Ocwen Posts $6M Loss, Affirms Interest in Selling Reverse Mortgage Business

Ocwen Financial Corporation (NYSE: OCN) on Thursday announced a $6 million loss for the third quarter of 2017, while also reiterating management’s desire to potentially sell off its reverse mortgage lending arm, Liberty Home Equity Solutions.

“We are currently evaluating our long-term strategy there, including the potential sale of the reverse lending business, or some assets of the business,” CEO Ron Faris said during a call with shareholders.

Though Faris trumpeted the performance of Liberty and Ocwen’s reverse business during the third quarter — Liberty turned in a 7% increase in Home Equity Conversion Mortgage lending as compared to the third quarter of 2016 — the company remains focused on shedding non-core assets.

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“We will not hesitate to scale back, close, or sell underperforming business or product lines,” Faris said.

Ocwen ended the third quarter with about $98.7 million in undiscounted future gains from reverse mortgages, based on projected draws, Faris noted — adding that those benefits could be realized sooner if the West Palm Beach, Fla.-based company pulls off a sale of the HECM portfolio and business.

Going forward, Ocwen plans to focus on mortgage servicing and forward retail lending, having just shuttered its wholesale forward business and closing up its forward correspondent business earlier this year. It’s all part of a larger scheme to reduce overhead, interest rate risk, and funding risks, according to Faris.

Other earnings highlights

That $6 million loss for the quarter represented a marked improvement over previous quarters, Faris said: Ocwen logged losses of $32.6 million and $44 million during the previous two quarters. For comparison, the company saw net income of $9.5 million during the third warted of 2017.

Ocwen also described continued progress with its efforts to escape regulatory pressure in states across the nation: The company has reached settlements with 21 states and the District of Columbia, Faris said, providing a pathway back to acquiring mortgage servicing rights in those jurisdictions.

The lender and servicer had announced Wednesday that it selected Black Knight’s LoanSphere MSP servicing software to replace its troubled REALServicing platform, a condition of its agreements with state officials.

Ocwen remains in talks with the remaining state governments and the Consumer Financial Protection Bureau, which slapped the company with a lawsuit back in April.

“We remain focused on resolving these as best we can,” Faris said.

Additionally, Ocwen has already begun the process of transferring mortgage servicing rights to New Residential Investment Corporation (NYSE: NRZ), receiving $55 million in cash thus far. The deal, initially announced in May, could net Ocwen up to $400 million according to its own projections.

Ocwen’s stock closed Thursday’s trading at $3.50 per share, a gain of 2.0% or $0.07.

Written by Alex Spanko

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  • This statement by Mr. Faris is not double talk when it comes to Liberty: “We will not hesitate to scale back, close, or sell underperforming business or product lines…”

    The trouble with entities like Liberty is no matter how well they perform, if the underlying industry is in secular stagnation, what potential does the entity have? Yes, some will respond that such statements are not the expression of optimism and I will be the first to agree but neither is it a statement of pessimism; it is a realistic assessment of where our industry is. Worse, there is a high expectation that average revenues per HECM will drop over this fiscal year due primarily to Mortgagee Letter 2017-12 and a very low one that they will rise.

    One problem the industry has yet to resolve is finding a “Blue Ocean.” It is just now expanding its efforts into a long heralded potential referral sources such as financial advisors and Realtors. By now both of those sources of referrals are in the “Red Ocean,” full of competition.

    As both Larry Summers and Alvin Hansen have proclaimed, the only known way to speed the end of secular stagnation is by finding new sources of demand. So far the only thing the industry has indicated is that it is more than satisfied with being in secular stagnation.

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