Despite Reverse Mortgage Gains, Ocwen Announces $44M Quarterly Loss

The beleaguered Ocwen Financial Corporation (NYSE: OCN) turned in a net loss of $44 million in the second quarter of 2017, hamstrung by continued payments related to a host of regulatory issues.

Those costs include $33.6 million in settlement payments and $5.6 million in legal defense expenses related to regulatory actions by the Consumer Financial Protection Bureau and state governments.

The West Palm Beach, Fla.-based firm — which services and originates reverse mortgages under the Liberty Home Equity Solutions banner — announced that it would be on the hook for $34 million to $36 million to settle a class-action lawsuit related to its 2014 financial filings and a New York State consent decree.

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The second quarter finds Ocwen even deeper in the red than in the first, when it posted a $32.6 million shortfall, though the company pointed out that it finished the second quarter of 2016 with $87.2 million in losses. Revenues were also down 16.6% from the same time last year.

Despite the negative regulatory news, Ocwen had positive words for its Home Equity Conversion Mortgage lending business, which the company credited for an overall boost in lending revenue: The reverse channel has grown 33% since the same quarter last year, the company said, buoyed by a record $100 million in originations in June. Retail reverse originations also ran 40% higher than in the first quarter of this year, the company reported.

For comparison, Ocwen’s overall lending segment saw a 26.1% drop in volume during that span as the company shut down its forward correspondent lending channel, the company said.

“Our reverse mortgage segment has performed very well, and remains an industry leader,” Ocwen president and CEO Ron Faris said on an earnings call Wednesday morning.

Ongoing regulatory issues

Ocwen continues to explore ways to untangle its knot of cease-and-desist orders from up to 30 state regulatory agencies, which generally prevent the company from acquiring new mortgage servicing rights in those jurisdictions. While Ocwen is in negotiations with states — both individually and in “global” groups — Faris made it clear that no solution is immediately in sight.

“I would expect that we would remain under restriction to acquire mortgage servicing rights for the foreseeable future,” Faris said.

The company had no updates on its ongoing regulatory issues with the CFPB, though Faris noted that Ocwen is still awaiting comment from Attorney General Jeff Sessions on the constitutionality of the bureau itself — a legal play that would make the case disappear should a court declare the CFPB’s authority unconstitutional.

“We are preparing a robust defense and expect to see increased spend on professional expenses,” Faris said.

Ocwen’s stock closed Wednesday’s trading flat at $2.87 per share.

Written by Alex Spanko

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  • Here we go again. Is all this negative publicity with Liberty as its only profitable profit center help the reverse mortgage industry or is Ocwen using Liberty in an attempt to deflect its regulatory problems?

    How good would it be for the industry if its second largest originator suddenly fail under the weight of regulatory investigation, fines, penalties, etc.? Where would it leave Liberty?

  • Here we go again with the “beleaguered Ocwen” B$. What part of all Ocwen’s problems are not self-induced? The sorry servicing platform it clings to like a life raft is pulling it under. It deserves to drown, slowly and painfully.

    Any other entity you make payments to can handle double payments or some small deviation in payments- say, a payment and a half. Credit card companies can handle prepayments, banks can handle prepayments, car loan companies can handle it. Only Ocwen cannot handle a one cent deviation in your payment. That sends you into foreclosure track he-double hockey sticks.

    Yet Ocwen will pay settlements and fines to keep Bill Erbey’s patented servicing platform in place. Ocwen has admitted publicly that it knows the software is junk and flawed, yet it keeps using it. It has been known for over a decade that there is a “fundamental flaw” in its software that has yet to be fixed. QuickBooks could handle this, but Ocwen cannot?

    Ocwen is depriving American citizens of their right to pay their mortgage in peace and without harassment. People who have made every payment on time wind up in foreclosure because Ocwen is too brain dead to deal with any deviation.

    Ocwen seems to NEVER receive a fax or a piece of mail from anyone,for any reason. Should we blame Ocwen’s troubles on the USPS or the phone provider? No, let us put the blame where it belongs- on Ocwen which seems to have no interest on servicing a mortgage properly. Ocwen needs to go into the trash heap, permanently and forever!

  • Great responses! The “Wells Fargo” of the loan servicing industry has an ego “too big to fail” that sadly resonates historical familiarity. In its wake is industry damaging publicity, ironically the very industry it has reaped behemoth revenue from! They need to exit, but they won’t. So, we will wait until the continued sanctions, heavy duty fines and what is likely to be a showdown with borrower class action suits, any of which will hopefully show them the door! And what happens to Liberty? Take a close look… they are in an expedited hiring mode to quickly place as many reps in the field as they can right now. Mike Kent deserves incredible admiration as he strives forward in what is likely an agenda to prop up their bottom line in revenue and sales force to make them as attractive as possible for some sort of structured “buy out” and cutting their tether to a sinking tanker. Ocwen’s new mantra… “At the end of your rope? Tie a knot and hang on!” Pathetic.

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