Interest Income on Loans
Interest income on loans decreased $36.0 million in 2018 as compared to 2017 as a result of the adoption of new accounting guidance relating to sales of nonfinancial assets effective January 1, 2018 and the election of fair value accounting for residential loans held by the Residual Trusts on February 10, 2018 in connection with fresh start accounting. Under the new accounting guidance, a portion of our loans were derecognized and placed back into real estate owned when the loans resulted from prior seller-financed real estate owned sales and we determined collection of substantially all of the sales price is not yet probable. Interest income previously recognized on these loans was reversed and recorded as deferred revenue to be subsequently recognized as gain on sale of real estate owned within other expenses, net when certain criteria are met. Interest income earned on loans carried at fair value is recognized in other net fair value gains (losses) and is discussed below.
Intersegment Retention Revenue
Intersegment retention revenue relates to fees the Servicing segment charges to the Originations segment for loan originations completed that resulted from access to the Servicing segment’s servicing portfolio related to capitalized servicing rights. The decrease in intersegment retention revenue of $4.1 million in 2018 as compared to 2017 was due primarily to lower overall consumer retention volume related in part to a smaller capitalized servicing portfolio resulting from sales of servicing rights and originations flow volume sold with servicing rights released.
Net Gains on Sales of Loans
Net gains or losses on sales of loans include realized and unrealized gains and losses on loans as well as the changes in fair value of our IRLCs and other freestanding derivatives. A substantial portion of the gain or loss on sales of loans is recognized at the time we commit to originate or purchase a loan at specified terms as we recognize the value of the IRLC at the time of commitment. The fair value of the IRLC includes an estimate of the fair value of the servicing right we expect to receive upon sale of the loan.
The Servicing segment recognizes the change in fair value of the servicing rights component of the IRLCs and loans held for sale for Ginnie Mae loans that occur subsequent to the date of our commitment through the sale of the loan. Net gains (losses) on sales of loans for the Servicing segment consist of this change in fair value as well as net gains or losses on sales of loans to third parties.
Other revenues consist primarily of interest income on cash and cash equivalents, changes in the fair value of charged-off loans, and insurance marketing commissions. Other revenues also include insurance revenue in 2017. Other revenues increased $10.4 million in 2018 as compared to 2017 due primarily to $12.1 million higher interest income on cash and cash equivalents and $2.2 million higher fair value gains related to charged-off loans, partially offset by $4.0 million of insurance revenue recognized in 2017.
General and Administrative Expenses
General and administrative expenses decreased $122.5 million in 2018 as compared to 2017 resulting primarily from decreases of $25.9 million in default servicing expense, $19.5 million in legal fees related to litigation and regulatory costs, $11.3 million in occupancy costs due primarily to a lease liability accrual recorded in 2017, $8.9 million in professional fees due in part to transitioning work in-house and the sale of substantially all of our insurance business in 2017,$8.6 million in purchased services related in part to MSR sales and a smaller portfolio, $6.5 million in advance loss provision due to a decrease in the servicing advance portfolio and a decline in delinquent portfolios, $5.0 million in contractor costs due to a corporate initiative to reduce contractor headcount, and $16.8 million in other cost savings related to a smaller portfolio and lower headcount. In addition, there was a decrease of $18.0 million resulting from accretion recorded during 2018 related to fresh start accounting adjustments for advances, which is not comparable to 2017.
Salaries and Benefits
Salaries and benefits expense decreased $47.5 million in 2018 as compared to 2017 due primarily to a $42.0 million decrease in compensation and benefits primarily resulting from a lower average headcount and a $3.9 million decrease in severance related to restructuring initiatives in 2017. Headcount assigned directly to our Servicing segment decreased by approximately 500 full-time employees from 2,100 at December 31, 2017 to 1,600 at December 31, 2018.