Ocwen Financial Corporation (NYSE:OCN) (“Ocwen” or the
“Company”), a leading financial services holding company,
today reported a net loss of $44.5 million, or $0.33 per share, for
the three months ended March 31, 2019 compared to a net income of
$2.6 million or $0.02 per share for the three months ended March
31, 2018.
Glen A. Messina, President and CEO of Ocwen
said, “Through continued strong execution, the pace of our MSR
purchases is ahead of our expectations and we are on track with the
objectives of our integration, cost re-engineering and other key
business initiatives. I’m pleased with our progress to date and
believe it demonstrates our commitment and focus to deliver on the
objectives we have established to strengthen the Company and return
to profitability in the shortest time frame possible.”
First quarter 2019 Results
Pre-tax loss from continuing operations for the
first quarter of 2019 was $41.1 million, which was a $46.1 million
decrease from the first quarter of 2018. Pre-tax results for the
quarter were impacted by a number of significant items, including
but not limited to: $22.1 million in severance, retention and other
re-engineering costs and $13.8 million of unfavorable interest rate
and valuation assumption driven fair value changes in the quarter
offset by the recovery of $30.7 million of amounts previously
expensed from a service provider.
The Servicing segment recorded $57.5 million of
pre-tax loss for the first quarter of 2019. The business was
negatively impacted by portfolio runoff. We also recorded $31.1
million of interest rate driven unfavorable MSR fair value changes,
net of the NRZ financing liability fair value change in the
quarter.
The Lending segment recorded $19.9 million of
pre-tax income for the first quarter of 2019. Our reverse mortgage
lending business recorded $24.0 million of pre-tax income, which
included $17.3 million of interest rate and valuation assumption
driven favorable fair value changes. Our forward lending recapture
business incurred a $4.1 million pre-tax loss.
The Corporate segment recorded $3.4 million of
pre-tax loss for the first quarter of 2019. The quarter included
the recovery of $30.7 million of amounts previously expensed from a
service provider and $22.1 million of severance, retention and
other re-engineering costs.
Additional First quarter 2019 Business
Highlights
- We closed MSR acquisitions with $5 billion of unpaid principal
balance (UPB) and we have been awarded $26 billion in UPB of MSRs
that that we expect to close on in the second quarter 2019, subject
to negotiation and execution of purchase documentation and
satisfaction of customary closing conditions.
- Completed 8,285 modifications in the quarter to help struggling
families stay in their homes, 28% of which included debt
forgiveness totaling $67 million.
- Delinquencies decreased from 4.9% at December 31, 2018 to
4.7% at March 31, 2019, primarily driven by loss mitigation
efforts.
- The constant pre-payment rate (CPR) decreased from 12.9% in the
fourth quarter of 2018 to 12.5% in the first quarter of 2019. In
the first quarter of 2019, prime CPR was 13.2%, and non-prime CPR
was 11.9%.
- In the first quarter of 2019, Ocwen originated forward and
reverse mortgage loans with unpaid principal balances of $211.2
million and $141.3 million, respectively.
- Our reverse mortgage portfolio ended the quarter with an
estimated $64 million in discounted future gains from forecasted
future draws on existing loans. Neither the anticipated future
gains nor the future funding liability are included in the
Company’s financial statements.
Webcast and Conference Call
Ocwen will host a webcast and conference call on
Tuesday, May 7, 2018, at 8:30 a.m., Eastern Time, to discuss its
financial results for the first quarter of 2019. The conference
call will be webcast live over the internet from the Company’s
website at www.Ocwen.com, click on the “Shareholders” section. A
replay of the conference call will be available via the website
approximately two hours after the conclusion of the call and will
remain available for approximately 30 days.
About Ocwen Financial
Corporation
Ocwen Financial Corporation is a financial
services holding company which, through its subsidiaries, services
and originates loans. We are headquartered in West Palm Beach,
Florida, with offices throughout the United States and in the U.S.
Virgin Islands and operations in India and the Philippines. We have
been serving our customers since 1988. We may post information that
is important to investors on our website (www.Ocwen.com).
Forward Looking Statements
This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These forward-looking statements may be
identified by a reference to a future period or by the use of
forward-looking terminology. Forward-looking statements are
typically identified by words such as “believe”, “expect”,
“foresee”, “forecast”, “anticipate”, “intend”, “estimate”, “goal”,
“strategy”, “plan” “target” and “project” or conditional verbs such
as “will”, “may”, “should”, “could” or “would” or the negative of
these terms, although not all forward-looking statements contain
these words.
Forward-looking statements by their nature
address matters that are, to different degrees, uncertain. Our
business has been undergoing substantial change which has magnified
such uncertainties. Readers should bear these factors in mind when
considering such statements and should not place undue reliance on
such statements.
Forward-looking statements involve a number of
assumptions, risks and uncertainties that could cause actual
results to differ materially. In the past, actual results have
differed from those suggested by forward looking statements and
this may happen again.
Important factors that could cause actual
results to differ materially from those suggested by the
forward-looking statements include, but are not limited to, the
following: uncertainty related to our ability to successfully
integrate PHH’s business, and to realize the strategic objectives,
synergies and other benefits of the acquisition at the time
anticipated or at all, including our ability to integrate, maintain
and enhance PHH’s servicing, subservicing and other business
relationships, including its relationship with New Residential
Investment Corp. (NRZ); our ability to transition loan servicing to
the Black Knight Financial Services, Inc. LoanSphere MSP® servicing
system within the time and cost parameters anticipated and without
significant disruptions to our customers and operations;
uncertainty related to our cost re-engineering efforts and the
other actions we believe are necessary for us to improve our
financial performance; our ability to invest in MSRs or other
assets at adequate risk-adjusted returns, including our ability to
negotiate and execute purchase documentation and satisfy closing
conditions so as to consummate the acquisition of MSRs that have
been awarded to us; uncertainty related to claims, litigation,
cease and desist orders and investigations brought by government
agencies and private parties regarding our servicing, foreclosure,
modification, origination and other practices, including
uncertainty related to past, present or future investigations,
litigation, cease and desist orders and settlements with state
regulators, the Consumer Financial Protection Bureau (CFPB), State
Attorneys General, the Securities and Exchange Commission (SEC),
the Department of Justice or the Department of Housing and Urban
Development (HUD) and actions brought under the False Claims Act by
private parties on behalf of the United States of America regarding
incentive and other payments made by governmental entities; adverse
effects on our business as a result of regulatory investigations,
litigation, cease and desist orders or settlements; reactions to
the announcement of such investigations, litigation, cease and
desist orders or settlements by key counterparties, including
lenders, the Federal National Mortgage Association (Fannie Mae),
the Federal Home Loan Mortgage Corporation (Freddie Mac) and the
Government National Mortgage Association (Ginnie Mae); our ability
to comply with the terms of our settlements with regulatory
agencies and the costs of doing so; increased regulatory scrutiny
and media attention; any adverse developments in existing legal
proceedings or the initiation of new legal proceedings; our ability
to effectively manage our regulatory and contractual compliance
obligations; our ability to interpret correctly and comply with
liquidity, net worth and other financial and other requirements of
regulators as well as those set forth in our debt and other
agreements; our ability to comply with our servicing agreements,
including our ability to comply with our agreements with, and the
requirements of, Fannie Mae, Freddie Mac and Ginnie Mae and
maintain our seller/servicer and other statuses with them; the
adequacy of our financial resources, including our sources of
liquidity and ability to sell, fund and recover advances, repay
borrowings, meet our MSR or other asset investment objectives and
comply with our debt agreements, including the financial and other
covenants contained in them; our ability to timely transfer
mortgage servicing rights under our agreements with NRZ; our
ability to maintain our long-term relationship with NRZ under these
arrangements; our ability to realize anticipated future gains from
future draws on existing loans in our reverse mortgage portfolio;
our servicer and credit ratings as well as other actions from
various rating agencies, including the impact of prior or future
downgrades of our servicer and credit ratings; as well as other
risks detailed in Ocwen’s reports and filings with the SEC,
including its annual report on Form 10-K for the year ended
December 31, 2018 and any current and quarterly reports since such
date. Anyone wishing to understand Ocwen’s business should review
its SEC filings. Ocwen’s forward-looking statements speak only as
of the date they are made and, we disclaim any obligation to update
or revise forward-looking statements whether as a result of new
information, future events or otherwise.
FOR FURTHER INFORMATION CONTACT:
Investors: |
Media: |
Hugo Arias |
Dico Akseraylian |
|
T: (856) 917-0108 |
T: (856) 917-0066 |
|
E:
hugo.arias@ocwen.com |
E:
mediarelations@ocwen.com |
|
Residential Servicing
Statistics(Dollars in thousands) |
|
At or for the Three Months Ended |
March 31,2019 |
|
December 31,2018 |
|
September 30,2018 |
|
June 30,2018 |
|
March 31,2018 |
Total unpaid principal
balance of loans and REO serviced |
$ |
251,080,740 |
|
|
$ |
256,000,490 |
|
|
$ |
160,996,474 |
|
|
$ |
167,127,014 |
|
|
$ |
173,388,876 |
|
Non-performing loans and
REO serviced as a % of total UPB (1) |
4.7 |
% |
|
4.9 |
% |
|
7.8 |
% |
|
8.3 |
% |
|
9.0 |
% |
Prepayment speed
(average CPR)(2) (3) |
12.5 |
% |
|
12.9 |
% |
|
13.7 |
% |
|
14.3 |
% |
|
12.9 |
% |
(1) Performing loans include those loans that are 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) Average CPR for the prior three months. CPR measures
prepayments as a percentage of the current outstanding loan balance
expressed as a compound annual rate.
(3) Average CPR for the three months ended March 31, 2019
includes 13.2% for prime loans and 11.9% for non-prime loans.
Segment
Results (Dollars in thousands) |
|
|
|
|
For the Three Months EndedMarch 31, |
|
2019 |
|
2018 |
Servicing |
|
|
|
Revenue |
$ |
259,274 |
|
|
$ |
226,096 |
|
Expenses |
265,898 |
|
|
171,095 |
|
Other
expense, net |
(50,879 |
) |
|
(34,517 |
) |
Income
(loss) before income taxes |
(57,503 |
) |
|
20,484 |
|
|
|
|
|
Lending |
|
|
|
Revenue |
41,091 |
|
|
29,195 |
|
Expenses |
21,331 |
|
|
20,296 |
|
Other
income (expense), net |
100 |
|
|
(129 |
) |
Income
before income taxes |
19,860 |
|
|
8,770 |
|
|
|
|
|
Corporate Items and Other |
|
|
|
Revenue |
3,523 |
|
|
4,966 |
|
Expenses |
(7,124 |
) |
|
15,110 |
|
Other
expense, net |
(14,088 |
) |
|
(14,145 |
) |
Loss
before income taxes |
(3,441 |
) |
|
(24,289 |
) |
|
|
|
|
Consolidated income (loss) before income taxes |
$ |
(41,084 |
) |
|
$ |
4,965 |
|
OCWEN
FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS (Dollars in thousands, except per share
data) |
|
For the Three Months Ended March
31, |
|
2019 |
|
2018 |
Revenue |
|
|
|
Servicing and
subservicing fees |
$ |
255,863 |
|
|
$ |
222,138 |
|
Gain on
loans held for sale, net |
17,595 |
|
|
19,800 |
|
Other
revenue, net |
30,430 |
|
|
18,319 |
|
Total
revenue |
303,888 |
|
|
260,257 |
|
|
|
|
|
Expenses |
|
|
|
MSR
valuation adjustments, net |
108,998 |
|
|
17,129 |
|
Compensation and benefits |
94,696 |
|
|
78,075 |
|
Servicing
and origination |
28,698 |
|
|
31,418 |
|
Technology and communications |
24,435 |
|
|
22,803 |
|
Occupancy
and equipment |
16,589 |
|
|
12,614 |
|
Professional services |
3,441 |
|
|
37,770 |
|
Other
expenses |
3,248 |
|
|
6,692 |
|
Total
expenses |
280,105 |
|
|
206,501 |
|
|
|
|
|
Other income
(expense) |
|
|
|
Interest
income |
4,558 |
|
|
2,700 |
|
Interest
expense |
(70,445 |
) |
|
(50,810 |
) |
Bargain
purchase gain |
(285 |
) |
|
— |
|
Other,
net |
1,305 |
|
|
(681 |
) |
Total
other expense, net |
(64,867 |
) |
|
(48,791 |
) |
|
|
|
|
Income (loss) before
income taxes |
(41,084 |
) |
|
4,965 |
|
Income tax expense |
3,410 |
|
|
2,348 |
|
Net income (loss) |
(44,494 |
) |
|
2,617 |
|
Net income attributable
to non-controlling interests |
— |
|
|
(69 |
) |
Net income (loss) attributable to Ocwen
stockholders |
$ |
(44,494 |
) |
|
$ |
2,548 |
|
|
|
|
|
Income (loss)
per share attributable to Ocwen stockholders |
|
|
|
Basic |
$ |
(0.33 |
) |
|
$ |
0.02 |
|
Diluted |
$ |
(0.33 |
) |
|
$ |
0.02 |
|
|
|
|
|
Weighted
average common shares outstanding |
|
|
|
Basic |
133,918,986 |
|
|
133,121,465 |
|
Diluted |
133,918,986 |
|
|
134,606,929 |
|
OCWEN
FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS (Dollars in thousands, except per share
data) |
|
March 31, 2019 |
|
December 31, 2018 |
Assets |
|
|
|
Cash |
$ |
263,188 |
|
|
$ |
329,132 |
|
Restricted cash (amounts related to VIEs of $16,499 and
$20,968) |
63,379 |
|
|
67,878 |
|
Mortgage
servicing rights, at fair value |
1,400,191 |
|
|
1,457,149 |
|
Advances,
net |
225,360 |
|
|
249,382 |
|
Match
funded advances (related to variable interest entities (VIEs)) |
868,720 |
|
|
937,294 |
|
Loans
held for sale ($153,140 and $176,525 carried at fair value) |
222,687 |
|
|
242,622 |
|
Loans
held for investment, at fair value (amounts related to VIEs of
$26,237 and $26,520) |
5,753,154 |
|
|
5,498,719 |
|
Receivables, net |
197,043 |
|
|
198,262 |
|
Premises
and equipment, net |
69,316 |
|
|
33,417 |
|
Other
assets ($7,639 and $7,568 carried at fair value)(amounts related to
VIEs of $2,214 and $2,874) |
474,172 |
|
|
379,567 |
|
Assets
related to discontinued operations |
— |
|
|
794 |
|
Total
assets |
$ |
9,537,210 |
|
|
$ |
9,394,216 |
|
|
|
|
|
Liabilities and
Equity |
|
|
|
Liabilities |
|
|
|
HMBS-related borrowings, at fair value |
$ |
5,614,688 |
|
|
$ |
5,380,448 |
|
Match
funded liabilities (related to VIEs) |
649,384 |
|
|
778,284 |
|
Other
financing liabilities ($975,778 and $1,057,671 carried at fair
value) (amounts related to VIEs of $24,562 and $24,815) |
1,043,698 |
|
|
1,127,613 |
|
Other
secured borrowings, net |
436,982 |
|
|
382,538 |
|
Senior
notes, net |
448,143 |
|
|
448,727 |
|
Other
liabilities ($4,209 and $4,986 carried at fair value) |
832,721 |
|
|
703,636 |
|
Liabilities related to discontinued operations |
— |
|
|
18,265 |
|
Total
liabilities |
9,025,616 |
|
|
8,839,511 |
|
|
|
|
|
Stockholders’ Equity |
|
|
|
Ocwen
Financial Corporation (Ocwen) stockholders’ equity |
|
|
|
Common
stock, $.01 par value; 200,000,000 shares authorized; 133,946,055
and 133,912,425 shares issued and outstanding at March 31, 2019 and
December 31, 2018 respectively |
1,339 |
|
|
1,339 |
|
Additional paid-in capital |
555,046 |
|
|
554,056 |
|
Retained
earnings (accumulated deficit) |
(40,911 |
) |
|
3,567 |
|
Accumulated other comprehensive loss, net of income taxes |
(3,880 |
) |
|
(4,257 |
) |
Total
stockholders’ equity |
511,594 |
|
|
554,705 |
|
Total
liabilities and stockholders’ equity |
$ |
9,537,210 |
|
|
$ |
9,394,216 |
|
OCWEN
FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS (Dollars in thousands) |
|
For the Three Months EndedMarch
31, |
|
2019 |
|
2018 |
Cash flows from
operating activities |
|
|
|
Net income (loss) |
$ |
(44,494 |
) |
|
$ |
2,617 |
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
MSR
valuation adjustments, net |
108,998 |
|
|
17,129 |
|
Gain on
sale of mortgage servicing rights, net |
(369 |
) |
|
(958 |
) |
Provision
for bad debts |
9,170 |
|
|
15,336 |
|
Depreciation |
8,551 |
|
|
6,527 |
|
Equity-based compensation expense |
857 |
|
|
575 |
|
Gain on
valuation of financing liability |
(26,237 |
) |
|
(16,712 |
) |
Net gain
on valuation of mortgage loans held for investment and HMBS-related
borrowings |
(23,487 |
) |
|
(8,975 |
) |
Gain on
loans held for sale, net |
(11,112 |
) |
|
(8,832 |
) |
Origination and purchase of loans held for sale |
(304,182 |
) |
|
(358,078 |
) |
Proceeds
from sale and collections of loans held for sale |
305,322 |
|
|
383,734 |
|
Changes
in assets and liabilities: |
|
|
|
Decrease
in advances and match funded assets |
91,114 |
|
|
71,096 |
|
Decrease
in receivables and other assets, net |
23,627 |
|
|
57,949 |
|
Decrease
in other liabilities |
(36,755 |
) |
|
(68,128 |
) |
Other,
net |
(339 |
) |
|
6,131 |
|
Net cash
provided by operating activities |
100,664 |
|
|
99,411 |
|
|
|
|
|
Cash flows from
investing activities |
|
|
|
Origination of loans held for investment |
(209,264 |
) |
|
(251,086 |
) |
Principal
payments received on loans held for investment |
104,630 |
|
|
82,719 |
|
Purchase
of mortgage servicing rights |
(48,641 |
) |
|
— |
|
Proceeds
from sale of mortgage servicing rights |
868 |
|
|
123 |
|
Proceeds
from sale of advances |
1,070 |
|
|
4,286 |
|
Issuance
of automotive dealer financing notes |
— |
|
|
(19,642 |
) |
Collections of automotive dealer financing notes |
— |
|
|
49,756 |
|
Additions
to premises and equipment |
(531 |
) |
|
(2,983 |
) |
Other,
net |
525 |
|
|
916 |
|
Net cash
used in investing activities |
(151,343 |
) |
|
(135,911 |
) |
|
|
|
|
OCWEN
FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS — (continued) (Dollars in thousands) |
|
For the Three Months EndedMarch
31, |
|
2019 |
|
2018 |
Cash flows from
financing activities |
|
|
|
Repayment
of match funded liabilities, net |
(128,900 |
) |
|
(198,022 |
) |
Proceeds
from mortgage loan warehouse facilities and other secured
borrowings |
616,891 |
|
|
801,155 |
|
Repayment
of mortgage loan warehouse facilities and other secured
borrowings |
(727,711 |
) |
|
(964,104 |
) |
Proceeds
from issuance of additional senior secured term loan (SSTL) |
119,100 |
|
|
— |
|
Repayments of SSTL |
(6,358 |
) |
|
(4,188 |
) |
Payment
of debt issuance costs related to SSTL |
(1,284 |
) |
|
— |
|
Proceeds
from sale of mortgage servicing rights accounted for as a
financing |
577 |
|
|
279,586 |
|
Proceeds
from sale of reverse mortgages (HECM loans) accounted for as a
financing (HMBS-related borrowings) |
210,563 |
|
|
222,825 |
|
Repayment
of HMBS-related borrowings |
(102,389 |
) |
|
(80,811 |
) |
Other,
net |
(253 |
) |
|
(74 |
) |
Net cash
(used in) provided by financing activities |
(19,764 |
) |
|
56,367 |
|
|
|
|
|
Net increase (decrease)
in cash and restricted cash |
(70,443 |
) |
|
19,867 |
|
Cash and restricted
cash at beginning of year |
397,010 |
|
|
302,560 |
|
Cash and restricted cash
at end of period (1) |
$ |
326,567 |
|
|
$ |
322,427 |
|
|
|
|
|
(1) Cash and restricted cash as of March 31, 2019 and
March 31, 2018 includes $263.2 million and $285.7 million of cash
and $63.4 million and $36.8 million of restricted cash
respectively. |
Ocwen Financial (NYSE:OCN)
Historical Stock Chart
From Mar 2024 to Apr 2024
Ocwen Financial (NYSE:OCN)
Historical Stock Chart
From Apr 2023 to Apr 2024