Ocwen Financial Corporation
Aug 3, 2010

Ocwen Financial Corporation Announces Second Quarter 2010 Financial Results

WEST PALM BEACH, Fla., Aug. 3, 2010 -- Ocwen Financial Corporation ("Ocwen" or the "Company") (NYSE:OCN) today reported net income of $16.0 million for the second quarter of 2010 compared to net income of $17.8 million for the second quarter of 2009. The decline in net income was primarily due to the separation of the Altisource business (f/k/a Ocwen Solutions) from Ocwen in August 2009 and certain one-time charges reflected in the quarter along with professional fees incurred and operating expenses associated with the pending HomEq servicing acquisition which are partially offset by a reversal of an $8.2 million valuation allowance for income tax expense.Net income per diluted share was $0.15 for the second quarter of 2010 compared to $0.26 for the second quarter of 2009.

Second quarter pre-tax income from continuing operations was affected by:

Net income for the six months ended June 30, 2010 was $36.9 million or $0.35 per share, compared to $32.9 million or $0.49 per share for the same period in 2009.

SECOND QUARTER BUSINESS PERFORMANCE HIGHLIGHTS

Subsequent to the end of the quarter, the Company successfully closed a syndicated $350 million five year Senior Secured Term Loan Facility that will be used in part to acquire HomEq.

"With the acquisition of HomEq, we will become the third largest subprime servicer with over $80 billion in unpaid principal balances.Since 2001, Ocwen's servicing portfolio has grown at an average annual rate of 16%.We believe that there will be continued consolidation in the servicing industry and that we have significant and sustainable competitive advantages that make us the most viable acquirer of subprime servicing rights.Those advantages include our strong financial position, highly scalable platform, lowest operating cost structure and our ability to resolve delinquent loans faster and for higher value than other servicers. With the closing of the $350 million Senior Secured Term Loan Facility, Ocwen will have $200 million of liquidity after funding the HomEq acquisition," stated Chairman and CEO William Erbey.

"Our newly acquired servicing portfolio of $6.9 billion from Saxon had minimal impact on second quarter results as it was boarded in the middle of the quarter, and ancillary revenues, which are driven by the resolution of non-performing loans, will not ramp up until a few quarters after the acquisition.Similarly, as we resolve non performing loans over the next several quarters, we also expect to see a reduction in outstanding advances.Through our industry leading loan modification efforts and other loan workouts, we are able to shorten the timeframe that loans remain nonperforming.

"We have also reached the stage where loans modified under the federal government's HAMP initiative are now reaching their one year life, entitling us to additional success fees.We recorded $0.7 million in HAMP success fees in the second quarter and expect this revenue stream to increase over the next few quarters," said Ronald Faris, President of Ocwen.

Faris also added, "We are on track to close the HomEq transaction as scheduled on September 1, 2010.With the closing of HomEq and Saxon, we will have deployed over $440 million in effective equity into the servicing business this year doubling our investment.As our objective is to earn a 25% or better pre-tax return on the equity deployed in the servicing business, we have substantially increased the earnings capabilities of the servicing business.For the remainder of the year, however, we will see a sizeable negative impact on reported pre-tax earnings of approximately $50 million due to the set-up and transition costs associated with acquiring the HomEq platform.These costs were built into our investment analysis and anticipated cumulative returns, but they are required to be expensed as incurred and can not be capitalized."

Servicing

In comparison to the second quarter of 2009, revenue was 21% higher, and the average unpaid principal balance serviced increased from $39.6 billion at June 30, 2009 to $53.9 billion at June 30, 2010.Operating expenses increased by 25% primarily due to a $5.1 million accrual related to the MDL legal settlement along with professional services of $1.2 million and additional ramp-up expenses related to the acquisition of HomEq of $1.5 million.Pre-tax income for Servicing of $21.4 million was 38% higher than the same quarter last year even with the above one time charges.

Loans and Residuals

Loans and Residuals incurred a loss from continuing operations before taxes of $0.9 million as compared to a loss of $2.8 million in the second quarter of 2009.The balance of assets in this segment was $112.9 million at June 30, 2010 which includes $72.5 million of non-recourse assets associated with the four securitization trusts that we first included in our financial statements in 2010.The improvement in operating results reflects lower unrealized losses associated with a slower decline in loan and real estate valuations and a portfolio that is, excluding the securitization trusts, 30% smaller than in the second quarter of 2009.

Asset Management Vehicles

The loss from continuing operations before taxes for Asset Management Vehicles was $0.1 million as compared to $1.4 million in the second quarter of 2009.The carrying value of our investment in asset management vehicles was $13.5 million at June 30, 2010.

Corporate

In the second quarter of 2010, Corporate losses from continuing operations before taxes were $7.1 million compared to pre-tax profit of $3.0 million in the second quarter of 2009.The following unique items impacted the quarter:

Our exposure to non-core assets subject to valuation estimates has decreased significantly as our portfolio of Auction rate securities, Subordinates and residuals, Loans held for resale and Investments in unconsolidated entities have decreased by 59% since December 31, 2009.

Total consolidated assets increased by 17%, or $308.2 million, to $2,077.5 million during the first six months of 2010, and Total liabilities increased by 30%, or $274.1 million, to $1,177.6 million.These increases were primarily the result of advances from the $6.9 billion in servicing acquired from Saxon.

Ocwen Financial Corporation is a leading provider of residential and commercial loan servicing, special servicing and asset management services.Ocwen is headquartered in West Palm Beach, Florida with offices in California, the District of Columbia and Georgia and support operations in India and Uruguay.Utilizing proprietary technology and world-class training and processes, we provide solutions that make our clients' loans worth more.Additional information is available at www.ocwen.com.

This news 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, including, but not limited to, the securitization market and our plans to securitize loans and expectations as to the impact of rising interest rates and cost-effective resources in India.Forward-looking statements are not guarantees of future performance, and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially.

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: general economic and market conditions, prevailing interest or currency exchange rates, governmental regulations and policies, international political and economic uncertainty, availability of adequate and timely sources of liquidity, federal income tax rates, real estate market conditions and trends and the outcome of ongoing litigation as well as other risks detailed in Ocwen's reports and filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2009 and Form 10-Q for the quarters ended March 31, 2010.The forward-looking statements speak only as of the date they are made and should not be relied upon.Ocwen undertakes no obligation to update or revise the forward-looking statements.

Residential Servicing Statistics (Dollars in thousands)
At or for the three months ended
June 30,
2010
March 31,


2010
December 31,
2009
September 30,
2009
June 30,
2009
Total unpaid principal balance of loans and REO serviced $55,244,576 $49,677,999 $49,980,077 $40,293,698 $38,406,007


Non-performing loans and REO serviced as a % of total UPB (1)
26.2% 25.3% 25.6% 26.9% 27.4%
Prepayment speed (average CPR) 13% 12% 15%

20%
22%
(1)Loans for which borrowers are making scheduled payments under modification, forbearance or bankruptcy plans are considered performing loans.Non-performing loans exclude those serviced under special servicing agreements where we have no obligation to advance.
Segment Results (Dollars in thousands) (UNAUDITED)
Three months Six months
For the periods ended June 30, 2010 2009 2010 2009
Ocwen Asset Management


Servicing


Revenue $75,759 $62,726 $151,212 $137,421
Operating expenses 41,241 32,955 72,028 67,173
Income from operations 34,518 29,771 79,184

70,248
Other expense, net (13,093) (14,268) (25,253) (29,548)
Income from continuing operations before taxes 21,425 15,503 53,931 40,700
Loans and Residuals
Revenue
Operating expenses 1,369 747 2,561

1,309
Loss from operations (1,369) (747) (2,561) (1,309)
Other income (expense), net 449 (2,096) 1,514 (5,672)
Loss from continuing operations before taxes (920) (2,843) (1,047)

(6,981)
Asset Management

Revenue 176 460 364

997
Operating expenses 443 1,016 910 1,778
Loss from operations (267) (556) (546) (781)
Other income (expense), net 149 (846) 671

(1,148)
Income (loss) from continuing operations before taxes (118) (1,402) 125 (1,929)
Income from continuing operations before income taxes 20,387 11,258 53,009 31,790
Ocwen Solutions

Mortgage Services

Revenue 24,165

42,182
Operating expenses 16,017

28,909
Income from operations 8,148 13,273
Other income, net 700 722
Income from continuing operations before taxes 8,848

13,995
Financial Services

Revenue 16,471

33,787
Operating expenses 17,557 35,706
Loss from operations (1,086) (1,919)
Other expense, net (647)

(1,115)
Loss from continuing operations before taxes (1,733) (3,034)
Technology Products

Revenue

12,108 22,682
Operating expenses 7,121 15,294
Income from operations 4,987

7,388
Other expense, net (52) (129)
Income from continuing operations before taxes 4,935 7,259
Income from continuing operations before income taxes 12,050

18,220


Corporate Items and Other
Revenue 425 112 774 365
Operating expenses 1,817 3,830 4,740

7,813
Loss from operations (1,392) (3,718) (3,966) (7,448)
Other income (expense), net (5,733) 6,755 (4,336) 7,047
Income (loss) from continuing operations before taxes (7,125) 3,037 (8,302)

(401)


Corporate Eliminations
Revenue (407) (6,863) (811) (13,665)
Operating expenses (212) (6,593) (404)

(13,066)
Loss from operations (195) (270) (407) (599)
Other income, net 195 270 407 599
Income from continuing operations before taxes

Consolidated income from continuing operations before income taxes
$13,262

$26,345

$ 44,707



$49,609
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(UNAUDITED)
Three months Six months
For the periods ended June 30, 2010 2009 2010

2009


Revenue
Servicing and subservicing fees $65,936 $65,488 $132,416 $144,298


Process management fees
8,315 40,086 16,221 73,778
Other revenues 1,702 3,605 2,902 5,693
Total revenue 75,953 109,179 151,539 223,769
Operating expenses

Compensation and benefits

13,089
27,254 25,866 55,799
Amortization of mortgage servicing rights 7,854 8,543 14,229 18,584
Servicing and origination 2,458 15,835 3,049

28,473
Technology and communications 6,191 4,481 11,855 9,289
Professional services 9,134 8,208 12,389 15,394
Occupancy and equipment 3,870 4,818 8,316

10,864
Other operating expenses 2,062 3,511 4,131 6,513
Total operating expenses 44,658 72,650 79,835 144,916
Income from operations 31,295 36,529 71,704 78,853
Other income (expense)

Interest income

1,900
2,254 5,545 4,419
Interest expense (13,359) (17,300) (25,830) (33,963)
Gain (loss) on trading securities (1,710) 5,435 (945)

5,055
Loss on loans held for resale, net (1,049) (2,987) (2,087) (7,541)
Equity in earnings (losses) of unconsolidated entities 343 (576) 1,078 (549)
Other, net (4,158) 2,990 (4,758)

3,335
Other expense, net (18,033) (10,184) (26,997) (29,244)
Income from continuing operations before income taxes 13,262 26,345 44,707 49,609
Income tax expense (benefit) (2,777) 9,472 7,797 17,509
Income from continuing operations 16,039 16,873 36,910

32,100
Income from discontinued operations, net of income taxes 1,052 864
Net income 16,039 17,925 36,910 32,964
Net income attributable to non-controlling interests (1) (95) (12)

(25)
Net income attributable to Ocwen Financial Corporation (OCN) $16,038 $17,830 $36,898 $32,939


Basic earnings per share

Income from continuing operations attributable to OCN $0.16 $0.25 $0.37 $0.49


Income from discontinued operations attributable to OCN
0.01 0.02
Net income attributable to OCN $0.16 $0.26 $0.37 $0.51


Diluted earnings per share

Income from continuing operations attributable to OCN $0.15 $0.24 $0.35 $0.48


Income from discontinued operations attributable to OCN
0.02 0.01
Net income attributable to OCN $0.15 $0.26 $0.35 $0.49


Weighted average common shares outstanding

Basic 100,168,953 67,316,446

100,072,950
65,045,842
Diluted 107,728,092 72,854,415 107,526,786

70,375,555
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
June 30,


2010
December 31,
2009


Assets
Cash $143,386 $90,919


Restricted cash – for securitization investors
1,012


Trading securities, at fair value


Auction rate
78,073 247,464
Subordinates and residuals 52 3,692
Loans held for resale, at lower of cost or fair value 30,696 33,197
Advances 150,870 145,914
Match funded advances 1,184,851 822,615
Loans, net – restricted for securitization investors 70,860
Mortgage servicing rights 126,668 117,802
Receivables, net 56,939 67,095
Deferred tax assets, net 117,253 132,683
Premises and equipment, net 3,528 3,325
Investments in unconsolidated entities 13,533 15,008
Other assets 99,808 89,636
Total assets $2,077,529

$1,769,350


Liabilities and Equity

Liabilities

Match funded liabilities $835,172 $465,691
Secured borrowings – owed to securitization investors

67,199
Lines of credit and other secured borrowings 100,667 55,810
Investment line 156,968
Servicer liabilities 1,970 38,672
Debt securities 82,554 95,564
Other liabilities 90,037 90,782
Total liabilities 1,177,599 903,487
Equity
Ocwen Financial Corporation stockholders' equity
Common stock, $.01 par value; 200,000,000 shares authorized;


100,192,127 and 99,956,833 shares issued and outstanding
at June 30, 2010 and December 31, 2009, respectively
1,002 1,000
Additional paid-in capital 461,890 459,542
Retained earnings 444,370 405,198
Accumulated other comprehensive loss, net of income taxes (7,572) (129)
Total Ocwen Financial Corporation stockholders' equity 899,690 865,611
Non-controlling interest in subsidiaries 240 252
Total equity 899,930 865,863
Total liabilities and equity $2,077,529

$1,769,350


CONTACT:  Ocwen Financial Corp.
          David J. Gunter, Executive Vice President, Chief Financial 
           Officer & Chief Accounting Officer
          (561) 682-8367
          David.Gunter@Ocwen.com