Ocwen Financial Corporation (NYSE:OCN) (“Ocwen” or the “Company”),
a leading financial services holding company, today announced
operating results for the third quarter of 2017. Ocwen incurred a
GAAP net loss of $(6.1) million, or $(0.05) per share, for the
three months ended September 30, 2017 compared to net income of
$9.5 million for the three months ended September 30, 2016. Ocwen
generated revenue of $284.6 million, down 20.8% compared to the
third quarter of the prior year, primarily driven by the impact of
portfolio run-off and lower HAMP fees due to the expiration of the
program. Cash Flows from Operating Activities were $120.5 million
for the third quarter and $401.2 million for the nine months ended
September 30, 2017, compared to $178.3 million for the third
quarter of last year and $350.4 million for the first nine months
of last year.
“We continued to make progress during the third
quarter on a number of fronts. We transferred the first tranche of
mortgage servicing rights under our July agreements with New
Residential Investment Corp., and we made progress settling some of
our regulatory matters,” commented Ron Faris, President and CEO of
Ocwen. Mr. Faris continued, “Our servicing business continues to
perform well despite portfolio runoff and achieved its fifth
consecutive quarterly pre-tax profit. We continue to focus on
helping homeowners in need, including those recently impacted by
the hurricanes through a variety of targeted programs. I would also
note that our own offices, especially those in the United States
Virgin Islands, sustained substantial damage, but we have been able
to maintain operations with only minimal interruption.”
Third Quarter 2017 Results
Pre-tax loss for the third quarter of 2017 was
$(26.6) million, a $(28.9) million decline from the third quarter
of 2016. Net loss for the third quarter results for 2017 included a
one-time tax benefit of $23.2 million related to the release of
certain previously established reserves relating to uncertain tax
positions.
The Servicing segment recorded $5.7 million of
pre-tax income, a $(29.8) million decline versus the third quarter
of 2016, driven by $(25.8) million lower HAMP fees. Revenue loss
from runoff was offset by operational and financing cost
improvements across multiple areas. On September 1, 2017, we
transferred legal title for MSRs with $15.9 billion in UPB to NRZ
and received a lump sum payment of $54.6 million. Conceptually,
these upfront payments are a proxy for the net present value of the
difference between higher future fees for servicing the mortgage
loans under the relevant 2012 and 2013 agreements and the lower
fees for servicing the mortgage loans under the new subservicing
arrangements.
The Lending segment recorded $(7.6) million of
pre-tax loss for the third quarter of 2017, an $(8.9) million
decline versus the third quarter of 2016. Pre-tax results for the
quarter included a $(6.8) million write-off of the carrying value
of internally-developed software used in our forward lending
wholesale channel. Total mortgage lending volume declined by 46%
over the third quarter of 2016, driven by our decision to exit the
forward lending correspondent channel in the second quarter of 2017
and a 55% reduction in the forward lending wholesale channel over
the third quarter of 2016. The correspondent and wholesale volume
declines were partially offset by a 102% increase in funded volumes
at our higher margin forward lending retail channel and 7% overall
growth in reverse lending versus the third quarter of 2016.
Additional Third Quarter 2017 Business
Highlights
- Completed 6,544 modifications in the quarter, 9% of which were
HAMP modifications. Note that the HAMP program ended on December
31, 2016, but modifications in process at that time continue to
close.
- Delinquencies decreased from 11.2% at December 31, 2016 to 9.4%
at September 30, 2017, primarily driven by loss mitigation
efforts.
- The constant pre-payment rate (CPR) decreased from 15.0% in the
second quarter of 2017 to 14.7% in the third quarter of 2017.
In the third quarter of 2017, prime CPR was 18.0%, and
non-prime CPR was 12.7%.
- In the third quarter of 2017, Ocwen originated forward and
reverse mortgage loans with unpaid principal balance of $541.2
million and $227.8 million, respectively.
- Our reverse mortgage portfolio ended the quarter with an
estimated $98.7 million in undiscounted 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
Thursday, November 2, 2017, at 8:30 a.m., Eastern Time, to discuss
its financial results for the third quarter of 2017. 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,
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 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 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 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,
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 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; our ability to contain and reduce our operating costs;
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 July 2017
agreements with NRZ; our ability to maintain our long-term
relationship with NRZ under these new 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; volatility in our stock price; the
characteristics of our servicing portfolio, including prepayment
speeds along with delinquency and advance rates; our ability to
successfully modify delinquent loans, manage foreclosures and sell
foreclosed properties; uncertainty related to legislation,
regulations, regulatory agency actions, government programs and
policies, industry initiatives and evolving best servicing
practices; as well as other risks detailed in Ocwen’s reports and
filings with the SEC, including its amended annual report on Form
10-K/A for the year ended December 31, 2016 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: |
Stephen Swett |
John Lovallo |
Dan Rene |
T: (203) 614-0141 |
T: (917) 612-8419 |
T: (202) 973 -1325 |
E:
shareholderrelations@ocwen.com |
E:
jlovallo@levick.com |
E:
drene@levick.com |
|
Residential Servicing Statistics
(Unaudited)(Dollars in thousands) |
|
At or for the Three Months Ended |
September 30,2017 |
June 30,2017 |
March 31,2017 |
December 31,2016 |
September 30,2016 |
Total unpaid principal
balance of loans and REO serviced |
$ |
187,468,318 |
|
$ |
194,798,424 |
|
$ |
202,369,014 |
|
$ |
209,092,130 |
|
$ |
216,892,002 |
|
|
|
|
|
|
|
Non-performing loans
and REO serviced as a % of total UPB (1) |
9.4 |
% |
9.6 |
% |
10.7 |
% |
11.2 |
% |
11.4 |
% |
|
|
|
|
|
|
Prepayment speed
(average CPR)(2) (3) |
14.7 |
% |
15.0 |
% |
14.0 |
% |
15.1 |
% |
15.0 |
% |
(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 September 30, 2017 includes 18.0% for
prime loans and 12.7% for non-prime loans. |
|
|
|
|
|
|
|
|
Segment Results
(Unaudited) (Dollars in thousands) |
|
|
|
|
|
|
|
|
For the Three Months EndedSeptember
30, |
|
For the Nine Months EndedSeptember
30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Servicing |
|
|
|
|
|
|
|
Revenue |
$ |
246,545 |
|
|
$ |
319,080 |
|
|
$ |
802,347 |
|
|
$ |
951,727 |
|
Expenses |
218,565 |
|
|
202,156 |
|
|
637,406 |
|
|
734,326 |
|
Other
expense, net |
(22,299 |
) |
|
(81,475 |
) |
|
(146,911 |
) |
|
(259,815 |
) |
Income
(loss) before income taxes |
5,681 |
|
|
35,449 |
|
|
18,030 |
|
|
(42,414 |
) |
|
|
|
|
|
|
|
|
Lending |
|
|
|
|
|
|
|
Revenue |
31,935 |
|
|
30,696 |
|
|
95,457 |
|
|
89,255 |
|
Expenses |
38,412 |
|
|
30,013 |
|
|
100,628 |
|
|
85,471 |
|
Other
income (expense), net |
(1,092 |
) |
|
628 |
|
|
(1,901 |
) |
|
1,958 |
|
Income
(loss) before income taxes |
(7,569 |
) |
|
1,311 |
|
|
(7,072 |
) |
|
5,742 |
|
|
|
|
|
|
|
|
|
Corporate Items and Other |
|
|
|
|
|
|
|
Revenue |
6,162 |
|
|
9,672 |
|
|
20,002 |
|
|
22,277 |
|
Expenses |
16,502 |
|
|
39,509 |
|
|
92,308 |
|
|
165,556 |
|
Other
expense, net |
(14,325 |
) |
|
(4,559 |
) |
|
(37,311 |
) |
|
(16,208 |
) |
Loss
before income taxes |
(24,665 |
) |
|
(34,396 |
) |
|
(109,617 |
) |
|
(159,487 |
) |
|
|
|
|
|
|
|
|
Consolidated income (loss) before income taxes |
$ |
(26,553 |
) |
|
$ |
2,364 |
|
|
$ |
(98,659 |
) |
|
$ |
(196,159 |
) |
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in
thousands, except per share data) |
|
For the Three Months EndedSeptember
30, |
|
For the Nine Months EndedSeptember
30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenue |
|
|
|
|
|
|
|
Servicing
and subservicing fees |
$ |
233,220 |
|
|
$ |
302,235 |
|
|
$ |
761,523 |
|
|
$ |
906,993 |
|
Gain on
loans held for sale, net |
25,777 |
|
|
25,645 |
|
|
76,976 |
|
|
69,074 |
|
Other |
25,645 |
|
|
31,568 |
|
|
79,307 |
|
|
87,192 |
|
Total
revenue |
284,642 |
|
|
359,448 |
|
|
917,806 |
|
|
1,063,259 |
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Compensation and benefits |
90,538 |
|
|
92,942 |
|
|
272,750 |
|
|
287,613 |
|
Servicing
and origination |
72,524 |
|
|
63,551 |
|
|
204,947 |
|
|
249,230 |
|
Professional services |
38,417 |
|
|
65,489 |
|
|
145,651 |
|
|
257,795 |
|
Technology and communications |
27,929 |
|
|
25,941 |
|
|
79,530 |
|
|
85,519 |
|
Occupancy
and equipment |
15,340 |
|
|
16,760 |
|
|
49,569 |
|
|
62,213 |
|
Amortization of mortgage servicing rights |
13,148 |
|
|
(2,558 |
) |
|
38,560 |
|
|
18,595 |
|
Other |
15,583 |
|
|
9,553 |
|
|
39,335 |
|
|
24,388 |
|
Total
expenses |
273,479 |
|
|
271,678 |
|
|
830,342 |
|
|
985,353 |
|
|
|
|
|
|
|
|
|
Other income
(expense) |
|
|
|
|
|
|
|
Interest
income |
4,099 |
|
|
5,158 |
|
|
12,101 |
|
|
14,488 |
|
Interest
expense |
(47,281 |
) |
|
(110,961 |
) |
|
(212,471 |
) |
|
(308,083 |
) |
Gain on
sale of mortgage servicing rights, net |
6,543 |
|
|
5,661 |
|
|
7,863 |
|
|
7,689 |
|
Other,
net |
(1,077 |
) |
|
14,736 |
|
|
6,384 |
|
|
11,841 |
|
Total
other expense, net |
(37,716 |
) |
|
(85,406 |
) |
|
(186,123 |
) |
|
(274,065 |
) |
|
|
|
|
|
|
|
|
Income (loss) before
income taxes |
(26,553 |
) |
|
2,364 |
|
|
(98,659 |
) |
|
(196,159 |
) |
Income tax benefit |
(20,418 |
) |
|
(7,110 |
) |
|
(15,465 |
) |
|
(7,214 |
) |
Net income
(loss) |
(6,135 |
) |
|
9,474 |
|
|
(83,194 |
) |
|
(188,945 |
) |
Net income attributable
to non-controlling interests |
(117 |
) |
|
(83 |
) |
|
(289 |
) |
|
(373 |
) |
Net income
(loss) attributable to Ocwen stockholders |
$ |
(6,252 |
) |
|
$ |
9,391 |
|
|
$ |
(83,483 |
) |
|
$ |
(189,318 |
) |
|
|
|
|
|
|
|
|
Income (loss)
per share attributable to Ocwen stockholders |
|
|
|
|
|
|
|
Basic |
$ |
(0.05 |
) |
|
$ |
0.08 |
|
|
$ |
(0.66 |
) |
|
$ |
(1.53 |
) |
Diluted |
$ |
(0.05 |
) |
|
$ |
0.08 |
|
|
$ |
(0.66 |
) |
|
$ |
(1.53 |
) |
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding |
|
|
|
|
|
|
|
Basic |
128,744,152 |
|
|
123,986,987 |
|
|
125,797,777 |
|
|
123,991,343 |
|
Diluted |
128,744,152 |
|
|
124,134,507 |
|
|
125,797,777 |
|
|
123,991,343 |
|
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS (Dollars in thousands,
except share data) |
|
September 30, 2017 |
|
December 31, 2016 |
Assets |
|
|
|
Cash |
$ |
299,888 |
|
|
$ |
256,549 |
|
Mortgage
servicing rights ($598,147 and $679,256 carried at fair value) |
944,308 |
|
|
1,042,978 |
|
Advances,
net |
197,953 |
|
|
257,882 |
|
Match
funded assets (related to variable interest entities (VIEs)) |
1,243,899 |
|
|
1,451,964 |
|
Loans
held for sale ($200,438 and $284,632 carried at fair value) |
223,662 |
|
|
314,006 |
|
Loans
held for investment, at fair value |
4,459,760 |
|
|
3,565,716 |
|
Receivables, net |
231,514 |
|
|
265,720 |
|
Premises
and equipment, net |
42,720 |
|
|
62,744 |
|
Other
assets ($19,067 and $20,007 carried at fair value)(amounts related
to VIEs of $26,647 and $43,331) |
453,901 |
|
|
438,104 |
|
Total
assets |
$ |
8,097,605 |
|
|
$ |
7,655,663 |
|
|
|
|
|
Liabilities and
Equity |
|
|
|
Liabilities |
|
|
|
HMBS-related borrowings, at fair value |
$ |
4,358,277 |
|
|
$ |
3,433,781 |
|
Other
financing liabilities ($447,843 and $477,707 carried at fair
value) |
536,981 |
|
|
579,031 |
|
Match
funded liabilities (related to VIEs) |
1,028,016 |
|
|
1,280,997 |
|
Other
secured borrowings, net |
544,589 |
|
|
678,543 |
|
Senior
notes, net |
347,201 |
|
|
346,789 |
|
Other
liabilities ($71 and $1,550 carried at fair value) |
693,119 |
|
|
681,239 |
|
Total
liabilities |
7,508,183 |
|
|
7,000,380 |
|
|
|
|
|
Equity |
|
|
|
Ocwen
Financial Corporation (Ocwen) stockholders’ equity |
|
|
|
Common
stock, $.01 par value; 200,000,000 shares authorized; 130,859,058
and 123,988,160 shares issued and outstanding at September 30, 2017
and December 31, 2016, respectively |
1,309 |
|
|
1,240 |
|
Additional paid-in capital |
544,392 |
|
|
527,001 |
|
Retained
earnings |
42,400 |
|
|
126,167 |
|
Accumulated other comprehensive loss, net of income taxes |
(1,293 |
) |
|
(1,450 |
) |
Total Ocwen stockholders’ equity |
586,808 |
|
|
652,958 |
|
Non-controlling interest in subsidiaries |
2,614 |
|
|
2,325 |
|
Total
equity |
589,422 |
|
|
655,283 |
|
Total
liabilities and equity |
$ |
8,097,605 |
|
|
$ |
7,655,663 |
|
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in
thousands) |
|
For the Nine Months Ended September
30, |
|
2017 |
|
2016 |
Cash flows from
operating activities |
|
|
|
Net
loss |
$ |
(83,194 |
) |
|
$ |
(188,945 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
Amortization of mortgage servicing rights |
38,560 |
|
|
18,595 |
|
Loss on
valuation of mortgage servicing rights, at fair value |
78,437 |
|
|
63,609 |
|
Impairment charge (reversal) on mortgage servicing rights |
(1,551 |
) |
|
37,164 |
|
Gain on
sale of mortgage servicing rights, net |
(7,863 |
) |
|
(7,689 |
) |
Realized
and unrealized losses on derivative financial instruments |
364 |
|
|
2,213 |
|
Provision
for bad debts |
57,274 |
|
|
61,191 |
|
Depreciation |
20,430 |
|
|
18,277 |
|
Loss on
write off of fixed assets |
6,834 |
|
|
— |
|
Amortization of debt issuance costs |
1,979 |
|
|
10,475 |
|
Equity-based compensation expense |
4,489 |
|
|
4,000 |
|
Gain on
valuation of financing liability |
(27,024 |
) |
|
— |
|
Net gain
on valuation of mortgage loans held for investment and HMBS-related
borrowings |
(18,637 |
) |
|
(22,329 |
) |
Gain on
loans held for sale, net |
(39,542 |
) |
|
(52,206 |
) |
Origination and purchase of loans held for sale |
(3,074,725 |
) |
|
(4,575,264 |
) |
Proceeds
from sale and collections of loans held for sale |
3,067,522 |
|
|
4,493,887 |
|
Changes
in assets and liabilities: |
|
|
|
Decrease
in advances and match funded assets |
285,066 |
|
|
343,129 |
|
Decrease
in receivables and other assets, net |
156,008 |
|
|
122,305 |
|
(Decrease) increase in other liabilities |
(66,321 |
) |
|
4,749 |
|
Other,
net |
3,102 |
|
|
17,263 |
|
Net cash
provided by operating activities |
401,208 |
|
|
350,424 |
|
|
|
|
|
Cash flows from
investing activities |
|
|
|
Origination of loans held for investment |
(961,642 |
) |
|
(1,185,565 |
) |
Principal
payments received on loans held for investment |
311,560 |
|
|
528,263 |
|
Purchase
of mortgage servicing rights |
(1,658 |
) |
|
(15,969 |
) |
Proceeds
from sale of mortgage servicing rights |
2,263 |
|
|
45,254 |
|
Proceeds
from sale of advances |
6,119 |
|
|
74,982 |
|
Issuance
of automotive dealer financing notes |
(129,471 |
) |
|
— |
|
Collections of automotive dealer financing notes |
119,389 |
|
|
— |
|
Additions
to premises and equipment |
(7,365 |
) |
|
(28,649 |
) |
Other |
1,480 |
|
|
9,483 |
|
Net cash
used in investing activities |
(659,325 |
) |
|
(572,201 |
) |
|
|
|
|
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in thousands) |
|
For the Nine Months Ended September
30, |
|
2017 |
|
2016 |
Cash flows from
financing activities |
|
|
|
Repayment
of match funded liabilities, net |
(252,981 |
) |
|
(218,517 |
) |
Proceeds
from mortgage loan warehouse facilities and other secured
borrowings |
5,810,591 |
|
|
6,632,059 |
|
Repayments of mortgage loan warehouse facilities and other secured
borrowings |
(6,016,169 |
) |
|
(6,834,720 |
) |
Payment
of debt issuance costs |
(841 |
) |
|
(2,242 |
) |
Proceeds
from sale of mortgage servicing rights accounted for as a
financing |
54,601 |
|
|
— |
|
Proceeds
from sale of reverse mortgages (HECM loans) accounted for as a
financing (HMBS-related borrowings) |
981,730 |
|
|
820,438 |
|
Repayment
of HMBS-related borrowings |
(287,908 |
) |
|
(161,995 |
) |
Issuance
of common stock |
13,913 |
|
|
— |
|
Repurchase of common stock |
— |
|
|
(5,890 |
) |
Other |
(1,480 |
) |
|
(1,094 |
) |
Net cash
provided by financing activities |
301,456 |
|
|
228,039 |
|
|
|
|
|
Net increase in
cash |
43,339 |
|
|
6,262 |
|
Cash at beginning of
year |
256,549 |
|
|
257,272 |
|
Cash at end of
period |
$ |
299,888 |
|
|
$ |
263,534 |
|
|
|
|
|
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