Ocwen Financial Corporation
OCWEN FINANCIAL CORP (Form: 8-K, Received: 08/02/2017 06:59:43)
 

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): August 2, 2017  

 

  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:

  o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
  o 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 o

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. o

 
 

Item 2.02 Results of Operations and Financial Condition.

 

On August 2, 2017, Ocwen Financial Corporation issued a press release announcing preliminary results for the second quarter ended June 30, 2017. 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 August 2, 2017, announcing preliminary financial results for the second quarter ended June 30, 2017
 
 

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: August 2, 2017 By: /s/ Michael R. Bourque, Jr.
    Michael R. Bourque, Jr.
    Chief Financial Officer
    (On behalf of the Registrant and as its principal financial officer)
 

 

Exhibit 99.1

(OCWEN LOGO) Ocwen Financial Corporation ®

FOR IMMEDIATE RELEASE

 

OCWEN FINANCIAL ANNOUNCES PRELIMINARY OPERATING RESULTS

FOR SECOND QUARTER 2017

 

Reported a Q2 2017 net loss of $(44) million, a $43 million improvement over Q2 2016
     
Generated $195 million of Cash from Operating Activities during Q2 2017
     
Continued focus on community outreach programs with “Summer of Help and Hope” events
     
Assisted over 11,000 additional struggling families through loan modifications

 

West Palm Beach, FL – (August 2, 2017) Ocwen Financial Corporation, (NYSE:OCN) (“Ocwen” or the “Company”) , a leading financial services holding company, today announced preliminary operating results for the second quarter of 2017. Ocwen incurred a GAAP net loss of $(44.4) million, or $(0.36) per share, for the three months ended June 30, 2017 compared to a net loss of $(87.2) million for the three months ended June 30, 2016. Ocwen generated revenue of $311.3 million, down 16.6% compared to the second 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 offset by mortgage lending growth. Cash Flows from Operating Activities were $195.1 million for the second quarter and $280.7 million for the six months ended June 30, 2017, compared to $172.2 million during the first six months of last year.

 

“Despite the recent regulatory setbacks, we made progress during the second quarter on a number of fronts. We signed our agreements relating to mortgage servicing rights transfer and subservicing with New Residential Investment Corp. We settled additional legacy litigation matters further reducing future uncertainty; and we specifically identified approximately $12 million in annual corporate overhead cost savings that we expect to realize in the second half of this year. We also saw our servicing business achieve its fourth consecutive quarterly pre-tax profit, and for this quarter, after adjusting for various items such as legal settlements, Ocwen recorded an overall adjusted pre-tax profit of $2.8 million,” commented Ron Faris, President and CEO of Ocwen. Mr. Faris continued, “Just as important, we continued our successful community outreach efforts, assisting over 11,000 struggling families.” 

 

Second Quarter 2017 Results

 

Pre-tax loss for the second quarter of 2017 was $(41.6) million, a $54.8 million improvement from the second quarter of 2016. Pre-tax results for the quarter include a number of significant items: $(33.6) million of legal settlement-related expenses (after allowing for expected insurance and other recoveries), $(5.6) million of CFPB and state regulatory matter-related defense costs, $(3.7) million of unfavorable GNMA & GSE MSR Fair Value changes and $(1.5) million of severance and other items. Excluding these significant items, the Company had an adjusted pre-tax income of $2.8 million during the second quarter of 2017.

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The Servicing segment recorded $9.2 million of pre-tax income, a $21.4 million improvement versus the second quarter of 2016, despite $(23.0) million lower HAMP fees.

 

The Lending segment recorded $(0.6) million of pre-tax loss for the second quarter of 2017, a $(5.6) million decline versus the second quarter of 2016. Total mortgage lending volume declined by 26.1% over the second quarter of 2016, driven by a 70% reduction in the Forward Lending Correspondent channel as the Company decided to exit that channel in the second quarter of 2017. The Correspondent volume decline was offset by a 96% increase in the higher margin Forward Lending Retail channel and 33% overall growth in Reverse Lending volumes.

 

Additional Business Highlights

 

Completed 11,029 modifications in the quarter, 24% of which were HAMP modifications.
Delinquencies decreased from 11.2% at December 31, 2016 to 9.6% at June 30, 2017, primarily driven by loss mitigation efforts.
The constant pre-payment rate (CPR) increased from 14.0% in the first quarter of 2017 to 15.0% in the second quarter of 2017. In the second quarter of 2017, prime CPR was 18.2%, and non-prime CPR was 13.0%.
In the second quarter of 2017, Ocwen originated forward and reverse mortgage loans with unpaid principal balance of $699.5 million and $275.4 million, respectively. The Forward Lending originations decrease of 16.9% versus the first quarter of 2017 was primarily driven by our exit from the Correspondent channel and focus on higher margin retail and wholesale originations.
Our reverse mortgage portfolio ended the quarter with an estimated $105.4 million in undiscounted future gains from future draws on existing loans. Neither the anticipated future gains nor the future funding liability are included in the Company’s financial statements.
Partnered with the Hardest Hit Fund Program across 18 states and launched “Summer of Help & Hope” borrower outreach events.

 

Webcast and Conference Call

 

Ocwen will host a webcast and conference call on Wednesday, August 2, 2017, at 8:30 a.m., Eastern Time, to discuss its financial results for the second 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) .

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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; 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 contain and reduce our operating costs, including our ability to successfully execute on our cost improvement initiative; the adequacy of our financial resources, including our sources of liquidity and ability to sell, fund and recover advances, repay borrowings and comply with debt covenants, 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 (filed with the SEC on 5/15/17) and any current and quarterly reports since such date. 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.

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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. Further information may be found on Ocwen’s website.

 

Preliminary Results

 

The financial results and other financial data presented in this press release are preliminary, based upon the Company’s estimates and subject to completion of the Company’s financial closing procedures and issuance of its financial statements as of and for the quarter ended June 30, 2017. Moreover, the financial results and other financial data have been prepared on the basis of currently available information. The Company’s final financial results and other financial data could differ materially from its preliminary financial results and other financial data. The Company’s final financial results will be set forth in the Company’s Form 10-Q for the second quarter of 2017.

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 (Preliminary, Unaudited)
(Dollars in thousands)   

    At or for the Three Months Ended  
    June 30,
2017
    March 31,
2017
    December 31,
2016
    September 30,
2016
    June 30,
2016
 
Total unpaid principal balance of loans and REO serviced   $ 194,798,424     $ 202,369,014     $ 209,092,130     $ 216,892,002     $ 229,276,001  
                                         
Non-performing loans and REO serviced as a % of total UPB (1)     9.6 %     10.7 %     11.2 %     11.4 %     11.9 %
                                         
Prepayment speed (average CPR) (2) (3)     15.0 %     14.0 %     15.1 %     15.0 %     14.2 %
(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, 2017 includes 18.2% for prime loans and 13.0% for non-prime loans.

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Segment Results (Preliminary, Unaudited)
(Dollars in thousands)
                       
    For the Three Months Ended
June 30,
    For the Six Months Ended
June 30,
 
    2017     2016     2017     2016  
Servicing                                
Revenue   $ 271,784     $ 325,120     $ 555,802     $ 632,547  
Expenses     201,928       257,751       418,842       532,070  
Other expense, net     (60,638 )     (79,553 )     (124,613 )     (178,340 )
Income (loss) before income taxes     9,218       (12,184 )     12,347       (77,863 )
                                 
Lending                                
Revenue     32,776       35,376       63,522       58,660  
Expenses     32,886       31,181       62,217       55,558  
Other income (expense), net     (504 )     815       (810 )     1,329  
Income (loss) before income taxes     (614 )     5,010       495       4,431  
                                 
Corporate Items and Other                                
Revenue     6,740       12,558       13,840       12,604  
Expenses     45,666       96,086       75,804       126,047  
Other expense, net     (11,286 )     (5,696 )     (22,984 )     (11,648 )
Loss before income taxes     (50,212 )     (89,224 )     (84,948 )     (125,091 )
                                 
Corporate Eliminations                                
Revenue                        
Expenses                        
Other income (expense), net                        
Income (loss) before income taxes                        
                                 
Consolidated loss before income taxes   $ (41,608 )   $ (96,398 )   $ (72,106 )   $ (198,523 )
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OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Preliminary, Unaudited)
 
    For the Three Months Ended
June 30,
    For the Six Months Ended
June 30,
 
    2017     2016     2017     2016  
Revenue                                
Servicing and subservicing fees   $ 255,801     $ 307,262     $ 528,303     $ 604,758  
Gain on loans held for sale, net     28,255       27,857       51,199       43,429  
Other     27,244       37,935       53,662       55,624  
Total revenue     311,300       373,054       633,164       703,811  
                                 
Expenses                                
Compensation and benefits     90,411       98,422       182,212       194,671  
Servicing and origination     64,516       89,987       132,423       185,679  
Professional services     65,405       121,399       107,234       192,306  
Technology and communications     24,254       32,709       51,601       59,578  
Occupancy and equipment     16,480       20,708       34,229       45,453  
Amortization of mortgage servicing rights     12,697       8,347       25,412       21,153  
Other     6,717       13,446       23,752       14,835  
Total expenses     280,480       385,018       556,863       713,675  
                                 
Other income (expense)                                
Interest income     4,239       5,140       8,002       9,330  
Interest expense     (81,128 )     (91,033 )     (165,190 )     (197,122 )
Gain on sale of mortgage servicing rights, net     1,033       853       1,320       2,028  
Other, net     3,428       606       7,461       (2,895 )
Total other expense, net     (72,428 )     (84,434 )     (148,407 )     (188,659 )
                                 
Loss before income taxes     (41,608 )     (96,398 )     (72,106 )     (198,523 )
Income tax expense (benefit)     2,828       (9,180 )     4,953       (104 )
Net loss     (44,436 )     (87,218 )     (77,059 )     (198,419 )
Net income attributable to non-controlling interests     (71 )     (160 )     (172 )     (290 )
Net loss attributable to Ocwen stockholders   $ (44,507 )   $ (87,378 )   $ (77,231 )   $ (198,709 )
                                 
Loss per share attributable to Ocwen stockholders                                
Basic   $ (0.36 )   $ (0.71 )   $ (0.62 )   $ (1.60 )
Diluted   $ (0.36 )   $ (0.71 )   $ (0.62 )   $ (1.60 )
                                 
Weighted average common shares outstanding                                
Basic     124,582,280       123,893,752       124,300,171       123,993,545  
Diluted     124,582,280       123,893,752       124,300,171       123,993,545  
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OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Preliminary, Unaudited)
 
    June 30,
 2017
    December 31,
 2016
 
Assets                
Cash   $ 251,472     $ 256,549  
Mortgage servicing rights ($625,650 and $679,256 carried at fair value)     975,185       1,042,978  
Advances, net     219,214       257,882  
Match funded assets (related to variable interest entities (VIEs))     1,292,908       1,451,964  
Loans held for sale ($239,491 and $284,632 carried at fair value)     260,959       314,006  
Loans held for investment, at fair value     4,223,776       3,565,716  
Receivables, net     252,797       265,720  
Premises and equipment, net     56,409       62,744  
Other assets ($18,037 and $20,007 carried at fair value) ($26,570 and $43,331 related to VIEs)     399,672       438,104  
Total assets   $ 7,932,392     $ 7,655,663  
                 
Liabilities and Equity                
Liabilities                
HMBS-related borrowings, at fair value   $ 4,061,626     $ 3,433,781  
Other financing liabilities ($441,007 and $477,707 carried at fair value)     533,806       579,031  
Match funded liabilities (related to VIEs)     1,108,377       1,280,997  
Other secured borrowings, net     643,860       678,543  
Senior notes, net     347,063       346,789  
Other liabilities ($11 and $1,550 carried at fair value)     657,413       681,239  
Total liabilities     7,352,145       7,000,380  
                 
Equity                
Ocwen Financial Corporation (Ocwen) stockholders’ equity                
Common stock, $.01 par value; 200,000,000 shares authorized; 124,778,548 and 123,988,160 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively     1,248       1,240  
Additional paid-in capital     529,188       527,001  
Retained earnings     48,652       126,167  
Accumulated other comprehensive loss, net of income taxes     (1,338 )     (1,450 )
Total Ocwen stockholders’ equity     577,750       652,958  
Non-controlling interest in subsidiaries     2,497       2,325  
Total equity     580,247       655,283  
Total liabilities and equity   $ 7,932,392     $ 7,655,663  
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OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Preliminary, Unaudited)
 
    For the Six Months Ended
June 30,
 
    2017     2016  
Cash flows from operating activities                
Net loss   $ (77,059 )   $ (198,419 )
Adjustments to reconcile net loss to net cash provided by operating activities:                
Amortization of mortgage servicing rights     25,412       21,153  
Loss on valuation of mortgage servicing rights, at fair value     51,959       59,104  
Impairment of mortgage servicing rights     4,650       39,030  
Gain on sale of mortgage servicing rights, net     (1,320 )     (2,028 )
Realized and unrealized (gains) losses on derivative financial instruments     (31 )     2,080  
Provision for bad debts     31,918       32,785  
Depreciation     13,439       11,850  
Amortization of debt issuance costs     1,334       6,498  
Equity-based compensation expense     3,263       3,079  
Net gain on valuation of mortgage loans held for investment and HMBS-related borrowings     (11,381 )     (14,451 )
Gain on loans held for sale, net     (29,512 )     (35,794 )
Origination and purchase of loans held for sale     (2,243,475 )     (2,883,124 )
Proceeds from sale and collections of loans held for sale     2,217,259       2,789,433  
Changes in assets and liabilities:                
Decrease in advances and match funded assets     226,742       215,525  
Decrease in receivables and other assets, net     87,548       75,208  
(Decrease) increase in other liabilities     (28,053 )     40,955  
Other, net     8,043       9,285  
Net cash provided by operating activities     280,736       172,169  
                 
Cash flows from investing activities                
Origination of loans held for investment     (698,473 )     (675,665 )
Principal payments received on loans held for investment     192,569       238,838  
Purchase of mortgage servicing rights     (1,657 )     (12,432 )
Proceeds from sale of mortgage servicing rights     1,464       15,122  
Proceeds from sale of advances     3,719       66,651  
Issuance of automotive dealer financing notes     (85,076 )      
Collections of automotive dealer financing notes     76,264        
Additions to premises and equipment     (7,243 )     (17,312 )
Other     2,277       8,179  
Net cash used in investing activities     (516,156 )     (376,619 )
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OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (continued)
(Dollars in thousands)
(Preliminary, Unaudited)
 
    For the Six Months Ended
June 30,
 
    2017     2016  
Cash flows from financing activities                
Repayment of match funded liabilities, net     (172,620 )     (152,668 )
Proceeds from mortgage loan warehouse facilities and other secured borrowings     4,216,466       4,173,609  
Repayments of mortgage loan warehouse facilities and other secured borrowings     (4,475,642 )     (4,368,903 )
Payment of debt issuance costs     (841 )     (2,242 )
Proceeds from sale of reverse mortgages (HECM loans) accounted for as a financing (HMBS-related borrowings)     664,453       522,981  
Repurchase of common stock           (5,890 )
Other     (1,473 )     (794 )
Net cash provided by financing activities     230,343       166,093  
                 
Net decrease in cash     (5,077 )     (38,357 )
Cash at beginning of year     256,549       257,272  
Cash at end of period   $ 251,472     $ 218,915  
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