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.
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