversion for 2013 or 2012 because the effect was anti-dilutive.

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

---

(1)	Acquired ResCap servicing platform, related assets and assumed liabilities and added approximately 2,450 U.S. based employees.

(2)	Purchase price includes $389.9 million of MSRs and $1.7 billion of servicing advances, net of assumed liabilities of $74.6 million consisting primarily of accruals for compensatory fees for foreclosures that may ultimately exceed investor timelines. We recognized goodwill of $207.8 million in connection with the acquisition.

(3)	Consists of $55.6 billion conventional and government insured, $55.6 billion non-Agency, $44.9 billion master servicing and $27.0 billion subservicing. Subsequent to the ResCap acquisition, we acquired $246.4 million UPB of newly originated government insured MSRs from ResCap at contractually agreed multiples of the applicable servicing fee, which approximated market value.

(4)	We acquired the MSRs related to $87.5 billion in UPB from Ally Bank in the Ally MSR Transaction and terminated the subservicing contract with respect to the acquired MSRs.

---

(5)	Purchase price includes $683.8 million of MSRs and $73.6 million of servicing advances and other receivables, net of the estimated fair value of the assumed origination representation and warranty obligations of $136.7 million in connection with the majority of the acquired MSRs.

(6)	Consists of conventional MSRs. Prior to the acquisition, we subserviced these loans on behalf of Ally Bank under a contract assumption in connection with the ResCap Acquisition. We also acquired newly originated conventional MSRs from Ally Bank through August 31, 2013, at a contractually agreed multiple of the applicable servicing fee, which approximated market value.

(7)	Purchase price and MSR UPB in connection with December and 2014 settlements are preliminary. Final purchase amounts could be different.

(8)	Purchase price consists of $398.8 million of MSRs and $2.1 billion of servicing advances. The OneWest MSR Transaction is closing in stages with the final closing expected to occur during the first quarter of 2014. Purchase price, including the final closing, is $2.5 billion, consisting of $406.1 million of MSRs and $2.1 billion of servicing advances.

(9)	UPB consists of $31.2 billion conventional MSRs and $37.8 billion non-Agency MSRs. Additional UPB acquired in the final closing is estimated to be $849.9 million non-Agency MSRs and $243.9 million conventional MSRs.

(1)	Match funded advances include advances sold to SPEs formed for the sole purpose of financing advances on loans that we service for others. We either account for these sales as secured financing transactions or we consolidate the SPE because Ocwen is the primary beneficiary of the SPE. The corresponding liability is classified as match funded liabilities on our Consolidated Balance Sheets.

(2)	Consists of Rights to MSRs for non-Agency MSRs, including all such MSRs acquired in the Homeward and ResCap Acquisitions. Because we retained legal title to the MSRs, the sales of the Rights to MSRs have been accounted for as financings. See Note 4 — Sales of Advances and MSRs for additional information.

(3)	Consists of 2013 vintage conventional MSRs generated on our Homeward lending platform. These transactions have been accounted for as sales with the gain deferred and recognized over the life of the subservicing contract.

---

---

---

---

---

•	interest earned on loan payments that we have collected but have not yet remitted to the owner of the mortgage (float earnings);

•	referral commissions from brokers for REO properties sold through our network of brokers;

•	Speedpay® fees from borrowers who pay by telephone or through the Internet; and

•	late fees from borrowers who were delinquent in remitting their monthly mortgage payments but have subsequently become current.

---

1.	When a loan becomes current via a non-HAMP modification, we earn $500 of deferred servicing fees and $300 of late fees. To the extent any principal is forgiven as part of a non-HAMP modification, no late fees are collected or earned.

2.	When a loan becomes current via a HAMP modification, we earn $500 of deferred servicing fees and an initial HAMP fee of $1,000, or $1,500 if the loan was in imminent risk of default. We forfeit late fees in connection with a HAMP modification.

3.	We earn HAMP success fees of up to $1,000 for HAMP modifications that remain less than 90 days delinquent at the first, second and third anniversary of the start of the trial modification.

1.	The loan and borrower are evaluated for HAMP eligibility. If HAMP criteria are met, HAMP documentation and trial offer phases proceed. The three most common reasons for failure to qualify for HAMP are:

•	existing loan terms that are already below a 31% debt to income (DTI) ratio;

•	inadequate documentation; or

•	inadequate or inconsistent income.

2.	If the criteria to qualify for HAMP are not met, the loan and borrower are evaluated utilizing non-HAMP criteria that are more flexible and focus both on the borrower’s ability to pay and on maximizing net present value for investors. If the criteria are met, non-HAMP documentation and trial modification and/or modification phases proceed.

3.	If the loan and borrower qualify for neither a HAMP nor a non-HAMP modification, liquidation of the loan then proceeds either via a discounted payoff, a deed-in-lieu-of-foreclosure or a foreclosure and REO sale.

---

---

---

---

---

(1)	Performing loans include those loans that are current (less than 90 days past due) and those loans for which borrowers are making scheduled payments under loan modification, forbearance or bankruptcy plans. We consider all other loans to be non-performing.

(2)	At December 31, 2013, we serviced 834,734 subprime non-Agency loans with a UPB of $146.0 billion. This compares to 747,908 subprime non-Agency loans with a UPB of $113.4 billion at December 31, 2012 and 548,504 subprime non-Agency loans with a UPB of $84.7 billion at December 31, 2011.

(3)	Conventional loans at December 31, 2013 include 36,336 non-Agency loans with a UPB of $11.0 billion that we subservice and that consist primarily of jumbo loans which exceed loan size limits set by Fannie Mae and Freddie Mac.

(4)	Excludes Freddie Mac loans serviced under special servicing agreements where we have no obligation to advance.

(5)

Excludes interest expense related to financing liabilities that we recognized in connection with the HLSS Transactions. Interest on HLSS financing liabilities amounted to $245.8 million and $54.7 million for the years ended December 31, 2013 and 2012, respectively. Also excludes an average of $512.9 million and $92.0 million of HLSS financing liabilities for the years ended December 31, 2013 and 2012, respectively. In 2012, excludes the effects, which were insignificant, of the facilities assumed in connection with the Homeward Acquisition. See Note 4 — Sales of Advances and MSRs to the Consolidated Financial Statements for additional information regarding the HLSS Transactions.

(6)

During 2012, in addition to the $57.5 million scheduled quarterly principal repayments on our $575.0 million SSTL, we made mandatory principal prepayments of $274.5 million using a portion of the proceeds of the HLSS Transactions. The effective average interest rate declined from 2011 to 2012 principally because we used a portion of the proceeds from the HLSS Transactions to repay borrowings from higher cost advance funding facilities before repaying the fixed rate Litton facility in December.

(7)

The ResCap and Homeward acquisitions directly added an average of 1,966 and 556 employees, respectively, during 2013. Average employment for 2012 and 2011 includes 36 and 286 employees, respectively, who transferred to Ocwen as part of the Litton acquisition. Excluding employees directly added in connection with these acquisitions, U.S average staffing was 799, 661 and 552 for 2013, 2012 and 2011, respectively.

•

A 250% increase in the average UPB of assets serviced driven primarily by acquisitions and new MSR capitalization in connection with our lending activities. During 2013, acquired portfolios (including Homeward) added total servicing and subservicing fees of $862.4 million. This increase was offset in part by runoff of the portfolio as a result of principal repayments, modifications, real estate sales and servicing transfers; and

•	A 38% increase in total completed modifications across all portfolios.

---

•	A change in the portfolio product mix, with a larger proportion of the portfolio attributable to conventional and government insured loans for which we earn lower fees on average;

•	A change in the portfolio profile, with a larger proportion of the portfolio growth attributable to performing loans, which leads to lower revenue potential for ancillary and default servicing; and

•	A change in the portfolio mix, with a larger proportion of the portfolio attributable to subservicing for which we earn lower fees.

•	Compensation and benefits increased by $227.2 million, or 243%, largely as a result of an increase in headcount resulting from the ResCap and Homeward Acquisitions. The average number of employees added in connection with these acquisitions were 1,966 and 556, respectively.

•	Amortization of MSRs increased by $209.6 million in 2013 due principally to $205.9 million of additional amortization attributable to the Homeward, ResCap, Ally and OneWest acquisitions, offset in part by a decline in amortization attributable to portfolio runoff.

---

•

Servicing and origination expenses for 2013 are reported net of $30.8 million in gains attributable to changes in fair value of our MSRs measured at fair value. Excluding these fair value gains, servicing and origination expenses increased by $100.9 million primarily due to $55.3 million of losses recognized in connection with our Ginnie Mae servicing, $21.5 million in scheduled interest paid to GSE investors on loans that voluntarily pay off during the month and increased costs attributable to the legacy Homeward and ResCap servicing platforms. As servicer, we are obligated to purchase delinquent loans from Ginnie Mae securitizations immediately prior to foreclosure at a price equal to the UPB of the loans plus accrued and unpaid interest. Upon resolution of the loan, we file claims for reimbursement from the FHA or the VA in accordance with the contractual reimbursement levels. We may not be reimbursed fully for interest and principal losses and expenses to the extent that they exceed reimbursable rates. These costs are contemplated in the projected cash flows in connection with our Ginnie Mae MSRs.

•	Technology and communications costs and Occupancy and equipment costs increased by a combined $122.6 million as we added facilities and infrastructure, largely in connection with the Homeward and ResCap Acquisitions, to support the residential servicing portfolio growth.

•

Other operating expenses increased by $107.2 million due in large part to $50.9 million of additional overhead cost allocations for support services including law, human resources, accounting and finance. We also incurred $34.3 million of outsourcing expenses, primarily in connection with the ResCap servicing platform. The ResCap servicing platform leverages third-party outsourcing for a variety of functions. We anticipate these costs will be absorbed and/or diminish as the ResCap assets transition to the REALServicing™ platform.

---

•

A 46% increase in the average UPB of assets serviced principally attributable to portfolio acquisitions and shift in portfolio mix to serviced from subserviced. The acquired portfolios generated incremental servicing fees of $144.7 million during 2012. In addition, we recognized an incremental $164.8 million of servicing fees on 2011 portfolio acquisitions. Because we acquired the Homeward servicing portfolio on December 27, 2012, it did not have a significant impact on 2012. These increases were offset in part by runoff of the portfolio as a result of principal repayments, modifications and real estate sales;

•	Incentive fees of $25.0 million earned on subservicing portfolios added during 2012;

•	A 12.0% increase in the ratio of the UPB of serviced loans to subserviced loans in our portfolio to 86.3% at December 31, 2012 as compared to 77.0% at December 31, 2011 as a result of portfolio acquisitions; and

•	A 9.0% increase in completed modifications as compared to 2011.

•	We recognized loan servicing fees and late charges of $100.7 million and $56.1 million during 2012 and 2011, respectively, for completed modifications.

•	We also earned HAMP fees of $76.7 million and $42.0 million in 2012 and 2011, respectively, which included HAMP success fees of $54.8 million and $27.1 million in 2012 and 2011, respectively, for loans that were still performing at the one-year anniversary of their modification.

•	Compensation and benefits increased by $14.4 million, or 18.0%, due to:

◦	A 67% increase in average staffing (excluding employees added as part of the Homeward and Litton acquisitions), as we increased our headcount to manage the actual and planned increases in the servicing portfolio and the insourcing of certain foreclosure functions that had previously been outsourced; offset by

◦	$34.0 million of nonrecurring expenses in 2011 that were associated with the Litton acquisition.

•	Amortization of MSRs increased by $30.0 million in 2012 due principally to $39.7 million of additional amortization attributed to portfolio acquisitions completed in 2012 offset in part by a decline in amortization on pre-existing MSRs because of runoff of the portfolio.

•	Technology and Communications costs and Occupancy and equipment costs increased by a combined $28.7 million as we have added facilities and infrastructure to support the servicing portfolio growth.

•	Servicing and origination expense increased by $16.9 million primarily as a result of growth in the portfolio and a $6.7 million charge to establish a liability for compensatory fees based on performance against benchmarks for various metrics associated with the servicing of GSE non-performing loans.

---

•	2012

◦	$18.2 million of incremental operating expenses attributable to the Litton acquisition consisting primarily of $2.5 million in severance and other employee termination benefits and $11.1 million in occupancy and equipment costs. Occupancy and equipment costs include $4.8 million to establish a liability for the remaining lease payments on a former Litton facility that we vacated.

◦	Professional services of $3.7 million in connection with the cancellation of a planned $200.0 million SSTL facility because cash generated from operations, the sale of assets to HLSS and maximized borrowings under our advance facilities enabled us to close acquisitions without upsizing the facility.

•	2011

◦	$51.2 million of operating expenses includes $34.0 million of compensation and benefits, $5.0 million of technology and communication costs, $5.3 million of professional services and $5.0 million of occupancy costs related to the Litton acquisition.

•	The effects of an increase in average borrowings under advance facilities principally as a result of acquisitions; and

•	Interest on the $575.0 million SSTL that we entered into in connection with the Litton acquisition.

•	The 2012 transfer of the HomEq advance facility to HLSS;

•	The 2012 repayment of $2.0 billion of match funded liabilities with the proceeds from the sales of Rights to MSRs and match funded advances to HLSS;

•	Lower spreads on advance facilities, particularly as a result of the 3.3875% fixed rate on the Litton advance facility; and

•	Prepayments of the prior SSTL in 2011 resulting in the accelerated amortization of $12.6 million of deferred facility costs and unamortized discount. Excluding this accelerated amortization, the average rate on 2011 borrowings would have been 6.18%.

---

(1)	Includes loans originated or purchased by Homeward and OLS.

(2)	Includes loans originated or purchased by Liberty since the acquisition date of April 1, 2013.

---

---

---

---

•	Collections of servicing fees and ancillary revenues;

•	Collections of prior servicer advances in excess of new advances;

•	Proceeds from match funded liabilities;

•	Proceeds from other borrowings, including warehouse facilities;

•	Proceeds from sales of Rights to MSRs and related servicing advances to HLSS; and

•	Proceeds from sales of originated loans.

•	Payments for advances in excess of collections on existing servicing portfolios;

•	Payment of interest and operating costs;

•	Purchase of MSRs and related advances;

•	Funding of originated loans; and

•	Repayments of borrowings, including match funded liabilities and warehouse facilities.

•	Requirements for maturing liabilities compared to dollars generated from maturing assets and operating cash flow,

•	Future sales of Rights to MSRs and servicing advances; and

---

•	The change in advances and match funded advances compared to the change in match funded liabilities and available borrowing capacity.

•	We borrowed $1.3 billion under a new SSTL facility in connection with the ResCap Acquisition and repaid the remaining balance of the previous SSTL;

•	We borrowed $1.2 billion under two new and one existing match funded advance facility in connection with the financing of advances that we acquired in connection with the ResCap Acquisition. The two new facilities were repaid and terminated in conjunction with the July 1, 2013 HLSS Transaction;

•	We borrowed $1.2 billion under a new $1.4 billion bridge facility. The proceeds from this bridge facility were used to repay certain advance facilities that were assumed in the Homeward Acquisition. This facility was repaid and terminated in connection with the July 1, 2013 HLSS Transaction;

•	We amended the maximum borrowing capacity of certain warehouse facilities and added two new warehouse facilities, increasing the available borrowing capacity available to our Lending business activities by $257.3 million;

•	We borrowed $1.9 billion under a new match funded advance facility to finance advances acquired in connection with the OneWest and certain other MSR transactions; and

•	We increased the borrowing capacity of a match funded advance facility from $225.0 million to $475.0 million in November 2013.

---

---

---

---

(1)	As disclosed above, effective April 1, 2013, we terminated the hedging program for our fair value MSRs and closed out the remaining economic hedge positions.

---

---

(1)	See Note 5 — Fair Value to the Consolidated Financial Statements for additional fair value information on financial instruments.

(2)	Net of market valuation allowances and including non-performing loans.

(3)

Excludes financing liabilities of $651.1 million and $303.7 million at December 31, 2013 and 2012, respectively, that we recorded in connection with the sales of Rights to MSRs to HLSS which did not qualify as sales for accounting purposes. These financing liabilities have no contractual maturity and is amortized over the life of the transferred Rights to MSRs. Also, excludes the financing liabilities of $615.6 million at December 31, 2013 that we recorded in connection with the securitizations of HMBS which did not quality as sales for accounting purposes. These financing liabilities have no contractual maturity and are amortized as the related loans are repaid.

(4)	Average 1-Month LIBOR for the periods indicated.

---

---

(1)

Amounts are exclusive of any related discount. Excludes match funded liabilities and borrowings under mortgage loan warehouse facilities as these represent non-recourse debt that has been collateralized by assets which are not available to satisfy general claims against Ocwen. Also excludes financing liabilities which result from sales of assets that do not qualify as sales for accounting purposes and, therefore, are accounted for as secured financings. See Note 15 — Borrowings to the Consolidated Financial Statements for additional information related to these excluded borrowings.

(2)	Represents estimated future interest payments on other secured borrowings, based on applicable interest rates as of December 31, 2013.

(3)	Represents additional equity draw obligations in connection with reverse mortgage loans originated or purchased by Liberty. Because these draws can be made in their entirety, we have classified them as due in less than one year at December 31, 2013.

---

---

•	Mortgage prepayment speeds;

•	Delinquency rates, and

•	Discount rates.

---

•	Increases in prepayment speeds generally reduce the value of our MSRs as the underlying loans prepay faster which causes accelerated MSR amortization, higher compensating interest payments and lower overall servicing fees, partially offset by a lower overall cost of servicing, increased float earnings on higher float balances and lower interest expense on lower servicing advance balances.

•	Increases in delinquencies generally reduce the value of our MSRs as the cost of servicing increases during the delinquency period, and the amounts of servicing advances and related interest expense also increase.

•	Increases in the discount rate reduce the value of our MSRs due to the lower overall net present value of the net cash flows.

•	Increases in interest rate assumptions will increase interest expense for financing servicing advances although this effect is partially offset because rate increases will also increase the amount of float earnings that we recognize.

---

---

•	ASU 2013-04 (ASC 405, Liabilities): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date, a consensus of the FASB Emerging Issues Task Force.

•	ASU 2013-05 (ASC 830, Foreign Currency Matters): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, a consensus of the FASB Emerging Issues Task Force.

•	ASU 2013-11 (ASC 740, Income Taxes): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force).

•	ASU 2011-11 (ASC 210, Balance Sheet): Disclosures about Offsetting Assets and Liabilities

•	ASU 2013-01 (ASC 210, Balance Sheet): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities

•	ASU 2013-02 (ASC 220, Comprehensive Income): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

---

ITEM 9A.	CONTROLS AND PROCEDURES

ITEM 9B.	OTHER INFORMATION

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

---

ITEM 11.	EXECUTIVE COMPENSATION

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES

---

---

---

*	Management contract or compensatory plan or agreement.

†	The schedules referenced in the Purchase Agreements, the Merger Agreement and the Asset Purchase Agreement have been omitted in accordance with Item 601 (b)(2) of Regulation S-K. A copy of any referenced schedules will be furnished supplementally to the SEC upon request.

(1)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed with the SEC on August 12, 2009.

(2)	Incorporated by reference to the similarly described exhibit included with the Registrant’s Form 8-K filed with the SEC on June 6, 2011.

(3)	Incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed with the SEC on October 24, 2011.

(4)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2012.

(5)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed with the SEC on October 5, 2012.

(6)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed with the SEC on November 8, 2012.

(7)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed with the SEC on June 13, 2013.

(8)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed on April 4, 2013.

(9)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed on September 24, 2013.

(10)	Incorporated by reference from the similarly described exhibit filed in connection with the Registrant’s Registration Statement on Form S-1 (File No. 333-5153) as amended, declared effective by the SEC on September 25, 1996.

(11)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010.

(12)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed with the SEC on December 28, 2012.

(13)	Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed with the SEC on May 10, 2013.

---

(14)	Incorporated by reference from the similarly described exhibit filed in connection with the Registrant’s Registration Statement on Form S-8 (File No. 333-44999), effective when filed with the SEC on January 27, 1998.

(15)	Incorporated by reference from the similarly described exhibit to our definitive Proxy Statement with respect to our 2003 Annual Meeting of Shareholders as filed with the SEC on March 28, 2003.

(16)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2000.

(17)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004.

(18)	Incorporated by reference from the similarly described exhibit to our definitive Proxy Statement with respect to our 2007 Annual Meeting of Shareholders as filed with the SEC on March 30, 2007.

(19)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed with the SEC on August 16, 2012.

(20)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed with the SEC on October 5, 2012.

(21)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed with the SEC on April 18, 2013.

(22)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed with the SEC on July 8, 2013.

(23)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2013.

(24)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed with the SEC on February 19, 2013.

(25)	Incorporated by reference from the similarly described exhibit included with the Registrant’s Form 8-K filed with the SEC on September 24, 2013.

(26)	Incorporated by reference from “Note 23 — Basic and Diluted Earnings per Share” on page F-55 of our Consolidated Financial Statements.

---

---

---

---

---

---

---

---

(1)	Net of tax benefit (expense) of $0.8 million, $3.0 million and $(0.3) million for 2013, 2012 and 2011, respectively.

(2)	Net of tax benefit (expense) of $(3.6) million, $3.8 million and $0.5 million for 2013, 2012 and 2011, respectively.

---

---

(1)	See Note 3 — Business Acquisitions for information regarding the acquisitions of Liberty Home Equity Solutions, Inc. and Correspondent One S.A. during 2013.

---

---

•	Combined Loans held for sale, at fair value of $426.5 million (previously reported as a separate line item) and Loans held for sale, at the lower of cost or fair value of $82.9 million (previously included in Other assets) in a new line item, Loans held for sale;

•	Combined Mortgage servicing rights, at amortized cost of $676.7 million (previously reported as a separate line item) and Mortgage servicing rights, at fair value of $85.2 million (previously reported as a separate line item) in a new line item, Mortgage servicing rights; and

•	Reclassified Financing liabilities of $306.3 million from Lines of credit and other secured borrowings to a new line item.

---

---

---

---

---

---

---

(1)	The UPB of the loans transferred is the maximum exposure to loss under our standard representations and warranties obligations.

---

---

(1)	Initial fair value estimate.

(2)

As of the acquisition date, the purchase of certain MSRs from ResCap was not complete pending the receipt of certain consents and court approvals. During the third and fourth quarters of 2013, we obtained the required consents and approvals for a portion of these MSRs and paid an additional purchase price of $120.4 million to acquire the MSRs and related advances. The purchase price allocation has been revised to include the resulting adjustments to MSRs, advances and goodwill. We completed additional settlements in January and February 2014.

(3)	The Homeward purchase price allocation has been revised to include a $34.6 million income tax liability, with an offsetting increase to goodwill.

(4)	See Note 16 — Other Liabilities for additional information.

---

•	conforming servicing revenues to the revenue recognition policies followed by Ocwen;

•	conforming the accounting for MSRs to the valuation and amortization policies of Ocwen;

•	adjusting interest expense to eliminate the pre-acquisition interest expense of ResCap and to recognize interest expense as if the acquisition-related debt of Ocwen had been outstanding at January 1, 2012; and

•	reporting acquisition-related charges for professional services as if they had been incurred in 2012 rather than 2013.

---

•	conforming servicing revenues to the revenue recognition policy followed by Ocwen;

•	conforming the accounting for MSRs to the valuation and amortization policies of Ocwen;

•	reversing depreciation recognized by Homeward and reporting depreciation based on the estimated fair values and remaining lives of the acquired premises and equipment at the date of acquisition;

•	adjusting interest expense to eliminate the pre-acquisition interest expense of Homeward and to recognize interest expense as if the acquisition-related debt of Ocwen had been outstanding at January 1, 2011; and

•	reporting acquisition-related charges for professional services related to the acquisition as if they had been incurred in 2011 rather than 2012.

---

(1)

Net loss includes non-recurring transaction related expenses of $49.6 million, including (i) $33.1 million of severance and other compensation related to Litton employees, (ii) $6.8 million of amortization of the acquired MSRs, (iii) $2.0 million of depreciation resulting from the write-down of certain of the acquired furniture and fixtures that are no longer in use and (iv) $0.4 million of fees for professional services related to the acquisition. Net loss does not include an allocation of costs related to the servicing of the Litton loans on Ocwen’s platform.

•	conforming revenues to the revenue recognition policy followed by Ocwen;

•	conforming the accounting for MSRs to the valuation and amortization policy of Ocwen;

•	reversing depreciation recognized by Litton and reporting depreciation based on the estimated fair values and remaining lives of the acquired premises and equipment at the date of acquisition;

•	adjusting interest expense to eliminate the pre-acquisition interest expense of Litton and to recognize interest expense as if the acquisition-related debt of Ocwen had been outstanding at January 1, 2010; and

•	reporting acquisition-related charges, including severance paid to Litton employees and fees for professional services related to the acquisition as if they had been incurred in 2010 rather than 2011.

---

(1)	Additions charged to operations during 2011 and 2012 were recorded in the Servicing segment. In 2013, $15.9 million of the charges were recorded in the Servicing segment, $0.7 million was recorded in the Lending segment and the

---

(2)	We expect the remaining liability for employee termination benefits at December 31, 2013 to be settled in 2014.

---

Level 1:	Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

Level 2:	Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3:	Unobservable inputs for the asset or liability.

---

(a)	Measured at fair value on a recurring basis.

(b)	Measured at fair value on a non-recurring basis.

(c)	Disclosed, but not carried, at fair value.

---

---

(1)	Total losses attributable to derivative financial instruments still held at December 31, 2012 and 2011 were $1.2 million and $5.1 million, respectively.

•	Life in years ranging from 2.76 to 23.25 (weighted average of 7.10);

•	Conditional repayment rate ranging from 4.83% to 38.40% (weighted average of 9.65%); and

•	Discount rate of 1.72%.

---

•	Prepayment speeds ranging from 6.41% to 17.50% (weighted average of 13.90%) depending on loan type;

•	Delinquency rates ranging from 6.18% to 30.82% (weighted average of 17.32%) depending on loan type;

•	Interest rate of 1-month LIBOR plus a range of 0.00% to 3.75% for computing the cost of financing servicing advances;

•	Interest rate of 1-month LIBOR for computing float earnings; and

•	Discount rates ranging from 9.98%% to 16.73% (weighted average of 11.64%)

•	Mortgage prepayment speeds;

•	Delinquency rates; and

•	Discount rates.

---

•	Life in years ranging from 2.74 to 22.55 (weighted average of 6.42);

•	Conditional repayment rate ranging from 4.83% to 37.97% (weighted average of 9.65%); and

•	Discount rate of 1.17%.

---

---

(1)	Purchases include $60.0 million of reverse mortgages acquired in the Liberty Acquisition in 2013 and $558.7 million of forward mortgages acquired in the Homeward Acquisition in 2012. See Note 3 — Business Acquisitions for additional information.

(2)	Includes gains of $41.7 million recorded during 2013 to adjust Loans Held for investment - reverse mortgages to fair value.

---

(1)	Includes gains of $74.8 million and $2.9 million for 2013 and 2012, respectively, representing the value assigned to MSRs retained on sales of loans. Also includes gains of $35.1 million recorded during 2013 on sales of repurchased loans into Ginnie Mae guaranteed securitizations.

(1)	Servicing advances acquired in connection with the acquisition of MSRs through business acquisitions and asset acquisitions. See Note 3 — Business Acquisitions and Note 9 — Mortgage Servicing for additional information.

---

(1)	Represents advances acquired in connection with business and asset acquisitions that were pledged to advance facilities at the date of acquisition.

(2)	Represents new advances initially classified as Advances at the date of payment and subsequently pledged to advance facilities.

---

(1)	See Note 3 — Business Acquisitions for additional information regarding MSRs recognized in connection with business acquisitions.

(2)

The acquired MSRs relate to mortgage loans with a UPB of $87.5 billion owned by Freddie Mac and Fannie Mae. We also acquired servicing advances and other receivables of $73.6 million. Prior to the closing, we subserviced the related MSRs on behalf of Ally Bank. We assumed the origination representation and warranty obligations of approximately $136.7 million in connection with a majority of the acquired MSRs. We had been subservicing these MSRs on behalf of Ally under a subservicing contract that we assumed in connection with the ResCap Acquisition. No operations, entities or other assets were acquired in the transaction.

(3)

The acquired MSRs relate to mortgage loans with a UPB of approximately $69.0 billion and related servicing advance receivables of $2.1 billion acquired in the OneWest MSR Transaction. No operations or other assets were purchased in the transaction. As part of the OneWest MSR Transaction, both the seller and OLS have agreed to indemnification provisions for the benefit of the other party. The OneWest MSR Transaction closed in stages, and the majority of loans were boarded onto our primary servicing platform as of December 31, 2013. Each closing is subject to, among other things, receipt of certain investor and third party consents and customary closing conditions.

(4)	The acquired MSRs relate to mortgage loans with a UPB of approximately $6.3 billion and related servicing advance receivables of $422.1 million.

(5)	Cash proceeds from the sale were $34.8 million. These MSRs were sold with subservicing retained. The gain on the sale of $5.1 million has been deferred and will be recognized in earnings over the life of the subservicing contract.

(6)	In the Consolidated Statement of Operations, Amortization of mortgage servicing rights is reported net of the amortization of servicing liabilities and includes the amount of charges we recognized to increase servicing liability obligations.

---

(1)	See Note 3 — Business Acquisitions for additional information.

(2)	Changes in fair value are recognized in Servicing and origination expense in the Consolidated Statements of Operations.

---

(1)	Includes UPB of $175.1 billion and $79.4 billion at December 31, 2013 and 2012, respectively, for which the Rights to MSRs have been sold to HLSS.

---

(1)

The balances at December 31, 2013 and 2012 arise from our Servicing business and primarily include reimbursable expenditures due from investors and amounts to be recovered from the custodial accounts of the trustees. The balances at December 31, 2013 also include $54.0 million of receivables and $14.0 million of allowance for losses related to defaulted FHA or VA insured loans repurchased from Ginnie Mae guaranteed securitizations.

(2)	See Note 26 — Related Party Transactions for additional information regarding transactions with Altisource and HLSS.

(3)	Includes $13.6 million related to probable losses expected to be indemnified under the terms of the Homeward merger agreement. See Note 3 — Business Acquisitions for additional information.

---

(1)	These balances relate to match funded liabilities and other secured borrowings. We amortize these costs to the earlier of the scheduled amortization date, contractual maturity date or prepayment date of the debt.

(2)	During 2012 and 2013, we completed intra-entity transfers of certain MSRs. The deferred tax effects of these transactions have been recognized as prepaid income tax assets and are being amortized to Income tax expense over a 7-year period.

(3)	See Note 19 — Derivative Financial Instruments and Hedging Activities for additional information regarding derivatives.

(4)	The balance at December 31, 2012 includes an investment of $13.4 million in Correspondent One. As disclosed in Note 3 — Business Acquisitions, we increased our ownership from 49% to 100% on March 31, 2013. Effective on that

---

(5)

The balance at December 31, 2013 represents an initial cash deposit that we made in connection with the agreement we entered into on December 20, 2013 to acquire MSRs and related advances from Wells Fargo Bank, N.A. This deposit along with an additional deposit of $15.0 million that we made in January 2014 will be held in escrow until the transaction closes. The balance at December 31, 2012 represents an earnest money cash deposit we made in connection with the ResCap Acquisition. This deposit was subsequently applied towards the purchase price upon closing of the transaction on February 15, 2013. See Note 3 — Business Acquisitions for additional information.

---

(1)

The amortization date of our facilities is the date on which the revolving period ends under each advance facility note and repayment of the outstanding balance must begin if the note is not renewed or extended. The maturity date is the date on which all outstanding balances must be repaid. In two advance facilities, there are multiple notes outstanding.  For each note, after the amortization date, all collections that represent the repayment of advances pledged to the facility must be applied to reduce the balance of the note outstanding, and any new advances are ineligible to be financed.

(2)	Borrowing capacity is available to us provided that we have additional eligible collateral to pledge. Collateral may only be pledged to one facility. At December 31, 2013, none of the available borrowing capacity could be used based on the amount of eligible collateral that had been pledged.

(3)

Advance facility assumed in the Homeward Acquisition. The 2011-Servicing Advance Revolving Trust 1, 2012-Servicing Advance Revolving Trust 2, 2012-Servicing Advance Revolving Trust 3 and 2012-Homeward DSF Advance Revolving Trust 2012-1 facilities were repaid in February 2013 from the proceeds of a new $1.7 billion bridge facility which has an amortization date of August 14, 2013. The amortization date of the 2012-Homeward Agency Advance Funding Trust 2012-1 facility has been extended to March 3, 2014.

---

(4)	These notes were issued to finance the advances acquired from Bank of America, NA (BANA) in connection with the acquisition of MSRs. We repaid this facility in full in July 2013.

(5)	1-Month LIBOR (1ML) was 0.17% and 0.21% at December 31, 2013 and 2012, respectively.

(6)	These notes were issued to finance the advances acquired from BANA in connection with the acquisition of MSRs. We repaid this facility in full in October 2013.

(7)	The borrowing capacity under this facility was increased to $475.0 million in November 2013.

(8)

These notes were issued in connection with the OneWest MSR Transaction. On February 3, 2014, the maximum borrowing capacity on the 2013-VF2 notes was increased by $100.0 million to a total of $500.0 million. On February 28, 2014, the maximum borrowing capacity under the 2013-VF1 note is scheduled to decline by $250.0 million to a total of $1.3 billion. On February 28, 2014 we negotiated a deferral for a month of the scheduled decrease in the maximum borrowing capacity under the 2013-VF1 Note.

(9)	The interest margin on these notes increases to 200 bps on July 15, 2014, to 225 bps on August 15, 2014 and 250 bps on September 15, 2014.

(10)	The interest margin on these notes increases to 191 bps on July 15, 2014, to 215 bps on August 15, 2014 and 238 bps on September 15, 2014.

(11)	The interest margin on these notes increases to 486 bps on July 15, 2014, to 546 bps on August 15, 2014 and 607 bps on September 15, 2014.

(1)

The HLSS Transaction financing liabilities have no contractual maturity but are amortized over the estimated life of the transferred Rights to MSRs using the interest method with the servicing income that is remitted to HLSS representing payments of principal and interest. For purposes of applying the interest method, the balance of the liability is reduced each month based on the change in the present value of the estimated future cash flows underlying the related MSRs. See Note 4 — Sales of Advances and MSRs for additional information regarding the HLSS Transactions.

(2)	The financing liability is being amortized using the interest method with the servicing income that is remitted to the purchaser representing payments of principal and interest.

(3)	Represents amounts due to the holders of beneficial interests in Ginnie Mae guaranteed HMBS. The beneficial interests have no maturity dates, and the borrowings mature as the related loans are repaid. See Note 2 — Securitizations and Variable Interest Entities for additional information.

---

---

(1)	In February 2013, we repaid this loan in full and wrote off the remaining discount as part of the loss on extinguishment.

(2)

On February 15, 2013, we entered into a new SSTL facility agreement and borrowed $1.3 billion that was used principally to fund the ResCap Acquisition and repay the balance of the previous SSTL. The loan was issued with an original issue discount of $6.5 million that we are amortizing over the term of the loan. We are required to repay the principal amount of the borrowings in consecutive quarterly installments of $3.3 million. In addition, we are generally required to use the net cash proceeds (as defined) from any asset sale (as defined) to repay loan principal. Generally, this provision applies to non-operating sales of assets, and net cash proceeds represent the proceeds from the sale of the assets, net of the repayment of any debt secured by a lien on the assets sold. However, for assets sales that are part of an HLSS Transaction, we have the option, within 180 days, either to invest the net cash proceeds in MSRs or related assets, such as advances, or to repay loan principal. The borrowings are secured by a first priority security interest in substantially all of the assets of Ocwen. Borrowings bear interest, at the election of Ocwen, at a rate per annum equal to either (a) the base rate [the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 0.50% and (iii) the one-month Eurodollar rate (1-Month LIBOR)], plus a margin of 2.75% and a base rate floor of 2.25% or (b) the one month Eurodollar rate, plus a margin of 3.75% with a one month Eurodollar floor of 1.25%. To date we have elected option (b) to determine the interest rate.

•	permit repurchases of all of the Preferred Shares, which may be converted to common stock prior to repurchase, and up to $1.5 billion of common stock, subject, in each case, to pro forma financial covenant compliance;

•	eliminate the dollar cap on Junior Indebtedness (as defined in the SSTL) but retain the requirement for any such issuance to be subject to pro forma covenant compliance;

•	include a value for whole loans (i.e., loans held for sale) in collateral value for purposes of calculating the loan-to-value ratio and include specified deferred servicing fees and the fair value of specified mortgage servicing rights in net worth for purposes of calculating the ratio of consolidated total debt to consolidated tangible net worth; and

•	modify the applicable quarterly covenant levels for the corporate leverage ratio, ratio of consolidated total debt to consolidated tangible net worth and loan-to-value ratio.

(3)	Ocwen borrowed funds from Altisource in connection with the financing of the Homeward Acquisition. See Note 26 — Related Party Transactions for additional information regarding this agreement with Altisource. We repaid this loan in full in February 2013.

(4)	This note was issued to finance the acquisition of MSRs from BANA. Prepayments of the balance on this note may be required if the borrowing base, as defined, falls below the amount of the note outstanding.

(5)	On March 19, 2013, the maturity date was extended to March 18, 2014 and the maximum borrowing capacity was increased from $125.0 million to $300.0 million.

(6)

Under this participation agreement, the lender provides financing on an uncommitted basis for $50.0 million to $90.0 million at the discretion of the lender. The participation agreement allows the lender to acquire a 100% beneficial interest in the underlying mortgage loans. However, the transaction does not qualify for sale accounting treatment and is accounted for as a secured borrowing. The lender earns the stated interest rate of the underlying mortgage loans while the loans are financed under the participation agreement. In April 2013, we extended the maturity date of the participation agreement to May 31, 2014.

(7)	On August 3, 2013, we extended the maturity date of this facility to August 2, 2014.

(8)	On September 27, 2013, we extended the maturity date of this facility to September 26, 2014.

(9)	Repurchase agreement for Class A-2 and A-3 notes issued by Ocwen Real Estate Asset Liquidating Trust 2007-1 which have a current face value of $24.5 million at December 31, 2013. This agreement has no stated credit limit and lending is determined for each transaction based on the acceptability of the securities presented as collateral.

•	Specified net worth requirements;

•	Restrictions on future indebtedness; and

•	Monitoring and reporting of various specified transactions or events, including specific reporting on defined events affecting collateral underlying certain borrowing agreements.

---

(1)	For match funded liabilities, the expected maturity date is the date on which the revolving period ends for each advance financing facility note and repayment of the outstanding balance must begin if the note is not renewed or extended.

(2)

Excludes $651.1 million recorded in connection with sales of MSRs and Rights to MSRs accounted for as financings and $615.6 million recorded in connection with the securitizations of HMBS that we record as financings. The MSR-related financing liabilities have no contractual maturity and are amortized over the life of the transferred Rights to MSRs. The HMBS-related financing liabilities have no contractual maturity and are amortized as the related loans are repaid. See Note 2 — Securitizations and Variable Interest Entities and Note 15 — Borrowings for additional information.

(3)	At December 31, 2013 all Match funded liabilities and all Other secured borrowings were variable rate obligations.

(1)	The balance includes origination representation and warranty obligations and compensatory fees for foreclosures that may ultimately exceed investor timelines. These obligations were primarily assumed in connection with the Ally MSR Transaction, the ResCap Acquisition and the Homeward Acquisition. See Note 28 — Commitments and Contingencies for additional information.

(2)	See Note 26 — Related Party Transactions for additional information regarding transactions with Altisource and HLSS.

(3)

We recognized $53.5 million of expense in Professional services during 2013 to establish the liability. We recognized the remaining $13.4 million of the liability as an adjustment to the initial purchase price allocation related to the Homeward Acquisition. We applied this measurement period adjustment retrospectively to our Consolidated Balance Sheet at December 31, 2012 with an offsetting increase in goodwill. See Note 28 — Commitments and Contingencies for additional information.

(4)	The balance represents amounts due to investors in connection with loans we service under servicing and subservicing agreements.

(5)	See Note 22 — Income Taxes for information on the liability for selected tax items.

---

•	Ranking. The Preferred Shares shall, with respect to the payment of dividends, redemption and distributions upon the liquidation, winding up or dissolution of Ocwen rank senior to all classes of common stock.

•

Dividends. Holders of the Preferred Shares are entitled to receive mandatory and cumulative dividends payable quarterly at the rate per share equal to the greater of (i) 3.75% per annum multiplied by $1,000 per share and (ii) in the event Ocwen pays a regular quarterly dividend on its common stock in such quarter, the rate per share payable in respect of such quarterly dividend on an as-converted basis. If Ocwen declares a special dividend on common stock, then any dividend shall be payable to the holders of the shares of common stock and the holders of the Preferred Shares on a pari passu, as-converted basis. Any such dividend may be paid either in cash or in Preferred Shares.

•	Conversion. Each Preferred Share, together with any accrued and unpaid dividends, may be converted to common stock at the option of the holder at a conversion price equal to $31.79.

•

Redemption. Ocwen may redeem the Preferred Shares commencing on December 27, 2014. The shares of Series A Preferred Stock are redeemable, at Ocwen’s option, in whole, or, from time to time, in part, at any time beginning on the second anniversary of the issue date of the Preferred Shares, payable through the issuance of shares of common stock. The redemption amount is any accrued and unpaid dividends plus: 103% of the liquidation preference of $1,000 for each Preferred Share plus from the second anniversary of the issue date and prior to the third anniversary; 102% of the liquidation preference from the third anniversary and prior to the fourth anniversary; 101% of the liquidation preference from the fourth anniversary and prior to the fifth anniversary; and the liquidation preference from the fifth anniversary.

•

Voting. The holders of Preferred Shares shall be entitled to vote on all matters submitted to the stockholders for a vote, voting together with the holders of the common stock as a single class, with each share of common stock entitled to one vote per share and each Preferred Share entitled to one vote for each share of common stock issuable upon conversion of the Preferred Share as of the record date for such vote or, if no record date is specified, as of the date of such vote.

•

Protective Provisions. So long as the Preferred Shares are outstanding, Ocwen will not, without obtaining the approval of the holders of a majority of the Preferred Shares (i) issue any preferred stock other than the Preferred Shares, any senior securities or any parity securities in excess of $325 million; (ii) amend or alter the Articles of Designation or Articles of Incorporation in any manner that under the Florida Business Corporation Act requires the prior vote as a separate class of the holders of the Preferred Shares; (iii) amend or otherwise alter the Articles of Designation or the Articles of Incorporation in any manner that would adversely affect the rights, privileges or preferences of the Preferred Shares; (iv) pay any dividend in cash to the common stock in respect of any quarterly dividend unless the dividend payable in respect of such quarter on the Preferred Shares is also paid in cash to the same extent; or (v) waive compliance with any provision of the Articles of Designation or take any actions intended to circumvent the provisions of the Articles of Designation.

•	Change of Control; Liquidation Event.

1.

Change of Control. In the case of any change in control of Ocwen, then, upon consummation of such transaction, each holder of Preferred Shares shall be entitled to receive in respect of such share the greater of (i) the liquidation preference of $1,000 plus accrued and unpaid dividends thereon, whether or not declared, if any, or (ii) the amount such holder would receive if such holder converted such Preferred Shares into the kind and amount of securities, cash or other assets receivable upon the consummation of the change in control by a holder of the number of shares of Common Stock into which such Preferred Shares might have been converted immediately prior to such change in control;

2.

Liquidation Event. Upon any liquidation event, each holder of Preferred Shares will be entitled to payment out of Ocwen’s assets available for distribution, before any distribution or payment out of such assets may be made to the holders of any junior securities, and subject to the rights of the holders of any senior securities or parity securities upon liquidation and the rights of Ocwen’s creditors, of an amount equal to the liquidation preference of $1,000 plus accrued and unpaid dividends thereon, whether or not declared. After payment in full of the liquidation preference plus accrued and unpaid dividends thereon to which holders of Preferred Shares are entitled, such holders will not be entitled to any further participation in any distribution of Ocwen’s assets.

---

(1)	On September 23, 2013, holders elected to convert 100,000 of the Preferred Shares into 3,145,640 shares of common stock. See Note 26 — Related Party Transactions for additional information.

(2)	Accretion includes a $3.5 million accelerated write-off of the unamortized discount related to the 100,000 Preferred Shares converted on September 23, 2013.

---

---

---

(1)	Derivatives are reported at fair value in Receivables, Other assets or in Other liabilities.

(1)	Includes the write off in 2012 and 2013 of the remaining of unamortized losses when a borrowing under the related advance financing facility was repaid in full, and the facility was terminated.

(2)	See Note 4 — Sales of Advances and MSRs.

---

(1)	Includes interest expense of $245.8 million and $54.7 million in 2013 and 2012, respectively, related to financing liabilities recorded in connection with the HLSS Transactions as indicated in the table below:

(2)	Interest expense that we expect to be paid on the HMBS-related borrowings is included with net fair value gains in Other revenues. See Note 2 — Securitizations and Variable Interest Entities for additional information.

(3)	We redeemed the remaining 3.25% Convertible Notes outstanding on March 28, 2012.

(4)	We redeemed the remaining 10.875% Capital Securities outstanding on August 31, 2012.

---

---

---

(1)

The effect of our Preferred Shares on diluted EPS is computed using the if-converted method. For purposes of computing diluted EPS, we assume the conversion of the Preferred Shares into shares of common stock unless the effect is anti-dilutive. Conversion of the Preferred Shares has not been assumed for 2013 and 2012 because the effect would have been antidilutive. There were no Preferred Shares outstanding during 2011.

(2)

Prior to the redemption of the 3.25% Convertible Notes in March 2012, we also computed their effect on diluted EPS using the if-converted method. Interest expense and related amortization costs applicable to the 3.25% Convertible Notes, net of income tax, were added back to net income. We assumed the conversion of the 3.25% Convertible Notes into shares of common stock unless the effect was anti-dilutive. On March 28, 2012, we issued 4,635,159 shares of common stock upon conversion of $56.4 million of the 3.25% Convertible Notes.

(3)	These stock options were anti-dilutive because their exercise price was greater than the average market price of our stock.

(4)	Shares that are issuable upon the achievement of certain performance criteria related to Ocwen’s stock price and an annualized rate of return to investors. See Note 24 — Employee Compensation and Benefit Plans for additional information regarding these market-condition options.

---

---

(1)	Stock options granted in 2012 include 2,000,000 options granted to Ocwen’s Executive Chairman of the Board of Directors, William C. Erbey at an exercise price of $24.38 equal to the closing price of the stock on the day of the Committee’s approval. See Note 26 — Related Party Transactions for additional information regarding Mr. Erbey’s stock and stock option holdings.

(2)	The total intrinsic value of stock options exercised, which is defined as the amount by which the market value of the stock on the date of exercise exceeds the exercise price, was $35.3 million, $23.9 million and $4.1 million for 2013, 2012 and 2011, respectively.

(3)

In connection with the exercise of stock options during 2013, 2012 and 2011, employees delivered 138,553, 33,605 and 324,248 shares, respectively, of common stock to Ocwen as payment for the exercise price and the income tax withholdings on the compensation. As a result, a total of 652,015, 1,082,944 and 410,977 net shares of stock were issued in 2013, 2012 and 2011, respectively, related to the exercise of stock options.

(4)	Excluding 547,500 market-based options that have not met their performance criteria, the net aggregate intrinsic value of stock options outstanding and stock options exercisable at December 31, 2013 was $351.0 million and $280.5 million, respectively. A total of 5,933,125 market-based options were outstanding at December 31, 2013, of which 3,960,002 were exercisable.

(5)	At December 31, 2013, the weighted average remaining contractual term of options outstanding and options exercisable was 5.7 years and 4.7 years, respectively.

(6)	The total fair value of the stock options that vested and became exercisable during 2013, 2012 and 2011, based on grant-date fair value, was $4.7 million, $2.2 million and $1.3 million, respectively.

(1)	We estimate volatility based on the historical volatility of Ocwen’s common stock over the most recent period that corresponds with the estimated expected life of the option.

(2)

For the options valued using the Black-Scholes model we determined the expected life based on historical experience with similar awards, giving consideration to the contractual term, exercise patterns and post vesting forfeitures. The expected term of the options valued using the lattice (binomial) model is derived from the output of the model. The lattice (binomial) model incorporates exercise assumptions based on analysis of historical data. For all options, the expected life represents the period of time that options granted were expected to be outstanding at the date of the award.

---

---

(1)	Intersegment billings for services rendered to other segments are recorded as revenues, as contra-expense or as other income, depending on the type of service that is rendered.

(2)	Servicing has a contractual right to receive interest income on float balances. However, Corporate controls investment decisions associated with the float balances. Accordingly, Servicing receives revenues generated by those investments

---

(3)	Depreciation and amortization expense are as follows:

(4)	Operating expenses for 2011 include non-recurring transaction-related expenses associated with the Litton Acquisition of $50.3 million recorded in the Servicing segment.

---

---

---

•	creates an inter-agency body that is responsible for monitoring the activities of the financial system and recommending a framework for substantially increased regulation of large interconnected financial services firms;

•	creates a liquidation framework for the resolution of certain bank holding companies and other large and interconnected nonbank financial companies;

•	strengthens the regulatory oversight of securities and capital markets activities by the SEC; and

•	creates the CFPB, a new federal entity responsible for regulating consumer financial services.

---

•	force-placing insurance, unless there is a reasonable belief that the borrower has failed to comply with a contractual requirement to maintain insurance;

•	charging a fee for responding to a valid qualified written request;

•	failing to take timely action to respond to the borrower’s request to correct errors related to payment, payoff amounts, or avoiding foreclosure;

•	failing to respond within ten (10) business days of a request from the borrower to provide contact information about the owner or assignee of loan; and

•	failing to return an escrow balance or provide a credit within twenty (20) business days of a residential mortgage loan being paid off by the borrower.

•	acknowledging receipt of a qualified written request under RESPA within five (5) business days and providing a final response within thirty (30) business days;

•	promptly crediting mortgage payments received from the borrower on the date of receipt except where payment does not conform to previously established requirements; and

•	sending an accurate payoff statement within a reasonable period of time but in no case more than seven (7) business days after receipt of a written request from the borrower.

---

•	A commitment by Ocwen to service loans in accordance with specified servicing guidelines and to be subject to oversight by an independent national monitor for three years. Ocwen is presently subject to substantially the same guidelines and oversight with respect to the portion of its servicing portfolio acquired from ResCap in early 2013.

•

A payment of $127.3 million, which includes a fixed amount for administrative expenses, to a consumer relief fund to be disbursed by an independent administrator to eligible borrowers. Pursuant to indemnification and loss sharing provisions of applicable acquisition documents, approximately half of this consumer relief fund payment is to be funded by the former owners of certain servicing portfolios previously acquired by Ocwen and integrated into Ocwen’s servicing platform. Ocwen established a reserve of $66.9 million with respect to its portion of the payment into the consumer relief fund. This reserve is expected to cover all of Ocwen’s portion of the consumer relief fund payment.

•

A commitment by Ocwen to continue its principal forgiveness modification programs to delinquent and underwater borrowers, including underwater borrowers at imminent risk of default, in an aggregate amount of at least $2 billion over three years. These and all of Ocwen’s other loan modifications are designed to be sustainable for homeowners while providing a net present value for loan investors that is superior to that of foreclosure. Principal forgiveness as part of a loan modification is determined on a case-by-case basis in accordance with the applicable servicing agreement. Principal forgiveness does not involve an expense to Ocwen other than the operating expense incurred in arranging the modification, which is part of Ocwen’s role as loan servicer.

•	Ocwen and the former owners of certain of the acquired servicing portfolios will receive from the Regulators comprehensive releases, subject to certain exceptions, from liability with respect to residential mortgage servicing, modification and foreclosure practices.

---

•	representations and warranties concerning loan quality, contents of the loan file or loan underwriting circumstances are inaccurate;

•	adequate mortgage insurance is not secured within a certain period after closing;

•	a mortgage insurance provider denies coverage; or

•	there is a failure to comply, at the individual loan level or otherwise, with regulatory requirements.

---

(1)	Includes principal and interest losses realized in connection with repurchased loans, make-whole, indemnification and fee payments and settlements net of recoveries, if any.

---

(1)	Operating expenses for the second quarter of 2013 include a $52.8 million charge recorded in connection with an agreement with the CFPB, various state attorneys general and other agencies regarding certain foreclosure-related matters. See Note 28 — Commitments and Contingencies for additional information regarding this agreement.

---