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CST: 19/05/2019 13:32:18   

Ocwen Financial Announces Operating Results for First Quarter 2019

12 Days ago

  • Reported a Net Loss of $44 million for the first quarter of 2019

  • Closed or have been awarded MSRs to date with current UPB of $31 billion

  • On track to complete servicing system conversion to Black Knight MSP® and the merger of our principal licensed legal entities in the second quarter of 2019

  • Continued to execute on our cost re-engineering plan and realized annualized run rate cost savings consistent with our expectations through the first quarter of 2019

  • Upsized our Senior Secured Term Loan by $120 million and expect to close $300 million of MSR financing on a fully committed basis in the second quarter of 2019

  • Ended the quarter with $512 million of total stockholders’ equity

WEST PALM BEACH, Fla., May 07, 2019 (GLOBE NEWSWIRE) -- 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 Ended
March 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 Ended
March 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 Ended
March 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.

 

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