Ocwen Financial Corporation (NYSE: OCN) (“Ocwen” or the “Company”),
a leading non-bank mortgage servicer and originator, today
announced its first quarter 2022 results and provided an update on
the Company’s key business priorities.
The Company reported GAAP net income of $58 million for the
first quarter with an adjusted pre-tax loss of $11 million (see
“Note Regarding Non-GAAP Financial Measures” below). First quarter
results were consistent with the Company’s expectations
notwithstanding the rapid rise in interest rates.
Glen A. Messina, President and CEO of Ocwen, said, “Our
financial performance during the quarter demonstrates the strength
of our balanced business model, as servicing profitability more
than offset forward originations market headwinds resulting from
the rapid rise in interest rates. In addition, our unique
end-to-end reverse mortgage platform is delivering strong financial
performance in a growing market. With the pressure on the
originations industry, we are taking actions to restore
profitability in forward originations, including expense reduction
actions, growing our client base and shifting to higher margin
products and services.”
Messina continued, “We believe we have several strengths that
can help us achieve our financial objectives in this market cycle.
We expect our forward servicing business will benefit from rising
rates. Our reverse business is well positioned to continue
delivering profitable growth in an expanding market. Our enterprise
sales team and industry-leading operating execution to support our
customers, clients and investors are driving a strong subservicing
opportunity pipeline. We are dynamically managing our business and
will adjust as necessary to address emerging opportunities and
risks.”
First Quarter 2022 Operating and Business
Highlights
- Total servicing portfolio increased
to $275 billion, up 54% YoY; total servicing additions of $20
billion, up 46% YoY
- Reverse servicing and subservicing
combined UPB of $29 billion, up over 3X vs. 1Q’21
- Robust subservicing sales pipeline
of over $330 billion as of March 31, 2022, including $55 billion in
Reverse subservicing
- Reverse originations up 108% YoY,
margins holding vs. 4Q‘21
- Higher margin Correspondent products
and services (GNMA, Best Efforts and Non-Delegated) volume up 109%
YoY
- Refinance recapture rate 39%,
compared to 22% in 1Q‘21
- Total operation expenses down 8 bps
(annualized) from 29 bps in 1Q’21 to 21 bps in 1Q’22
- Total liquidity of $314 million as
of March 31, 2022, an increase of $121 million over December 31,
2021 and $38 million over March 31, 2021
- Achieved HUD Tier 1 Servicer
Ranking
Webcast and Conference Call
Ocwen will hold a conference call on Thursday, May 5, 2022 at
8:30 a.m. (ET) to review the Company’s first quarter 2022 operating
results and to provide a business update. A live audio webcast and
slide presentation for the call will be available by visiting the
Shareholder Relations page at www.ocwen.com. Participants can
access the conference call by dialing (800) 304-0389 or (773)
341-1655 and using the conference ID 5259170 approximately 10
minutes prior to the call. 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 (NYSE: OCN) is a leading non-bank
mortgage servicer and originator providing solutions through its
primary brands, PHH Mortgage and Liberty Reverse Mortgage. PHH
Mortgage is one of the largest servicers in the country, focused on
delivering a variety of servicing and lending programs. Liberty is
one of the nation’s largest reverse mortgage lenders dedicated to
education and providing loans that help customers meet their
personal and financial needs. We are headquartered in West Palm
Beach, Florida, with offices in the United States and the U.S.
Virgin Islands and operations in India and the Philippines and have
been serving our customers since 1988. For additional information,
please visit 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 “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, and includes
statements in this press release regarding the ability of our
recent strategic transactions to improve our earnings.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain. Our business has been
undergoing substantial change and we are 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
continuing impacts of the COVID-19 pandemic, including the response
of the U.S. government, state governments, the Federal National
Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage
Corporation (Freddie Mac) (together, the GSEs), the Government
National Mortgage Association (Ginnie Mae) and regulators, as well
as the impacts on borrowers and the economy generally; the
potential for ongoing disruption in the financial markets and in
commercial activity generally as a result of international events,
changes in monetary and fiscal policy, and other sources of
instability; the extent to which our MSR asset vehicle (MAV), other
transactions and our enterprise sales initiatives will generate
additional subservicing volume, increase market share within the
subservicing market, and result in increased profitability; the
timing and amount of presently anticipated forward and reverse loan
boarding; whether we will increase the total investment commitments
in MAV, and if so, when and on what terms; our ability to close
acquisitions of MSRs and other transactions, including the ability
to obtain regulatory approvals; our ability to repurchase shares of
our common stock and/or bonds, and if so, in what quantities and
when; our ability to continue to grow our reverse servicing
business; our ability to retain clients and employees of acquired
businesses, and the extent to which acquisitions and our other
strategic initiatives will contribute to achieving our growth
objectives; the extent to which we will be able to execute call
rights transactions, and whether such transactions will generate
the returns anticipated; the adequacy of our financial resources,
including our sources of liquidity and ability to sell, fund and
recover servicing advances, forward and reverse whole loans, and
HECM and forward loan buyouts and put backs, as well as repay,
renew and extend borrowings, borrow additional amounts as and when
required, meet our MSR or other asset investment objectives and
comply with our debt agreements, including the financial and other
covenants contained in them; increased servicing costs based on
increased borrower delinquency levels or other factors; the future
of our long-term relationship with New Residential Investment
Corp.; our ability to improve our financial performance through
cost and productivity improvements; the performance of our lending
business in a competitive market and uncertain interest rate
environment; our ability to execute on identified business
development and sales opportunities; uncertainty related to past,
present or future claims, litigation, cease and desist orders and
investigations regarding our servicing, foreclosure, modification,
origination and other practices brought by government agencies and
private parties, including 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); adverse effects
on our business as a result of regulatory investigations,
litigation, cease and desist orders or settlements and the
reactions of key counterparties, including lenders, the GSEs and
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 interpret
correctly and comply with liquidity, net worth and other financial
and other requirements of regulators, the GSEs and Ginnie Mae, as
well as those set forth in our debt and other agreements; our
ability to comply with our servicing agreements, including our
ability to comply with the requirements of the GSEs and Ginnie Mae
and maintain our seller/servicer and other statuses with them; our
ability to fund 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 any future
downgrades; as well as other risks and uncertainties detailed in
our reports and filings with the SEC, including our annual report
on Form 10-K for the year ended December 31, 2021 and any current
report or quarterly report filed with the SEC since such date.
Anyone wishing to understand Ocwen’s business should review our SEC
filings. Our 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.
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 expenses.
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 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 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 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.
Readers are cautioned not to place undue reliance on analysis of
the adjustments we make to GAAP expenses and pre-tax income
(loss).
Beginning with the three months ended June 30, 2020, we refined
our definitions of Expense Notables, which we previously referred
to as “Expenses Excluding MSR Valuation Adjustments, net, and
Expense Notables,” and Income Statement Notables in order to be
more descriptive of the types of items included.
Expense Notables
In the table titled “Expense Overview”, we adjust GAAP operating
expenses for the following factors: expenses related to severance,
retention and other actions associated with continuous cost and
productivity improvement efforts; significant legal and regulatory
settlement expense items(a); and certain other significant
activities including, but not limited to, insurance related expense
and settlement recoveries, compensation or incentive compensation
expense reversals and other transactions consistent with the intent
of providing management and investors with a supplemental means of
evaluating our expenses.
(a) Including however not limited to CFPB, Florida
Attorney General/Florida Office of Financial Regulations and
Massachusetts Attorney General litigation related legal expenses,
state regulatory action related legal expenses and state regulatory
action settlement related escrow analysis costs (collectively, CFPB
and state regulatory defense and escrow analysis expenses).
Expense
Overview |
|
|
|
($ in millions) |
Q1'22 |
|
Q1'21 |
I |
Operating Expenses (as reported) |
127 |
|
|
140 |
|
|
Adjustments for Notables(a) |
|
|
|
|
Significant legal & regulatory settlement expenses |
5 |
|
|
0 |
|
|
CFPB & state regulatory defense & escrow analysis
costs |
(0) |
|
|
(0) |
|
|
Expense recoveries |
4 |
|
|
0 |
|
|
Covid-19 Related Expenses |
(0) |
|
|
0 |
|
|
Other(b) |
8 |
|
|
(1) |
|
II |
Expense Notables |
17 |
|
|
(1) |
|
III |
Adjusted Expenses (I + II) |
144 |
|
|
139 |
|
(a) Certain notables presented in prior periods that
are nil for each quarter shown here have been omitted
(b) Includes non-routine costs associated with
strategic transactions including stock price changes impacting
compensation expense, and transaction costs related to the reverse
platform acquisition from Reverse Mortgage Solutions, Inc.
Income Statement Notables
In the table titled “Income Overview” below, we show certain
adjustments to GAAP pre-tax loss for the following factors: Expense
Notables; 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; changes in fair value of our
MSRs in our NRZ and MAV financing liability due to changes in
interest rates, valuation inputs and other assumptions; changes in
fair value of our reverse originations portfolio due to changes in
interest rates, valuation inputs and other assumptions and certain
other non-routine transactions, including but not limited to
pension benefit cost adjustments and opportunistic gains related to
exercising servicer call rights on second lien portfolio
subsequently sold and fair value assumption changes on other
investments (collectively, Other) consistent with the intent of
providing management and investors with a supplemental means of
evaluating our net income/(loss).
Income
Overview |
|
|
|
($ in millions) |
Q1'22 |
|
Q1’21 |
I |
Reported Pre-Tax Income / (Loss) |
61 |
|
|
12 |
|
|
Adjustments for
Notables(c) |
|
|
|
|
Expense Notables (from table above) |
(17) |
|
|
1 |
|
|
Non-Agency MSR FV Change(d) |
(9) |
|
|
(2) |
|
|
Agency MSR FV Change, net of macro hedge(d) |
(120) |
|
|
(25) |
|
|
NRZ/MAV MSR Liability FV Change |
55 |
|
|
2 |
|
|
Reverse FV Change |
18 |
|
|
4 |
|
|
Corporate Debt Refinance |
- |
|
|
15 |
|
|
Other(e) |
1 |
|
|
0 |
|
II |
Total Income Statement Notables |
(72) |
|
|
(5) |
|
III |
Adjusted Pre-tax Income (Loss) (I+II) |
(11) |
|
|
7 |
|
(c) Notables presented in prior periods that are nil for
each quarter shown here have been omitted
(d) FV changes that are driven by changes in interest
rates, valuation inputs or other assumptions, net of unrealized
gains / (losses) on MSR hedge. Non-Agency = Total MSR excluding
GNMA & GSE MSRs. Agency = GNMA & GSE MSRs. The adjustment
does not include $1.1 million valuation gains of certain MSRs that
were purchased at a discount in Q1 2022 ($9 million in Q1
2021).
(e) Other contains non-routine transactions,
including but not limited to pension benefit cost adjustments, long
term employee compensation changes, and fair value assumption
changes on other investments.
FOR FURTHER INFORMATION CONTACT:
Investors: |
Media: |
June Campbell |
Dico Akseraylian |
T: (856) 917-3190 |
T: (856) 917-0066 |
E:shareholderrelations@ocwen.com |
E:mediarelations@ocwen.com |
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