Ocwen Financial Provides Business Update and Preliminary Second Quarter Results
Preliminary second quarter results demonstrate continued momentum in operating and financial performance
Balanced business model, growing originations channels and proven core competency in special servicing position the Company well to deliver profitability and capture growth opportunities
The Company reported a net income of
The Company reported the following preliminary results for the second quarter 2020 (see “Note Regarding Non-GAAP Financial Measures” and “Note Regarding Financial Performance Estimates” below):
- Pre-tax loss was
$6.2 millioncompared to pre-tax loss of $84.3 millionfor the second quarter 2019. Adjusted pre-tax income was $17.8 million, included $10.0 millionof amortization of NRZ lump-sum payments; third consecutive quarter of positive adjusted pre-tax income. COVID-19 impact was immaterial during the quarter.
- Annualized pre-tax loss improved by
$228 millioncompared to the combined annualized pre-tax loss of Ocwenand PHH Corporationfor the second quarter 2018; annualized adjusted pre-tax earnings run rate excluding amortization of NRZ lump-sum payments improved by more than $350 millioncompared to the combined adjusted annualized earnings run rate of Ocwenand PHH Corporationfor the second quarter 2018.
$4.0 billionof servicing UPB originated through forward and reverse lending channels, up 75% from prior quarter; average daily lock volume of approximately $100 millionin July to date.
$314 millionof unrestricted cash at June 30, 2020, up from $264 millionat March 31, 2020; previously identified balance sheet optimization actions on track.
- Approximately 112,000 forbearance plans outstanding as of
July 13, 2020, down from a peak of approximately 132,000 forbearance plans outstanding at the end of the second quarter. Servicer advance levels are approximately 17% below base case servicer advance levels as of June 30, 2020.
- Following receipt of shareholder advisory approval in
May 2020, Ocwen’s Board of Directors has determined to move forward with a reverse stock split in a ratio of 1:25. The Company currently expects to make the reverse split effective in early August.
Webcast and Conference Call
Ocwen will hold a conference call on
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. Our business has been undergoing substantial change and we are in the midst of a period of significant capital markets volatility and experiencing significant changes within the mortgage lending and servicing ecosystem 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, uncertainty relating to the 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||Q2’19||Q2’20(c)|
|OCN||PHH||OCN + PHH||OCN + PHH (Annualized)||OCN||OCN (Annualized)||OCN||OCN (Annualized)|
|I||Expenses (as reported) (a)||206||71||277||1,107||331||1,326|
|III||Deduction of MSR valuation adjustments, net||(33||)||—||(33||)||(132||)||(147||)||(589||)|
|IV||Operating Expenses (I+II+III)||173||72||245||979||184||737||145||579|
|Adjustments for Notables|
|Significant legal and regulatory settlement expenses||(2||)||(3||)||(5||)||(20||)||—||(1||)|
|NRZ consent process expenses||(1||)||—||(1||)||(2||)||(1||)||—|
|PHH acquisition and integration planning expenses||(2||)||—||(2||)||(8||)||—||—|
|COVID-19 Related Expenses||—||—||(6||)|
|VI||Adjusted Expenses (IV+V)||164||65||229||916||168||670||135||542|
(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
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 non-routine 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||Q2’19||Q2’20|
|OCN||PHH||OCN + PHH||OCN + PHH (Annualized)||OCN||OCN (Annualized)||OCN||OCN (Annualized)|
|I||Reported Pre-Tax Income / (Loss)(a)||(28||)||(35||)||(63||)||(253||)||(84||)||(337||)||(6||)||(25||)|
|Adjustment for Notables|
|Expense Notables (from prior table)||9||7||16||17||9|
|Non-Agency MSR FV Change(b)||(5||)||—||(5||)||3|
|Agency MSR FV Change, net of macro hedge(b)||95||3|
|NRZ MSR Liability FV Change (Interest Expense)||9||—||9||(46||)||(1||)|
|Reverse FV Change||4||—||4||(8||)||6|
|II||Total Income Statement Notables||11||7||18||72||58||230||24|
|III||Adjusted Pre-tax Income (Loss) (I+II)||(17||)||(28||)||(45||)||(181||)||(27||)||(107||)||18||71|
|IV||Amortization of NRZ Lump-sum Cash Payments||(35||)||—||(35||)||(141||)||(31||)||(123||)||(10||)|
|V||Adjusted Pre-tax Income (Loss) excluding Amortization of NRZ Lump-sum (III+IV)(c)||(53||)||(28||)||(81||)||(322||)||(58||)||(230||)||8||31|
(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
Note Regarding Financial Performance Estimates
This press release contains statements relating to our preliminary second quarter financial performance and our current assessments of the impact of the COVID-19 pandemic. These statements are based on currently available information and reflect our current estimates and assessments, including about matters that are beyond our control. We are operating in a fluid and evolving environment and actual outcomes may differ materially from our current estimates and assessments. The Company has not finished its second quarter financial closing procedures. There can be no assurance that actual results will not differ from our current estimates and assessments, including as a result of second quarter financial closing procedures, and any such differences could be material.
FOR FURTHER INFORMATION CONTACT:
|T: (856) 917-3190||T: (856) 917-0066|
|E: email@example.com||E: firstname.lastname@example.org|
a Including however not limited to
Source: Ocwen Financial Corp.