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Feb 28, 2018

Ocwen Financial Announces Operating Results for Fourth Quarter and Full Year 2017

  • Net Loss of $(128.5) million for 2017, a $70.9 million improvement over 2016

  • Generated $412 million of Cash Flows from Operating Activities in 2017

  • Helped over 45,000 struggling families remain in their homes through loan modifications

WEST PALM BEACH, Fla., Feb. 28, 2018 (GLOBE NEWSWIRE) -- Ocwen Financial Corporation (NYSE:OCN) (“Ocwen” or the “Company”), a leading financial services holding company, today reported a net loss of $(128.5) million, or $(1.01) per share, for the full year of 2017 compared to a net loss of $(199.4) million, or $(1.61) per share, for the full year of 2016, a $70.9 million improvement. Ocwen generated Revenue of $1.2 billion and Cash Flows from Operating Activities of $412 million for the full year of 2017, and ended the year with $260 million of cash.

For the three months ended December 31, 2017, Ocwen reported a net loss of $(45.3) million, or $(0.34) per share.

“2017 was another challenging year for Ocwen and our industry. However, we continued to make progress on a number of fronts, reducing our year over year loss by $70.9 million and helping over 45,000 struggling families retain their home through affordable loan modifications. We are also in an improved cash and liquidity position following the closing of our amended agreements with New Residential Investment Corp. in January 2018,” commented Ron Faris, President and CEO of Ocwen. Mr. Faris continued, “Our servicing business continued to perform well despite the challenges posed by continued portfolio runoff and posted its sixth consecutive quarter of pre-tax income."

Fourth Quarter and Full Year 2017 Results

Pre-tax loss for the fourth quarter of 2017 was $(45.3) million. Pre-tax results for the quarter were impacted by a number of significant items, the largest of which was $(49.8) million in litigation and regulatory settlement-related expenses. Excluding these settlement-related expenses and other adjusting items that largely offset, the Company had an adjusted pre-tax income of $4.0 million.

The Servicing business segment recorded $28.6 million of pre-tax income for the fourth quarter of 2017. For the full year 2017, the Servicing business recorded $46.7 million of pre-tax income, an increase of $43.3 million over 2016.

The Lending segment recorded $2.6 million of pre-tax income for the fourth quarter of 2017, a $10.2 million improvement over the prior quarter, driven by $(6.8) million in restructuring costs in the prior quarter and higher gains in the reverse lending business as a result of increased origination volume and improved margins. For the full year 2017, the Lending business recorded a pre-tax loss of $(4.4) million, a decrease of $4.6 million versus 2016. The 2017 loss in Lending was driven by our Forward Lending business, which had a pre-tax loss of $(28.4) million inclusive of the restructuring costs, which was partially offset by $24.0 million of pre-tax income in our Reverse Lending business.

Additional Business Highlights

  • In 2017, Ocwen completed 45,682 loan modifications with HAMP modifications accounting for 27.9% of the total. Note that the HAMP program ended on December 31, 2016, but modifications in process at that time were permitted to close after the deadline.
  • Delinquencies decreased from 9.4% at September 30, 2017 to 9.3% at December 31, 2017, primarily driven by ongoing consumer assistance efforts.
  • The constant pre-payment rate (“CPR”) marginally decreased from 14.7% in the third quarter of 2017 to 14.4% in the fourth quarter of 2017.  In the fourth quarter of 2017, the prime CPR was 17.3%, and the non-prime CPR was 12.7%.
  • For the full year 2017, Ocwen originated forward and reverse mortgage loans with an unpaid principal balance (UPB) of $2.5 billion and $1.0 billion, respectively. The decrease in forward mortgage originations compared to prior year was driven by our decision to exit the unprofitable Correspondent and Wholesale businesses.
  • Our reverse mortgage portfolio ended the year with an estimated $101.5 million in undiscounted 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.
  • We announced the exit of our Automotive Capital Services business in January 2018 and the exit is expected to be completed during the first half of 2018.

Webcast and Conference Call

Ocwen will host a webcast and conference call on Wednesday, February 28, 2018, at 8:30 a.m., Eastern Time, to discuss its financial results for the fourth quarter and full year 2017 as well as other recent events. 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 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 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; our ability to complete our proposed acquisition of PHH Corporation (PHH), to successfully integrate its business, and to realize the strategic objectives 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; 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 maintain our long-term relationship with NRZ under our 2017 and 2018 agreements; 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; uncertainty related to our ability to continue to collect certain expedited payment or convenience fees and potential liability for charging such fees; our ability to realize anticipated future gains from future draws on existing loans in our reverse mortgage portfolio; 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 and lending 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, as well as its annual report on Form 10-K for the year ended December 31, 2017, when 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.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures, such as our reference to adjusted pre-tax income. We believe these non-GAAP financial measures provide a useful supplement to discussions and analysis of our financial condition. We believe these non-GAAP financial measures provide an alternative way to view certain aspects of our business that is instructive. 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. For a full reconciliation of adjusted pre-tax income to GAAP pre-tax income, please see slides 33 and 38 of the Company’s 2017 earnings presentation, which may be found in the “Shareholder Relations” section of the Company’s website at www.Ocwen.com.  

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
(Dollars in thousands)
  At or for the Three Months Ended
December 31,
2017
September 30,
2017
June 30, 2017 March 31,
2017
December 31,
2016
Total unpaid principal balance of loans and REO serviced $ 179,352,554   $ 187,468,318   $ 194,798,424   $ 202,369,014   $ 209,092,130  
           
Non-performing loans and REO serviced as a % of total UPB (1) 9.3 % 9.4 % 9.6 % 10.7 %   11.2 %
           
Prepayment speed (average CPR) (2) (3) 14.4 % 14.7 % 15.0 % 14.0 %   15.1 %

(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 December 31, 2017 includes 17.3% for prime loans and 12.7% for non-prime loans.

               
Segment Results
(Dollars in thousands)
             
  For the Three Months Ended
December 31,
  For the Twelve Months Ended
December 31,
  2017   2016   2017   2016
Servicing              
Revenue $ 238,943     $ 295,432     $ 1,041,290     $ 1,247,159  
Expenses 78,978     176,251     716,384     910,577  
Other expense, net (131,315 )   (73,403 )   (278,226 )   (333,218 )
Income before income taxes 28,650     45,778     46,680     3,364  
               
Lending              
Revenue 32,018     23,108     127,475     112,363  
Expenses 27,430     28,728     128,058     114,199  
Other income (expense), net (1,947 )   9     (3,848 )   1,967  
Income (loss) before income taxes 2,641     (5,611 )   (4,431 )   131  
               
Corporate Items and Other              
Revenue 5,809     5,369     25,811     27,646  
Expenses 61,895     32,927     154,203     198,483  
Other expense, net (20,519 )   (22,811 )   (57,830 )   (39,019 )
Loss before income taxes (76,605 )   (50,369 )   (186,222 )   (209,856 )
               
Corporate Eliminations              
Revenue     (5 )       (5 )
Expenses     (5 )       (5 )
Other income (expense), net              
Income (loss) before income taxes              
               
Consolidated loss before income taxes $ (45,314 )   $ (10,202 )   $ (143,973 )   $ (206,361 )


 
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,
    2017     2016     2017     2016
Revenue              
Servicing and subservicing fees $ 227,853     $ 279,627     $ 989,376     $ 1,186,620  
Gain on loans held for sale, net   26,426       21,317       103,402       90,391  
Other   22,491       22,960       101,798       110,152  
Total revenue   276,770       323,904       1,194,576       1,387,163  
               
Expenses              
Compensation and benefits   86,244       93,727       358,994       381,340  
Professional services   83,800       47,791       229,451       305,586  
Servicing and origination   (62,277 )     30,571       142,670       279,801  
Technology and communications   20,960       24,814       100,490       110,333  
Occupancy and equipment   16,450       17,978       66,019       80,191  
Amortization of mortgage servicing rights   13,228       14,383       51,788       32,978  
Other   9,898       8,637       49,233       33,025  
Total expenses   168,303       237,901       998,645       1,223,254  
               
Other income (expense)              
Interest income   3,864       4,595       15,965       19,083  
Interest expense   (150,767 )     (104,500 )     (363,238 )     (412,583 )
Gain on sale of mortgage servicing rights, net   2,674       803       10,537       8,492  
Other, net   (9,552 )     2,897       (3,168 )     14,738  
Total other expense, net   (153,781 )     (96,205 )     (339,904 )     (370,270 )
               
Loss before income taxes   (45,314 )     (10,202 )     (143,973 )     (206,361 )
Income tax (benefit) expense   (51 )     228       (15,516 )     (6,986 )
Net loss   (45,263 )     (10,430 )     (128,457 )     (199,375 )
Net (income) loss attributable to non-controlling interests   780       (14 )     491       (387 )
Net loss attributable to Ocwen stockholders $   (44,483 )   $   (10,444 )   $   (127,966 )   $   (199,762 )
               
Loss per share attributable to Ocwen common stockholders              
Basic $ (0.34 )   $ (0.08 )   $ (1.01 )   $ (1.61 )
Diluted $ (0.34 )   $ (0.08 )   $ (1.01 )   $ (1.61 )
               
Weighted average common shares outstanding              
Basic   130,893,025       123,988,784       127,082,058       123,990,700  
Diluted   130,893,025       123,988,784       127,082,058       123,990,700  
                               


 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
(Dollars in thousands, except share data)
 
  December 31,
 2017
  December 31,
 2016
Assets      
Cash $ 259,655     $ 256,549  
Mortgage servicing rights ($671,962 and $679,256 carried at fair value) 1,008,844     1,042,978  
Advances, net 211,793     257,882  
Match funded assets (related to variable interest entities (VIEs)) 1,177,357     1,451,964  
Loans held for sale ($214,262 and $284,632 carried at fair value) 238,358     314,006  
Loans held for investment, at fair value 4,715,831     3,565,716  
Receivables, net 199,529     265,720  
Premises and equipment, net 37,006     62,744  
Other assets ($8,900 and $20,007 carried at fair value)(amounts related to VIEs of $27,359 and $43,331) 554,791     438,104  
Total assets $ 8,403,164     $ 7,655,663  
       
Liabilities and Equity      
Liabilities      
HMBS-related borrowings, at fair value $ 4,601,556     $ 3,433,781  
Other financing liabilities ($508,291 and $477,707 carried at fair value) 593,518     579,031  
Match funded liabilities (related to VIEs) 998,618     1,280,997  
Other secured borrowings, net 545,850     678,543  
Senior notes, net 347,338     346,789  
Other liabilities ($635 and $1,550 carried at fair value) 769,410     681,239  
Total liabilities 7,856,290     7,000,380  
       
Equity      
Ocwen Financial Corporation (Ocwen) stockholders’ equity      
Common stock, $.01 par value; 200,000,000 shares authorized; 131,484,058 and 123,988,160 shares issued and outstanding at December 31, 2017 and 2016, respectively 1,315     1,240  
Additional paid-in capital 547,057     527,001  
Retained earnings (accumulated deficit) (2,083 )   126,167  
Accumulated other comprehensive loss, net of income taxes (1,249 )   (1,450 )
Total Ocwen stockholders’ equity 545,040     652,958  
Non-controlling interest in subsidiaries 1,834     2,325  
Total equity 546,874     655,283  
Total liabilities and equity $ 8,403,164     $ 7,655,663  
               


 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Dollars in thousands)
  For the Years Ended
December 31,
  2017   2016
Cash flows from operating activities      
Net loss $ (128,457 )   $ (199,375 )
Adjustments to reconcile net loss to net cash provided by operating activities:      
Amortization of mortgage servicing rights 51,788     32,978  
Loss on valuation of mortgage servicing rights, at fair value 4,540     80,238  
Impairment charge (reversal) on mortgage servicing rights (3,366 )   10,813  
Gain on sale of mortgage servicing rights, net (10,537 )   (8,492 )
Realized and unrealized losses on derivative financial instruments 191     1,724  
Provision for bad debts 76,828     81,079  
Depreciation 26,886     25,338  
Loss on write-off of fixed assets, net 8,502      
Amortization of debt issuance costs 2,738     25,662  
Provision for (reversal of) valuation allowance on deferred tax assets (29,979 )   15,639  
Decrease (increase) in deferred tax assets other than provision for valuation allowance 30,710     (11,119 )
Equity-based compensation expense 5,624     5,181  
Gain on valuation of financing liability 41,282      
Loss (gain) on trading securities 6,756     (335 )
Net gain on valuation of mortgage loans held for investment and HMBS-related borrowings (23,733 )   (26,016 )
Gain on loans held for sale, net (53,209 )   (65,649 )
Origination and purchase of loans held for sale (3,695,163 )   (6,090,432 )
Proceeds from sale and collections of loans held for sale 3,662,065     5,969,812  
Changes in assets and liabilities:      
Decrease in advances and match funded advances 330,052     452,435  
Decrease in receivables and other assets, net 202,153     181,835  
Decrease in other liabilities (100,650 )   (7,143 )
Other, net 6,944     492  
Net cash provided by operating activities 411,965     474,665  
       
Cash flows from investing activities      
Origination of loans held for investment (1,277,615 )   (1,098,758 )
Principal payments received on loans held for investment 444,388     243,596  
Purchase of mortgage servicing rights (1,658 )   (17,356 )
Proceeds from sale of mortgage servicing rights 4,234     47,044  
Proceeds from sale of advances and match funded advances 9,446     103,017  
Issuance of automotive dealer financing notes (174,363 )   (100,722 )
Collections of automotive dealer financing notes 162,965     65,688  
Additions to premises and equipment (9,053 )   (33,518 )
Other, net 2,440     (610 )
Net cash used in investing activities (839,216 )   (791,619 )
       



OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (continued)
(Dollars in thousands)
  For the Years Ended
December 31,
  2017   2016
Cash flows from financing activities      
Repayment of match funded liabilities, net (282,379 )   (303,052 )
Proceeds from mortgage loan warehouse facilities and other secured borrowings 7,215,264     9,242,671  
Repayments of mortgage loan warehouse facilities and other secured borrowings (7,431,763 )   (9,463,063 )
Payment of debt issuance costs (841 )   (11,136 )
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) 1,281,543     1,086,795  
Repayment of HMBS-related borrowings (418,503 )   (230,045 )
Issuance of common stock 13,913      
Repurchase of common stock     (5,890 )
Other (1,478 )   (49 )
Net cash provided by financing activities 430,357     316,231  
       
Net increase (decrease) in cash 3,106     (723 )
Cash at beginning of year 256,549     257,272  
Cash at end of year $ 259,655     $ 256,549  
       

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Source: Ocwen Financial Corp.