Ocwen Financial Corporation (NYSE: OCN) (“Ocwen” or the “Company”),
a leading non-bank mortgage servicer and originator, today
announced its first quarter 2024 results and provided a business
update.
The Company reported GAAP net income of $30 million for the
first quarter with an adjusted pre-tax income of $14 million (see
“Note Regarding Non-GAAP Financial Measures” below).
Glen A. Messina, Chair, President and CEO of Ocwen, said, “We
reported strong results in the first quarter with growth in net
income and adjusted pre-tax income quarter over quarter, driven by
the strength of our balanced business and operational performance
in both our servicing and originations segments. Our strategy of
capital-light growth has enabled us to steadily grow our
subservicing portfolio through new client acquisitions and capital
partner relationships. Our actions to increase shareholder value
resulted in improved return on equity and book value per share both
on a sequential quarter and year over year basis. Additionally, we
made significant progress on our deleveraging objective by reducing
corporate debt by $47 million.”
Messina continued, “We are excited about our previously
announced plans to rebrand Ocwen to OnityTM Group, reflecting the
evolution of our Company and the confidence we have in our
business, capabilities and team. We are pleased with how we have
started the year, and we believe we have a strong foundation with
demonstrated capabilities to accelerate growth through interest
rate cycles.”
Additional First Quarter 2024 Operating and Business
Highlights
- Announced plans to rebrand Ocwen Financial Corporation to Onity
Group Inc. and begin trading on the NYSE under the stock symbol
“ONIT” in June, subject to shareholder approval
- Total ending servicing UPB of $302 billion and ending
subservicing UPB of $169 billion, up 5% and 8%, respectively,
compared to December 31, 2023
- Total liquidity of $219 million as of March 31, 2024
- Reduced GAAP operating expenses by $9.7 million, or 8.5%, from
Q1’23
- Increased mix of higher margin products to 41% of owned MSR
originations compared to 31% in Q1’23
- Reduced legacy MSR servicing advances by 14% compared to March
31, 2023
- Book value per share of $56 as of March 31, 2024
Webcast and Conference Call
Ocwen will hold a conference call on Thursday, May 2, 2024, at
8:30 a.m. (ET) to review the Company’s first quarter 2024 operating
results and to provide a business update. A live audio webcast and
slide presentation for the call will be available by visiting the
Shareholder Relations page at www.ocwen.com. Participants can
access the conference call by dialing (800) 343-4849 or (203)
518-9848 approximately 10 minutes prior to the call; please
reference the conference ID “Ocwen.” A replay of the conference
call will be available via the website approximately two hours
after the conclusion of the call. A telephonic replay will also be
available approximately three hours following the call’s completion
through May 16, 2024 by dialing (844) 512-2921 or (412) 317-6671;
please reference access code 11155712.
About Ocwen Financial Corporation
Ocwen Financial Corporation (NYSE: OCN) is a leading non-bank
mortgage servicer and originator providing solutions through its
primary brands, PHH Mortgage and Liberty Reverse Mortgage. PHH
Mortgage is one of the largest servicers in the country, focused on
delivering a variety of servicing and lending programs. Liberty is
one of the nation’s largest reverse mortgage lenders dedicated to
education and providing loans that help customers meet their
personal and financial needs. We are headquartered in West Palm
Beach, Florida, with offices and operations in the United States,
the U.S. Virgin Islands, India and the Philippines, and have been
serving our customers since 1988. For additional information,
please visit 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 “expect”, “believe”, “foresee”, “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, and includes
statements in this press release regarding our growth opportunities
and plans for rebranding. Forward-looking statements by their
nature address matters that are, to different degrees, uncertain.
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 potential for ongoing
disruption in the financial markets and in commercial activity
generally as a result of geopolitical events, changes in monetary
and fiscal policy, and other sources of instability; the impacts of
inflation, employment disruption, and other financial difficulties
facing our borrowers; the impact of recent failures and
re-organization of banking institutions and continued uncertainty
in the banking industry; our ability to timely reduce operating
costs, or generate offsetting revenue, in proportion to the
industry-wide decrease in originations activity; the impact of
cost-reduction initiatives on our business and operations;
shareholder approval of, and the reactions to, our rebranding
initiative; the amount of senior debt or common stock or that we
may repurchase under any repurchase programs, the timing of such
repurchases, and the long-term impact, if any, of repurchases on
the trading price of our securities or our financial condition;
breach or failure of Ocwen’s, our contractual counterparties’, or
our vendors’ information technology or other security systems or
privacy protections, including any failure to protect customers’
data, resulting in disruption to our operations, loss of income,
reputational damage, costly litigation and regulatory penalties;
our reliance on our technology vendors to adequately maintain and
support our systems, including our servicing systems, loan
originations and financial reporting systems, and uncertainty
relating to our ability to transition to alternative vendors, if
necessary, without incurring significant cost or disruption to our
operations; our ability to interpret correctly and comply with
current or future liquidity, net worth and other financial and
other requirements of regulators, the Federal National Mortgage
Association (Fannie Mae), and Federal Home Loan Mortgage
Corporation (Freddie Mac) (together, the GSEs), and the Government
National Mortgage Association (Ginnie Mae), as well as those set
forth in our debt and other agreements, including our ability to
identify and implement a cost-effective response to Ginnie Mae’s
risk-based capital requirements that take effect in late 2024; the
extent to which MAV, other transactions and our enterprise sales
initiatives will generate additional subservicing volume, and
result in increased profitability; MAV’s continued ownership of its
MSR portfolio after May 2024, and any impact on our subservicing
income as a result of the sale of MAV’s MSRs; the future of our
long-term relationship with Rithm Capital Corp. (Rithm); the timing
and amount of presently anticipated forward and reverse loan
boarding; our ability to close acquisitions of MSRs and other
transactions, including the ability to obtain regulatory approvals;
our ability to grow our reverse servicing business; our ability to
retain clients and employees of acquired businesses, and the extent
to which acquisitions and our other strategic initiatives will
contribute to achieving our growth objectives; the adequacy of our
financial resources, including our sources of liquidity and ability
to sell, fund and recover servicing advances, forward and reverse
whole loans, future draws on existing reverse loans, and HECM and
forward loan buyouts and put backs, as well as repay, renew and
extend borrowings, borrow additional amounts as and when required,
meet our MSR or other asset investment objectives and comply with
our debt agreements, including the financial and other covenants
contained in them; increased servicing costs based on increased
borrower delinquency levels or other factors; uncertainty related
to past, present or future claims, litigation, cease and desist
orders and investigations regarding our servicing, foreclosure,
modification, origination and other practices brought by government
agencies and private parties, including 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); scrutiny of our compliance with COVID-19-related
rules and regulations, including requirements instituted by state
governments, the GSEs, Ginnie Mae and regulators; the reactions of
key counterparties, including lenders, the GSEs and Ginnie Mae, to
our regulatory engagements and litigation matters; 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 the
requirements of the GSEs and Ginnie Mae and maintain our
seller/servicer and other statuses with them; our ability to fund
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 any future downgrades; as well
as other risks and uncertainties detailed in our reports and
filings with the SEC, including our annual report on Form 10-K for
the year ended December 31, 2023. Anyone wishing to understand
Ocwen’s business should review our SEC filings. Our 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.
Note Regarding Non-GAAP Financial Measures
This press release contains references to adjusted pre-tax
income (loss), a non-GAAP financial measure.
We believe this non-GAAP financial measure provides a useful
supplement to discussions and analysis of our financial condition,
because it is a measure that management uses to assess the
financial performance of our operations and allocate resources. In
addition, management believes that this presentation may assist
investors with understanding and evaluating our initiatives to
drive improved financial performance. Management believes,
specifically, that the removal of fair value changes of our net MSR
exposure due to changes in market interest rates and assumptions
provides a useful, supplemental financial measure as it enables an
assessment of our ability to generate earnings regardless of market
conditions and the trends in our underlying businesses by removing
the impact of fair value changes due to market interest rates and
assumptions, which can vary significantly between periods. However,
this measure should not be analyzed in isolation or as a substitute
to analysis of our GAAP pre-tax income (loss) nor a substitute for
cash flows from operations. There are certain limitations to the
analytical usefulness of the adjustments we make to GAAP pre-tax
income (loss) and, accordingly, we use these adjustments only for
purposes of supplemental analysis. Non-GAAP financial measures
should be viewed in addition to, and not as an alternative for,
Ocwen’s reported results under accounting principles generally
accepted in the United States. Other companies may use non-GAAP
financial measures with the same or similar titles that are
calculated differently to our non-GAAP financial measures. As a
result, comparability may be limited. Readers are cautioned not to
place undue reliance on analysis of the adjustments we make to GAAP
pre-tax income (loss).
Notables
In the table below, we adjust GAAP pre-tax income (loss) for the
following factors: MSR valuation adjustments, expense notables, and
other income statement notables. MSR valuation adjustments are
comprised of changes to Forward MSR and Reverse mortgage valuations
due to rates and assumption changes. Expense notables include
significant legal and regulatory settlement expenses, expense
recoveries, severance and retention costs, LTIP stock price
changes, consolidation of office facilities and other expenses
(such as costs associated with strategic transactions). Other
income statement notables include non-routine transactions that are
not categorized in the above.
(Dollars in millions) |
Q1’24 |
|
Q4’23 |
|
Q1’23 |
I |
Reported Net Income (Loss) |
30 |
|
(47) |
|
(40) |
A |
Income Tax Benefit
(Expense) |
(2) |
|
(2) |
|
(2) |
II |
Reported Pre-Tax Income (Loss) [I – A] |
32 |
|
(46) |
|
(38) |
|
Forward MSR
Valuation Adjustments due to rates and assumption changes,
net(a)(b)(c) |
18 |
|
(64) |
|
(46) |
|
Reverse
Mortgage Fair Value Change due to rates and assumption
changes(b)(d) |
2 |
|
13 |
|
7 |
III |
Total MSR Valuation Adjustments due to rates and assumption
changes, net |
20 |
|
(51) |
|
(39) |
|
Significant legal
and regulatory settlement expenses |
(2) |
|
(3) |
|
(2) |
|
Expense
recoveries |
- |
|
- |
|
0 |
|
Severance and
retention(e) |
(2) |
|
(2) |
|
(4) |
|
LTIP stock price
changes(f) |
3 |
|
(1) |
|
2 |
|
Office facilities
consolidation |
(0) |
|
0 |
|
(0) |
|
Other
expense notables(g) |
(1) |
|
1 |
|
0 |
B |
Total Expense Notables |
(2) |
|
(5) |
|
(4) |
C |
Other Income
Statement Notables(h) |
(0) |
|
(1) |
|
(1) |
IV |
Total
Other Notables [B + C] |
(2) |
|
(5) |
|
(5) |
V |
Total Notables(i)[III +
IV] |
18 |
|
(56) |
|
(44) |
VI |
Adjusted Pre-tax Income (Loss) [II – V] |
14 |
|
11 |
|
6 |
(a) MSR Valuation Adjustments that are due to changes in market
interest rates, valuation inputs or other assumptions, net of
overall fair value gains / (losses) on MSR hedge, including FV
changes of Pledged MSR liabilities associated with MSR transferred
to MAV, RITM and others and ESS financing liabilities that are due
to changes in market interest rates, valuation inputs or other
assumptions, a component of MSR valuation adjustment, net; the
adjustment does not include valuation gains on MSR purchases of
$1.9M for Q1’23
(b) The changes in fair value due to market interest rates were
measured by isolating the impact of market interest rate changes on
the valuation model output as provided by our third-party valuation
expert
(c) Beginning with the three months ended March 31, 2023, for
purposes of calculating Income Statement Notables and Adjusted
Pre-Tax Income, we changed the methodology used to calculate MSR
Valuation Adjustments due to rates and assumption changes to
exclude actual-to-model variances of realization of cash flows, or
runoff; the presentation of past periods has been conformed to the
current presentation; if we had used the methodology employed prior
to Q1’23, Forward MSR Valuation Adjustments due to rates and
assumption changes, net would have been $(38)M for Q1’23, $(61)M
for Q4’23 and $28M for Q1’24; Adjusted PTI (Loss) would have been
$(3)M for Q1’23, $8M for Q4’23, and $4M for Q1’24; see Note
Regarding Non-GAAP Financial Measures for more information
(d) FV changes of loans HFI and HMBS related borrowings due to
market interest rates and assumptions, a component of gain on
reverse loans held for investment and HMBS-related borrowings,
net
(e) Severance and retention due to organizational rightsizing or
reorganization
(f) Long-term incentive program (LTIP) compensation expense
changes attributable to stock price changes during the period
(g) Includes costs associated with but not limited to rebranding
and other strategic initiatives
(h) Contains non-routine transactions including but not limited
to gain on debt extinguishment and fair value assumption changes on
other investments recorded in other income/expense
(i) Certain previously presented notable categories with nil
numbers for each period shown have been omitted
Adjusted Pre-Tax Income (Loss) ROE
Calculation
(Dollars in millions) |
Q1’24 |
|
Q4’23 |
|
Q1’23 |
I |
Reported Net Income (Loss) |
30 |
|
(47) |
|
(40) |
II |
Notables
Items |
18 |
|
(56) |
|
(44) |
III |
Income Tax Benefit (Expense) |
(2) |
|
(2) |
|
(2) |
IV |
Adjusted Pre-tax
Income (Loss) [I – II – III] |
14 |
|
11 |
|
6 |
V |
Annualized Adjusted
Pre-tax Income (Loss) [IV * 4] |
56 |
|
43 |
|
23 |
|
Equity |
|
|
|
|
|
|
A Beginning Period Equity |
402 |
|
445 |
|
457 |
|
C Ending Period Equity |
432 |
|
402 |
|
416 |
|
D Equity Impact of Notables |
(18) |
|
56 |
|
44 |
|
B Adjusted Ending Period Equity[C +
D] |
414 |
|
458 |
|
460 |
VI |
Average Adjusted Equity [(A + B) / 2] |
408 |
|
452 |
|
459 |
VII |
Adjusted Pre-tax Income (Loss) [V / VI] |
13.8% |
|
9.4% |
|
5.0% |
Condensed Consolidated Balance Sheets
Assets ($ in millions) |
Mar 31, 2024 |
|
Dec 31, 2023 |
|
Mar 31, 2023 |
Cash and cash equivalents |
$185.1 |
|
$201.6 |
|
$216.6 |
Restricted cash |
|
66.1 |
|
|
53.5 |
|
|
39.3 |
Mortgage servicing rights (MSRs), at fair value |
|
2,374.7 |
|
|
2,272.2 |
|
|
2,580.6 |
Advances, net |
|
602.7 |
|
|
678.8 |
|
|
656.9 |
Loans held for sale |
|
1,028.9 |
|
|
677.3 |
|
|
849.4 |
Loans held for investment, at fair value |
|
8,130.5 |
|
|
7,975.5 |
|
|
7,669.0 |
Receivables, net |
|
152.1 |
|
|
154.8 |
|
|
200.2 |
Investment in equity method investee |
|
37.6 |
|
|
37.8 |
|
|
36.8 |
Premises and equipment, net |
|
11.8 |
|
|
13.1 |
|
|
18.9 |
Other assets |
|
500.6 |
|
|
449.2 |
|
|
359.3 |
Total Assets |
$13,090.1 |
|
$12,513.7 |
|
$12,627.0 |
Liabilities & Stockholders’ Equity ($ in
millions) |
Mar 31, 2024 |
|
Dec 31, 2023 |
|
Mar 31, 2023 |
Home Equity Conversion Mortgage-Backed Securities (HMBS) related
borrowings, at fair value |
$7,945.0 |
|
$7,797.3 |
|
$7,470.6 |
Other financing liabilities, at fair value |
|
906.8 |
|
|
900.0 |
|
|
1,152.5 |
Advance match funded liabilities |
|
440.2 |
|
|
499.7 |
|
|
469.9 |
Mortgage loan financing facilities, net |
|
1,108.9 |
|
|
710.6 |
|
|
948.3 |
MSR financing facilities, net |
|
964.1 |
|
|
916.2 |
|
|
914.6 |
Senior notes, net |
|
552.0 |
|
|
595.8 |
|
|
602.3 |
Other liabilities |
|
741.0 |
|
|
692.3 |
|
|
652.5 |
Total Liabilities |
$12,658.0 |
|
$12,111.9 |
|
$12,210.7 |
Total Stockholders’ Equity |
$432.1 |
|
$401.8 |
|
$416.3 |
Total Liabilities and Stockholders’ Equity |
$13,090.1 |
|
$12,513.7 |
|
$12,627.0 |
Condensed Consolidated Statements of
Operations
|
For the Three Months Ended |
|
For the Three Months Ended |
|
($ in millions) |
Mar 31, 2024 |
|
Mar 31, 2023 |
|
Revenue |
|
|
|
|
|
|
Servicing and subservicing fees |
$204.5 |
|
|
$232.2 |
|
|
|
Gain on reverse loans held for investment and HMBS-related
borrowings, net |
|
15.4 |
|
|
|
21.2 |
|
|
|
Gain on loans held for sale,
net |
|
10.9 |
|
|
|
2.8 |
|
|
|
Other
revenue, net |
|
8.3 |
|
|
|
5.6 |
|
|
Total Revenue |
|
|
239.1 |
|
|
|
261.8 |
|
|
MSR Valuation
Adjustments, net |
|
|
(11.6 |
) |
|
|
(69.0 |
) |
|
|
|
|
|
|
|
Operating
Expenses |
|
|
|
|
|
|
Compensation and benefits |
|
53.6 |
|
|
|
58.0 |
|
|
|
Servicing and origination |
|
15.0 |
|
|
|
15.7 |
|
|
|
Technology and
communications |
|
12.7 |
|
|
|
13.4 |
|
|
|
Professional services |
|
12.0 |
|
|
|
13.3 |
|
|
|
Occupancy, equipment and
mailing |
|
7.7 |
|
|
|
8.8 |
|
|
|
Other
expenses |
|
3.4 |
|
|
|
4.9 |
|
|
Total Operating Expenses |
|
|
104.4 |
|
|
|
114.1 |
|
|
|
|
|
|
|
|
Other Income
(Expense) |
|
|
|
|
|
|
Interest income |
|
17.5 |
|
|
|
14.1 |
|
|
|
Interest expense |
|
(67.4 |
) |
|
|
(62.3 |
) |
|
|
Pledged MSR liability
expense |
|
(44.9 |
) |
|
|
(70.3 |
) |
|
|
Earnings of equity method
investee |
|
2.7 |
|
|
|
0.3 |
|
|
|
Gain on extinguishment of
debt |
|
1.4 |
|
|
|
- |
|
|
|
Other,
net |
|
(0.6 |
) |
|
|
1.2 |
|
|
Total Other Income (Expense), net |
|
|
(91.3 |
) |
|
|
(117.0 |
) |
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
31.8 |
|
|
|
(38.3 |
) |
|
|
Income
tax expense |
|
1.7 |
|
|
|
1.9 |
|
|
Net Income (loss) |
|
$30.1 |
|
|
$(40.2 |
) |
|
Basic EPS |
|
$3.91 |
|
|
$(5.34 |
) |
|
Diluted EPS |
|
$3.74 |
|
|
$(5.34 |
) |
|
For Further Information Contact:
Dico Akseraylian, SVP, Corporate Communications(856)
917-0066mediarelations@ocwen.com
Ocwen Financial (NYSE:OCN)
Historical Stock Chart
From Jul 2024 to Aug 2024
Ocwen Financial (NYSE:OCN)
Historical Stock Chart
From Aug 2023 to Aug 2024