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CST: 19/05/2019 14:12:21   

Ocwen Financial Announces Operating Results for Fourth Quarter and Full Year 2018

81 Days ago

  • Reported a Net Loss of $(2.3) million for the fourth quarter of 2018 and a Net Loss of $(70.8) million for the full year 2018
  • Completed the acquisition of PHH Corporation, ended the year with a total servicing portfolio of 1.6 million loans representing unpaid principal balance (“UPB”) of $256 billion
  • Completed our cost re-engineering plan and have commenced execution
  • Completed the first two major servicing loan transfers to Black Knight’s MSP®  system, which involved approximately 240,000 loans
  • Successfully bid on MSR acquisitions of $5.4 billion in UPB in the fourth quarter of 2018 and first quarter to date
  • Ended the year with $555 million of total equity and $329 million of cash 

WEST PALM BEACH, Fla., Feb. 27, 2019 (GLOBE NEWSWIRE) -- Ocwen Financial Corporation, (NYSE:OCN) (“Ocwen” or the “Company”), a leading financial services holding company, today reported a net loss of $(70.8) million, or $(0.53) per share, for the full year 2018 compared to a net loss of $(128.0) million, or $(1.01) per share, for the full year of 2017, a $57.2 million improvement.

For the three months ended December 31, 2018, Ocwen reported a net loss of $(2.3) million, or $(0.02) per share.

Glen A. Messina, President and CEO of Ocwen, said, “We made solid progress in the quarter as we work to realize the scale and cost savings benefits of combining Ocwen and PHH and position the Company for future profitability. We are focused on executing our key business initiatives in order to address our most critical near-term business challenges, improve our financial performance, and establish a stronger foundation for the future. We continue with our disciplined and prudent approach to our integration efforts and are encouraged by the overall progress we are making.”

Fourth Quarter and Full Year 2018 Results

Pre-tax loss from continuing operations for the fourth quarter of 2018 was $(7.8) million and included a PHH post-acquisition pre-tax loss of $(31.5) million. Pre-tax results for the quarter were impacted by a number of significant items, including but not limited to: $64.0 million in bargain purchase gain, $(16.4) million in PHH transaction, integration and restructuring costs and $(10.1) million in expense related to significant litigation and regulatory settlements.

The Servicing segment recorded $(40.6) million of pre-tax loss for the fourth quarter of 2018 and included a PHH post-acquisition pre-tax loss of $(21.2) million. The business was negatively impacted by lower revenue from a smaller servicing portfolio due to portfolio runoff and de-boarding of previously announced subservicing clients as a result of terminations and transfers. For the full year 2018, the Servicing business recorded $(31.9) million of pre-tax loss.

The Lending segment recorded $3.0 million of pre-tax income for the fourth quarter of 2018. Our forward lending business incurred a $(5.3) million pre-tax loss that included a PHH post-acquisition pre-tax loss of $(2.4) million. Our reverse mortgage lending business recorded pre-tax income of $8.3 million. The Lending businesses were $5.1 million favorable to prior quarter largely driven by favorable valuation changes on our reverse mortgage lending portfolio as a result of falling interest rates. For the full year 2018, the Lending business recorded pre-tax income of $11.2 million, an increase of $15.6 million versus 2017. The forward lending business had a pre-tax loss of $(9.2) million, which was more than offset by $20.3 million of pre-tax income in our reverse mortgage lending business.

Additional Business Highlights

  • In 2018, Ocwen completed 39,545 loan modifications to help struggling families stay in their homes, 17% of which included debt forgiveness totaling over $200 million.
  • Delinquencies decreased from 7.8% at September 30, 2018 to 4.9% at December 31, 2018, primarily driven by acquisition of lower delinquency PHH portfolio and ongoing consumer assistance efforts.
  • The constant pre-payment rate (“CPR”) decreased from 13.7% in the third quarter of 2018 to 12.9% in the fourth quarter of 2018. In the fourth quarter of 2018, the prime CPR was 14.8%, and the non-prime CPR was 11.8%.
  • For the full year 2018, Ocwen originated forward and reverse mortgage loans with UPB of $0.9 billion and $0.6 billion, respectively. The Company intends to re-enter the correspondent forward lending channel and successfully launched a proprietary jumbo reverse mortgage pilot program.
  • Our reverse mortgage portfolio ended the year with an estimated $68.1 million in discounted future gains from future draws on existing loans. Neither the anticipated future gains nor future funding liability are included in the Company’s financial statements.

Webcast and Conference Call

Ocwen will host a webcast and conference call on Wednesday, February 27, 2019, at 8:30 a.m., Eastern Time, to discuss its financial results for the fourth quarter and full year 2018. The conference call will be webcast live over the internet from the Company’s website at www.Ocwen.com. To access the call, click on the “Shareholder Relations” 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, originates and services loans. We are headquartered in West Palm Beach, Florida, with offices throughout the United States and in the U.S. Virgin Islands as well as 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 use of forward-looking terminology.

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; 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 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 once filed. 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:
Stephen Swett   John Lovallo
T: (203) 614-0141   T: (917) 612-8419
E: shareholderrelations@ocwen.com
  E: jlovallo@levick.com


Residential Servicing Statistics
(Dollars in thousands)
 
  At or for the Three Months Ended
December 31,
2018
September 30,
2018
June 30, 2018 March 31,
2018
December 31,
2017
Total unpaid principal balance of loans
  and REO serviced
$ 256,000,490   $ 160,996,474   $ 167,127,014   $ 173,388,876   $ 179,352,554  
           
Non-performing loans and REO serviced
  as a % of total UPB (1)
4.9 % 7.8 % 8.3 % 9.0 % 9.3 %


Prepayment speed (average CPR) (2) (3)
12.9 % 13.7 % 14.3 % 12.9 % 14.4 %
 
(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) Constant Prepayment Rate 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 December 31, 2018 includes 14.8% for prime loans and 11.8% for non-prime loans.


Segment Results
(Dollars in thousands)
 
  For the Three Months Ended
December 31,
  For the Twelve Months Ended
December 31,
  2018   2017   2018   2017
Servicing              
Revenue $ 276,991     $ 238,943     $ 951,224     $ 1,041,290  
Expenses 249,406     78,978     772,467     716,384  
Other expense, net (68,201 )   (131,315 )   (210,705 )   (278,226 )
Income (loss) from continuing operations
before income taxes
(40,616 )   28,650     (31,948 )   46,680  
               
Lending              
Revenue 28,556     32,018     93,672     127,475  
Expenses 25,870     27,430     82,906     128,058  
Other income (expense), net 362     (1,947 )   388     (3,848 )
Income (loss) from continuing operations
before income taxes
3,048     2,641     11,154     (4,431 )
               
Corporate Items and Other              
Revenue 5,382     5,809     18,149     25,811  
Expenses 27,543     61,895     77,123     154,203  
Other income (expense), net 51,966     (20,519 )   8,292     (57,830 )
Income (loss) from continuing operations
before income taxes
29,805     (76,605 )   (50,682 )   (186,222 )
               
Consolidated loss before income taxes $ (7,763 )   $ (45,314 )   $ (71,476 )   $ (143,973 )


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)

  For the Three Months Ended
December 31,
  For the Twelve Months Ended
December 31,
  2018   2017   2018   2017
Revenue              
Servicing and subservicing fees $ 276,241     $ 227,853     $ 934,336     $ 989,376  
Gain on loans held for sale, net 16,608     26,426     77,743     103,402  
Other revenue, net 18,080     22,491     50,966     101,798  
Total revenue 310,929     276,770     1,063,045     1,194,576  
               
Expenses              
Compensation and benefits 86,816     86,244     298,036     358,994  
Professional services 54,733     83,800     165,554     229,451  
MSR valuation adjustments, net 61,762     (62,484 )   153,457     52,962  
Servicing and origination 39,845     13,435     131,297     141,496  
Technology and communications 30,935     20,960     98,241     100,490  
Occupancy and equipment 22,262     16,450     59,631     66,019  
Other expenses 6,466     9,898     26,280     49,233  
Total expenses 302,819     168,303     932,496     998,645  
               
Other income (expense)              
Interest income 4,008     3,864     14,026     15,965  
Interest expense (85,440 )   (150,767 )   (275,041 )   (363,238 )
Bargain purchase gain 64,036         64,036      
Gain on sale of mortgage servicing rights, net 1,022     2,674     1,325     10,537  
Other, net 501     (9,552 )   (6,371 )   (3,168 )
Total other expense, net (15,873 )   (153,781 )   (202,025 )   (339,904 )
               
Loss from continuing operations before income taxes (7,763 )   (45,314 )   (71,476 )   (143,973 )
Income tax expense (benefit) (4,012 )   (51 )   529     (15,516 )
Loss from continuing operations, net of tax (3,751 )   (45,263 )   (72,005 )   (128,457 )
Income from discontinued operations, net of tax 1,409         1,409      
Net loss (2,342 )   (45,263 )   (70,596 )   (128,457 )
Net (income) loss attributable to non-controlling interests     780     (176 )   491  
Net loss attributable to Ocwen stockholders $ (2,342 )   $ (44,483 )   $ (70,772 )   $ (127,966 )
               
Earnings (loss) per share attributable to Ocwen
  common stockholders – Basic and Diluted
             
Continuing operations $ (0.03 )   $ (0.34 )   $ (0.54 )   $ (1.01 )
Discontinued operations $ 0.01     $ -     $ 0.01     $ -  
               
Weighted average common shares outstanding              
Basic 133,912,425     130,893,025     133,703,359     127,082,058  
Diluted 133,912,425     130,893,025     133,703,359     127,082,058  


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
 
  December 31,
2018
  December 31,
2017
Assets      
Cash $ 329,132     $ 259,655  
Restricted cash (amounts related to VIEs of $20,968 and $21,922) 67,878     42,905  
Mortgage servicing rights ($1,457,149 and $671,962 carried at fair value) 1,457,149     1,008,844  
Advances, net 249,382     211,793  
Match funded assets (related to variable interest entities (VIEs)) 937,294     1,177,357  
Loans held for sale ($176,525 and $214,262 carried at fair value) 242,622     238,358  
Loans held for investment, at fair value (amounts related to VIEs of $26,520 and $0) 5,498,719     4,715,831  
Receivables, net 198,262     199,529  
Premises and equipment, net 33,417     37,006  
Other assets ($7,568 and $8,900 carried at fair value) (amounts related to VIEs of $2,874
  and $5,437)
379,567     511,886  
Assets related to discontinued operations 794      
Total assets $ 9,394,216     $ 8,403,164  
       
Liabilities and Equity      
Liabilities      
HMBS-related borrowings, at fair value $ 5,380,448     $ 4,601,556  
Other financing liabilities ($1,057,671 and $508,291 carried at fair value) (amounts
  related to VIEs of $24,815 and $0)
1,127,613     593,518  
Match funded liabilities (related to VIEs) 778,284     998,618  
Other secured borrowings, net 382,538     545,850  
Senior notes, net 448,727     347,338  
Other liabilities ($4,986 and $635 carried at fair value) 703,636     769,410  
Liabilities related to discontinued operations 18,265      
Total liabilities 8,839,511     7,856,290  
       
Equity      
Ocwen Financial Corporation (Ocwen) stockholders’ equity      
Common stock, $.01 par value; 200,000,000 shares authorized; 133,912,425 and
  131,484,058 shares issued and outstanding at December 31, 2018 and December
  31, 2017, respectively
1,339     1,315  
Additional paid-in capital 554,056     547,057  
Retained earnings (accumulated deficit) 3,567     (2,083 )
Accumulated other comprehensive loss, net of income taxes (4,257 )   (1,249 )
Total Ocwen stockholders’ equity 554,705     545,040  
Non-controlling interest in subsidiaries     1,834  
Total equity 554,705     546,874  
Total liabilities and equity $ 9,394,216     $ 8,403,164  


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 
  For the Years Ended
December 31,
  2018   2017
Cash flows from operating activities      
Net loss $ (70,596 )   $ (128,457 )
Adjustments to reconcile net loss to net cash provided by operating activities:      
MSR valuation adjustments, net 153,457     52,962  
Gain on sale of mortgage servicing rights, net (1,325 )   (10,537 )
Provision for bad debts 49,180     76,828  
Depreciation 27,202     26,886  
Loss on write-off of fixed assets, net     8,502  
Amortization of debt issuance costs 2,921     2,738  
Reversal of valuation allowance on deferred tax assets (23,347 )   (29,979 )
Decrease in deferred tax assets other than provision for valuation allowance 20,058     30,710  
Equity-based compensation expense 2,366     5,624  
(Gain) loss on valuation of financing liability (19,269 )   41,282  
(Gain) loss on trading securities (527 )   6,756  
Net gain on valuation of mortgage loans held for investment and HMBS-related
  borrowings
(18,698 )   (23,733 )
Bargain purchase gain (64,036 )    
Gain on loans held for sale, net (32,722 )   (53,209 )
Origination and purchase of loans held for sale (1,715,190 )   (3,695,163 )
Proceeds from sale and collections of loans held for sale 1,625,116     3,662,065  
Changes in assets and liabilities:      
Decrease in advances and match funded advances 258,899     330,052  
Decrease in receivables and other assets, net 144,310     199,209  
Decrease in other liabilities (69,207 )   (100,650 )
Other, net 3,986     7,135  
Net cash provided by operating activities 272,578     409,021  
       
Cash flows from investing activities      
Origination of loans held for investment (920,476 )   (1,277,615 )
Principal payments received on loans held for investment 400,521     444,388  
Net cash acquired in the acquisition of PHH 64,692      
Restricted cash acquired in the acquisition of PHH 38,813      
Purchase of mortgage servicing rights (5,433 )   (1,658 )
Proceeds from sale of mortgage servicing rights 7,276     4,234  
Proceeds from sale of advances and match funded advances 33,792     9,446  
Issuance of automotive dealer financing notes (19,642 )   (174,363 )
Collections of automotive dealer financing notes 52,598     162,965  
Additions to premises and equipment (9,016 )   (9,053 )
Proceeds from sale of real estate 9,546     3,147  
Other, net 2,464     (707 )
Net cash used in investing activities (344,865 )   (839,216 )
       
 
 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (continued)
(Dollars in thousands)
 
  For the Years Ended
December 31,
  2018   2017
Cash flows from financing activities      
Repayment of match funded liabilities, net (220,334 )   (282,379 )
Proceeds from mortgage loan warehouse facilities and other secured borrowings 2,991,261     7,215,264  
Repayments of mortgage loan warehouse facilities and other secured borrowings (3,417,398 )   (7,431,763 )
Repurchase of senior notes, net (18,482 )    
Payment of debt issuance costs     (841 )
Proceeds from sale of mortgage servicing rights accounted for as a financing 279,586     54,601  
Proceeds from sale of reverse mortgages (HECM loans) accounted for as a financing
  (HMBS-related borrowings)
948,917     1,281,543  
Repayment of HMBS-related borrowings (391,985 )   (418,503 )
Issuance of common stock     13,913  
Capital distribution to non-controlling interest
(822 )    
Purchase of non-controlling interest (1,188 )    
Other (2,818 )   (1,478 )
Net cash provided by financing activities 166,737     430,357  
       
Net increase in cash and restricted cash 94,450     162  
Cash and restricted cash at beginning of year 302,560     302,398  
Cash and restricted cash at end of year $ 397,010     $ 302,560  
 
(1) Cash and restricted cash as of December 31, 2018 and December 31, 2017 includes $329.1 million and $259.7 million of cash and $67.9 million and $42.9 million of restricted cash respectively.


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