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SEC Filings

DITECH HOLDING CORP filed this Form 10-K on 04/16/2019
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Go-Forward Trade Claims - On the DHCP Effective Date, trade creditors identified by us (with the consent of the Requisite Term Lenders) as being integral to and necessary for the ongoing operations of New Ditech) will receive a distribution in cash in an amount equaling a certain percentage of their claim, subject to an aggregate cap; and
Existing Equity Interests - On the DHCP Effective Date, holders of our existing preferred stock, common stock and warrants will have their claims extinguished.
If we proceed to confirmation of a sale transaction, we will distribute proceeds of such transaction in accordance with the priority scheme under the Bankruptcy Code.
Investments in MSR
Historically, to support our servicing business, we have from time to time bought or sold MSR; however, with a view to using our capital efficiently while increasing free cash-flow, in 2016 we began to limit our investment in MSR.
To date, we executed a number of transactions that helped us reduce our investment in MSR. In particular, we entered into several transactions with NRM pursuant to which we sold MSR to NRM and were retained by NRM to subservice some of these MSR. Refer to Note 4 to the Consolidated Financial Statements for additional information regarding our transactions with NRM.
The Company
At December 31, 2018, we serviced 1.5 million residential loans with a total unpaid principal balance of $187.2 billion. We originated $12.6 billion in mortgage loan volume in 2018.
During 2018, we added to the unpaid principal balance of our third-party mortgage loan servicing portfolio with subservicing contracts of $8.9 billion and mortgage loans sold with servicing retained of $6.5 billion, which was more than offset by $25.6 billion of payoffs and other adjustments, net of recapture activities of $3.5 billion, and $7.5 billion of sales with servicing released. In addition, we added to the unpaid principal balance of our third-party reverse loan servicing portfolio with $2.0 billion in Tail issuances, Ginnie Mae buyout loans sold with subservicing retained and other additions, which was more than offset by $2.8 billion in payoffs and curtailments.
Our mortgage loan originations business diversifies our revenue base and helps us replenish our servicing portfolio. During 2018, we originated $4.6 billion of mortgage loans through our consumer and wholesale channels and purchased $8.0 billion of mortgage loans through our correspondent channel. Substantially all of these purchased and originated mortgage loans were added to our servicing portfolio upon loan sale. The results of our originations business have been negatively impacted by the recent rise in interest rates, which reduces the level of refinancing transactions. Purchase activity has remained relatively consistent with that of 2017 despite the higher rate environment; however, we are not an established purchase money lender and it will take time to develop brand awareness and build market share.
Our profitability for the Reverse segment has been and will continue to be negatively impacted by recent changes to HUD requirements, which have led to additional working capital needs in relation to Ginnie Mae buyouts, and by the level of defaults we are experiencing with HECM loans. When a HECM loan is in default, we earn interest at the debenture rate, which is generally lower than the note rate we must pay. Additionally, if we miss HUD prescribed milestones in the foreclosure and claims filing process, HUD curtails the debenture interest being earned on loans in default. For loans in default, servicing costs generally increase as a result of foreclosure related activities such as legal costs, property preservation expense and other costs, which may include bankruptcy related activities. Further, after a foreclosure sale occurs and we obtain title to the property, we are responsible for the sale of the REO property. If we are unable to sell the property underlying a defaulted reverse loan for an acceptable price within the timeframe established by HUD, we are required to make an appraisal-based claim to HUD. In such cases, HUD reimburses us for the loan balance, eligible expenses and debenture interest, less the appraised value of the underlying property. Thereafter, all the risks and costs associated with maintaining and liquidating the property remains with us. We may incur additional losses on REO properties as they progress through the claims and liquidation processes. The significance of future losses associated with appraisal-based claims is dependent upon the volume of defaulted loans, condition of foreclosed properties and the general real estate market.