Ocwen Financial Announces Agreement With Oaktree for Additional $250 Million Investment and Preliminary Fourth Quarter Results
Executed agreement with Oaktree follows rigorous strategic review process
Continued profitability improvement and originations volume growth
Transformed into balanced and diversified originator and servicer positioned for profitable growth
The announcement of the anticipated debt investment from Oaktree marks the completion of a thorough and rigorous strategic review process that began in
This investment is in addition to the strategic relationship announced with Oaktree in
Preliminary Fourth Quarter Results
The Company reported a net loss of
The Company reported the following preliminary results for the fourth quarter 2020 (see “Note Regarding Non-GAAP Financial Measures” and “Note Regarding Financial Performance Estimates” below):
- Fourth quarter annualized pre-tax loss improved by
$242 millioncompared to the combined annualized pre-tax loss of Ocwenand PHH Corporationfor the second quarter 2018; fourth quarter annualized adjusted pre-tax earnings run rate excluding amortization of NRZ lump-sum payments improved by $383 millioncompared to the combined annualized adjusted pre-tax earnings run rate of Ocwenand PHH Corporationfor the second quarter 2018.
- Notable items for the quarter include, among others,
$13 millionof additional accrual related to the Company’s efforts to resolve the legacy CFPBmatter, $4 millionof other legal accruals and $1 millionof other net favorable items.
- Added approximately
$30 billionof servicing and subservicing UPB in the quarter, up 4X from prior year.
- Adequate liquidity at
December 31, 2020with approximately $285 millionof unrestricted cash; approximately $190 millionin MSR investments in the quarter.
Webcast and Conference Call
Ocwen will hold a conference call on
Note Regarding Financial Performance Estimates
This press release contains certain statements relating to our preliminary fourth quarter financial performance. These statements are based on currently available preliminary information and are subject to material changes following completion of our quarter-end and year-end closing procedures and other adjustments that may be made before our financial results are finalized and the audit of our financial statements is complete. There can be no assurance that actual final results will not differ from the preliminary financial results presented in the press release and any such differences could be material. In addition, these preliminary results are not comprehensive financial results for the fourth quarter, should not be viewed as a substitute for complete GAAP financial statements or more comprehensive financial information, and are not indicative of the results for any future period.
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. 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, our ability to consummate on favorable terms or at all the additional debt financing that is a condition to issuance and sale of the senior secured notes to Oaktree; our ability to satisfy the other conditions precedent to the issuance and sale of the senior secured notes to Oaktree; our ability to refinance our Senior Secured Term Loan and redeem the 6.375% senior unsecured notes due 2021 and the 8.375% senior secured second lien notes due 2022; our ability to obtain regulatory approvals and satisfy the closing conditions under the Transaction Agreement relating to our MSR joint venture with Oaktree and the timing for doing so; our ability to deploy the proceeds of the senior secured notes, if issued, in suitable investments at appropriate returns; uncertainty relating to the future impacts of the COVID-19 pandemic, including with respect to the response of the
Note Regarding Non-GAAP Financial Measures
This press release contains references to non-GAAP financial measures, such as our references to adjusted pre-tax income (loss) and adjusted pre-tax income (loss) excluding amortization of NRZ lump-sum payments.
We believe these non-GAAP financial measures provide a useful supplement to discussions and analysis of our financial condition. In addition, management believes that these presentations may assist investors with understanding and evaluating our cost re-engineering efforts and other initiatives to drive improved financial performance. However, these measures should not be analyzed in isolation or as a substitute to analysis of our GAAP expenses and pre-tax income (loss). There are certain limitations to the analytical usefulness of the adjustments we make to GAAP expenses and pre-tax income (loss) and, accordingly, we rely primarily on our GAAP results and 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
Beginning with the three months ended
In the table titled “Expense Notables”, we adjust GAAP operating expenses for the following factors (1) expenses related to severance, retention and other actions associated with continuous cost and productivity improvement efforts, (2) significant legal and regulatory settlement expense itemsa, (3) NRZ consent process expenses related to the transfer of legal title in MSRs to NRZ, (4) PHH acquisition and integration planning expenses, and (5) certain other significant activities including, but not limited to, insurance related expense and settlement recoveries, compensation or incentive compensation expense reversals and non-routine transactions (collectively, Other) consistent with the intent of providing management and investors with a supplemental means of evaluating our expenses.
|($ in millions)||Q2 '18||Q4 '19 (c)||Q4 '20 (c)|
|OCN + PHH
|I||Expenses (as reported) (a)||206||71||277||1,107||139||144|
|III||Deduction of MSR valuation adjustments, net||(33||)||—||(33||)||(132||)|
|IV||Operating Expenses (I+II+III)||173||72||245||979||139||557||144||577|
|Adjustments for Notables|
|Significant legal and regulatory settlement expenses||(2||)||(3||)||(5||)||(20||)||(3||)||(16||)|
|NRZ consent process expenses||(1||)||—||(1||)||(2||)||—||0|
|PHH acquisition and integration planning expenses||(2||)||—||(2||)||(8||)||—||—|
|Covid-19 Related Expenses||—||—||(3||)|
|VI||Adjusted Expenses (IV+V)||164||65||229||916||133||531||128||514|
(a) Q2’18 expenses as per OCN Form 10-Q of
(b) Reclassifications made to PHH reported expenses to conform to Ocwen presentation
(c) OCN changed the presentation of expenses in Q4’ 19 to separately report MSR valuation adjustments, net from operating expenses
a Including however not limited to
Income Statement Notables
In the table titled “Income Statement Notables”, we adjust GAAP pre-tax loss for the following factors (1) Expense Notables, (2) changes in fair value of our Agency and Non-Agency MSRs due to changes in interest rates, valuation inputs and other assumptions, net of hedge positions, (3) offsets to changes in fair value of our MSRs in our NRZ financing liability due to changes in interest rates, valuation inputs and other assumptions, (4) changes in fair value of our reverse originations portfolio due to changes in interest rates, valuation inputs and other assumptions, (5) certain other transactions, including but not limited to pension benefit cost adjustments and gains related to exercising servicer call rights and fair value assumption changes on other investments (collectively, Other) and (6) amortization of NRZ lump-sum cash payments consistent with the intent of providing management and investors with a supplemental means of evaluating our net income/(loss).
|($ in millions)||Q2 '18||Q4 '19||Q4 '20|
|OCN + PHH
|I||Reported Pre-Tax Income / (Loss)(a)||(28||)||(35||)||(63||)||(253||)||37||149||(1||)||(3||)|
|Adjustment for Notables|
|Expense Notables (from prior table)||9||7||16||7||16|
|Non-Agency MSR FV Change(b)||(5||)||—||(5||)||—||(6||)|
|Agency MSR FV Change, net of macro hedge(b)||(61||)||(9||)|
|NRZ MSR Liability FV Change (Interest Expense)||9||—||9||30||4|
|Reverse Lending FV Change||4||—||4||3||11|
|II||Total Income Statement Notables||11||7||18||72||(25||)||16|
|III||Adjusted Pre-tax Income (Loss) (I+II)||(17||)||(28||)||(45||)||(181||)||12||50||15||61|
|IV||Amortization of NRZ Lump-sum Cash Payments||(35||)||—||(35||)||(141||)||(26||)||(104||)||—|
|V||Adjusted Pre-tax Income (Loss) excluding Amortization of NRZ Lump-sum (III+IV)(c)||(52||)||(28||)||(81||)||(322||)||(14||)||(54||)||15||61|
(a) Q2’18 pre-tax loss as per respective Forms 10-Q filed on
(b) Represents FV changes that are driven by changes in interest rates, valuation inputs or other assumptions, net of unrealized gains / (losses) on macro hedge. Non-Agency = Total MSR excluding GNMA & GSE MSRs. Agency = GNMA & GSE MSRs. The adjustment does not include
(c) Represents OCN and PHH combined adjusted pre-tax income (loss) excluding amortization of NRZ lump-sum cash payments, annualized to equal
FOR FURTHER INFORMATION CONTACT:
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Source: Ocwen Financial Corp.