UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): July 26, 2018

 

OCWEN FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Florida		1-13219		65-0039856
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

1661 Worthington Road, Suite 100

West Palm Beach, Florida 33409

(Address of principal executive offices)

 

Registrant’s telephone number, including area code: (561) 682-8000

 

Not applicable.

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

	[  ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
	[  ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
	[  ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
	[  ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On July 26, 2018, Ocwen Financial Corporation issued a press release announcing results for the second quarter ended June 30, 2018. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

The information in this Item 2.02 and the information in the related exhibit attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit Number		Description
99.1		Press Release of Ocwen Financial Corporation dated July 26, 2018 announcing financial results for the second quarter ended June 30, 2018

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

	OCWEN FINANCIAL CORPORATION (Registrant)
Date: July 26, 2018	By:	/s/ John V. Britti
		John V. Britti
		Chief Executive Officer

 

 

 

Exhibit 99.1

 

Ocwen Financial Corporation®

 

FOR IMMEDIATE RELEASE

 

OCWEN FINANCIAL ANNOUNCES OPERATING RESULTS

FOR SECOND QUARTER 2018

 

	●	Reported a Q2 2018 net loss of $(30) million, a $15 million improvement over Q2 2017
	●	Generated $97 million of Cash Flows from Operating Activities during the quarter
	●	Helped over 10,700 struggling families remain in their homes through loan modifications
	●	Voluntarily paid-down $50 million of Corporate debt

 

West Palm Beach, FL – (July 26, 2018) Ocwen Financial Corporation (NYSE:OCN) (“Ocwen” or the “Company”), a leading financial services holding company, today announced operating results for the second quarter of 2018. Ocwen reported a GAAP net loss of $(29.8) million, or $(0.22) per share, for the three months ended June 30, 2018 compared to a net loss of $(44.4) million for the three months ended June 30, 2017, a $14.7 million improvement. Ocwen generated revenue of $253.6 million and cash flows from operating activities of $97.2 million for the three months ended June 30, 2018, and ended the quarter with $228.4 million of cash.

 

“In the second quarter of 2018, Ocwen has remained focused on four areas: helping homeowners, resolving legacy regulatory and legal matters, investing excess cash and preparing for our merger with PHH,” commented John Britti, Chief Executive Officer of Ocwen. “We have made progress in all four areas. Ocwen completed 10,752 modifications to help homeowners stay in their homes while providing loan investors better outcomes than foreclosure. Regarding legacy regulatory and legal matters, we believe that as a result of court rulings, settlements and ongoing negotiations, we are continuing to make progress on this front. We also continued the process of prudently deploying our excess cash in both short-term liquid and longer-term business investments. Our primary emphasis, however, has been on developing our plans for integration upon closing of our merger with PHH. We have made solid progress towards closing the transaction, and we are currently targeting closing the acquisition in the third quarter of 2018. Our integration planning has progressed sufficiently for us to revise our annual synergy run-rate target up to $100 million over annualized Q2 2018 operating expenses for both companies combined.”

 

Second Quarter 2018 Results

 

Pre-tax loss for the second quarter of 2018 was $(28.4) million, a $13.2 million improvement from the second quarter of 2017.

 

The Servicing segment recorded $2.1 million of pre-tax income for the second quarter of 2018, the eighth consecutive profitable quarter for the business.

 

The Lending segment recorded $1.4 million of pre-tax income for the second quarter of 2018, a $2.0 million increase over the second quarter of 2017. Our reverse mortgage lending business recorded $3.1 million of pre-tax income and our forward lending recapture business incurred a $(1.7) million pre-tax loss.

 

 

The Corporate segment recorded a $(31.9) million pre-tax loss for the second quarter of 2018 primarily driven by $(13.4) million of corporate interest expense, $(7.4) million of ongoing strategic transaction and restructuring costs and $(5.3) million of CFPB and state regulatory related legal fees and other expenses.

 

Additional Second Quarter 2018 Business Highlights

 

	●	Completed 10,752 modifications in the quarter to help struggling families stay in their homes, 14% of which included debt forgiveness totaling $51 million.
	●	Delinquencies decreased from 9.0% at March 31, 2018 to 8.3% at June 30, 2018, primarily driven by loss mitigation efforts and general economic conditions.
	●	The constant pre-payment rate (CPR) increased from 12.9% in the first quarter of 2018 to 14.3% in the second quarter of 2018. In the second quarter of 2018, prime CPR was 17.0%, and non-prime CPR was 12.9%.
	●	In the second quarter of 2018, Ocwen originated forward and reverse mortgage loans with unpaid principal balances of $216.4 million and $153.6 million, respectively.
	●	Our reverse mortgage portfolio ended the quarter with an estimated $106.7 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.
	●	Invested $155.2 million of excess cash to reduce borrowings on advances and warehouse lines and over $90 million in portfolio investments largely made up of seasoned residential loans acquired through executing RMBS call rights and targeted Ginnie Mae securitization loan buyouts.
	●	Announced updated annual synergy run-rate savings target of $100 million over annualized Q2 2018 combined Ocwen and PHH operating expenses, which we aim to achieve within about 18 months of close and is higher than our previous estimate of $50 million. This synergy target does not include the impact of transition-related expenses such as technology and other integration costs and severance expense or net MSR valuation adjustments. The closing is subject to regulatory approvals and other closing conditions.

 

Webcast and Conference Call

 

Ocwen will host a webcast and conference call on Thursday, July 26, 2018, at 8:30 a.m., Eastern Time, to discuss its financial results for the second quarter of 2018. 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 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 or others, 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 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 and January 2018 agreements with New Residential Investment Corp. (NRZ); our ability to maintain our long-term relationship with NRZ; 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; our ability to complete the proposed acquisition of PHH Corporation (PHH) in the third quarter or at all, 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 NRZ; our ability to execute an effective chief executive officer leadership transition; 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, 2017 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

(Dollars in thousands)

 

		At or for the Three Months Ended
		June 30, 2018				March 31, 2018				December 31, 2017				September 30, 2017				June 30, 2017
Total unpaid principal balance of loans and REO serviced		$	167,127,014			$	173,388,876			$	179,352,554			$	187,468,318			$	194,798,424
Non-performing loans and REO serviced as a % of total UPB (1)			8.3	%			9.0	%			9.3	%			9.4	%			9.6	%
Prepayment speed (average CPR)(2) (3)			14.3	%			12.9	%			14.4	%			14.7	%			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 June 30, 2018 includes 17.0% for prime loans and 12.9% for non-prime loans.

 

 

Segment Results

(Dollars in thousands)

 

		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2018				2017				2018				2017
Servicing
Revenue		$	230,509			$	271,784			$	456,605			$	555,802
Expenses			166,888				201,928				337,984				418,842
Other expense, net			(61,535	)			(60,638	)			(96,053	)			(124,613	)
Income before income taxes			2,086				9,218				22,568				12,347
Lending
Revenue			19,002				32,776				48,197				63,522
Expenses			17,785				32,886				38,081				62,217
Other income (expense), net			182				(504	)			55				(810	)
Income (loss) before income taxes			1,399				(614	)			10,171				495
Corporate Items and Other
Revenue			4,070				6,740				9,036				13,840
Expenses			20,977				45,666				36,086				75,804
Other expense, net			(14,983	)			(11,286	)			(29,129	)			(22,984	)
Loss before income taxes			(31,890	)			(50,212	)			(56,179	)			(84,948	)
Consolidated loss before income taxes		$	(28,405	)		$	(41,608	)		$	(23,440	)		$	(72,106	)

 

 

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data)
		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2018				2017				2018				2017
Revenue
Servicing and subservicing fees		$	222,227			$	255,801			$	444,365			$	528,303
Gain on loans held for sale, net			24,393				28,255				44,193				51,199
Other			6,961				27,244				25,280				53,662
Total revenue			253,581				311,300				513,838				633,164
Expenses
Compensation and benefits			69,838				90,411				147,913				182,212
Professional services			32,389				65,405				70,159				107,234
Servicing and origination			28,276				35,645				59,694				75,815
Technology and communications			23,906				24,254				46,709				51,601
MSR valuation adjustments, net			33,118				41,568				50,247				82,020
Occupancy and equipment			12,859				16,480				25,473				34,229
Other			5,264				6,717				11,956				23,752
Total expenses			205,650				280,480				412,151				556,863
Other income (expense)
Interest income			3,355				4,239				6,055				8,002
Interest expense			(77,503	)			(81,128	)			(128,313	)			(165,190	)
Gain on sale of mortgage servicing rights, net			78				1,033				1,036				1,320
Other, net			(2,266	)			3,428				(3,905	)			7,461
Total other expense, net			(76,336	)			(72,428	)			(125,127	)			(148,407	)
Loss before income taxes			(28,405	)			(41,608	)			(23,440	)			(72,106	)
Income tax expense			1,348				2,828				3,696				4,953
Net loss			(29,753	)			(44,436	)			(27,136	)			(77,059	)
Net income attributable to non-controlling interests			(78	)			(71	)			(147	)			(172	)
Net loss attributable to Ocwen stockholders		$	(29,831	)		$	(44,507	)		$	(27,283	)		$	(77,231	)
Loss per share attributable to Ocwen stockholders
Basic		$	(0.22	)		$	(0.36	)		$	(0.20	)		$	(0.62	)
Diluted		$	(0.22	)		$	(0.36	)		$	(0.20	)		$	(0.62	)
Weighted average common shares outstanding
Basic			133,856,132				124,582,280				133,490,828				124,300,171
Diluted			133,856,132				124,582,280				133,490,828				124,300,171

 

 

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data)
		June 30, 2018				December 31, 2017
Assets
Cash		$	228,412			$	259,655
Mortgage servicing rights ($1,043,995 and $671,962 carried at fair value)			1,043,995				1,008,844
Advances, net			173,787				211,793
Match funded assets (related to variable interest entities (VIEs))			993,926				1,177,357
Loans held for sale ($153,906 and $214,262 carried at fair value)			209,453				238,358
Loans held for investment, at fair value			5,143,758				4,715,831
Receivables, net			178,678				199,529
Premises and equipment, net			30,619				37,006
Other assets ($8,816 and $8,900 carried at fair value)(amounts related to VIEs of $20,021 and $27,359)			417,568				554,791
Total assets		$	8,420,196			$	8,403,164
Liabilities and Equity
Liabilities
HMBS-related borrowings, at fair value		$	5,040,983			$	4,601,556
Match funded liabilities (related to VIEs)			750,694				998,618
Other financing liabilities ($672,619 and $508,291 carried at fair value)			747,503				593,518
Other secured borrowings, net			340,418				545,850
Senior notes, net			347,612				347,338
Other liabilities ($2,448 and $635 carried at fair value)			591,803				769,410
Total liabilities			7,819,013				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 June 30, 2018, and December 31, 2017, respectively			1,339				1,315
Additional paid-in capital			552,800				547,057
Retained earnings (accumulated deficit)			47,056				(2,083	)
Accumulated other comprehensive loss, net of income taxes			(1,171	)			(1,249	)
Total Ocwen stockholders’ equity			600,024				545,040
Non-controlling interest in subsidiaries			1,159				1,834
Total equity			601,183				546,874
Total liabilities and equity		$	8,420,196			$	8,403,164

 

 

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
		For the Six Months Ended June 30,
		2018				2017
Cash flows from operating activities
Net loss		$	(27,136	)		$	(77,059	)
Adjustments to reconcile net loss to net cash provided by operating activities:
MSR valuation adjustments, net			50,247				82,020
Gain on sale of mortgage servicing rights, net			(1,036	)			(1,320	)
Provision for bad debts			25,879				31,918
Depreciation			12,640				13,439
Amortization of debt issuance costs			1,662				1,334
Equity-based compensation expense			772				3,263
Gain on valuation of financing liability			(8,642	)			—
Net gain on valuation of mortgage loans held for investment and HMBS-related borrowings			(7,930	)			(11,381	)
Gain on loans held for sale, net			(16,744	)			(29,512	)
Origination and purchase of loans held for sale			(838,581	)			(2,243,475	)
Proceeds from sale and collections of loans held for sale			800,982				2,217,259
Changes in assets and liabilities:
Decrease in advances and match funded assets			182,481				226,742
Decrease in receivables and other assets, net			86,606				89,437
Decrease in other liabilities			(68,556	)			(28,053	)
Other, net			3,926				8,013
Net cash provided by operating activities			196,570				282,625
Cash flows from investing activities
Origination of loans held for investment			(487,472	)			(698,473	)
Principal payments received on loans held for investment			186,216				192,569
Purchase of mortgage servicing rights			—				(1,657	)
Proceeds from sale of mortgage servicing rights			224				1,464
Proceeds from sale of advances			4,726				3,719
Issuance of automotive dealer financing notes			(19,642	)			(85,076	)
Collections of automotive dealer financing notes			52,581				76,264
Additions to premises and equipment			(6,398	)			(7,243	)
Other, net			3,577				2,277
Net cash used in investing activities			(266,188	)			(516,156	)

 

 

OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS — (continued) (Dollars in thousands)

 

		For the Six Months Ended June 30,
		2018				2017
Cash flows from financing activities
Repayment of match funded liabilities, net			(247,924	)			(172,620	)
Proceeds from mortgage loan warehouse facilities and other secured borrowings			1,546,226				4,216,466
Repayments of mortgage loan warehouse facilities and other secured borrowings			(1,870,943	)			(4,299,411	)
Proceeds from sale of mortgage servicing rights accounted for as a financing			279,586				—
Proceeds from sale of reverse mortgages (HECM loans) accounted for as a financing (HMBS-related borrowings)			499,576				664,453
Repayment of HMBS-related borrowings			(181,548	)			(176,231	)
Capital distribution to non-controlling interest			(822	)			—
Other, net			(991	)			(2,314	)
Net cash provided by financing activities			23,160				230,343
Net decrease in cash and restricted cash			(46,458	)			(3,188	)
Cash and restricted cash at beginning of year			302,560				302,398
Cash and restricted cash at end of period (1)		$	256,102			$	299,210

 

(1)	Cash and restricted cash as of June 30, 2018 and June 30, 2017 includes $228.4 million and $251.5 million of cash and $27.7 million and $47.7 million of restricted cash respectively.