Ocwen No Longer Exploring Liberty Sale, Upbeat About Reverse Mortgages

Months after announcing the potential sale of its reverse mortgage lending business, Ocwen Financial Corporation (NYSE: OCN) has changed course.

“After a strategic review, we have decided to remain in the reverse mortgage lending business, and are excited about its future coming off a strong year in 2017,” CEO Ron Faris said on the company’s Wednesday morning fourth-quarter earnings call with shareholders and analysts.

Faris also grouped reverse mortgage lending in with the company’s “core” businesses when discussing Ocwen’s go-forward strategy, along with mortgage servicing and subservicing.

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Ocwen’s about-face marks a change in strategy for the West Palm Beach, Fla.-based firm, which teased a potential Liberty sale multiple times last fall.

“The company is currently evaluating its long-term strategy with respect to its reverse ending activities, including the potential sale of the reverse lending business or some assets of the business,” Ocwen announced in an October filing with the Securities and Exchange Commission.

Liberty Home Equity Solutions finished 2017 in fourth place overall among Home Equity Conversion Mortgage lenders, generating 5,363 loans for 9.4% market share, according to Reverse Market Insight. Still, most in the industry have predicted a rough 2018 ahead given the reduced principal limit factors introduced last fall, with some saying the volume fall-off could be as steep as 30%.

“It is a challenging environment for reverse mortgages — some of the HUD rule changes that went into effect last year are expected to reduce volumes in 2018 — but we still believe that we have one of the premier platforms and are excited about that business going forward,” Faris said.

Faris spent most of Wednesday’s call discussing his company’s just-announced acquisition of lender and servicer PHH Corp. (NYSE: PHH). The $360 million all-cash deal will help increase efficiencies across its core business lines while allowing Ocwen to grow in a space without much expansion, Faris said.

“The PHH transaction was intended to add scale to all of these areas except reverse mortgages,” he said.

Sluggish results

Ocwen had a rough fourth quarter — turning in a net loss of $45.3 million — to cap off a down year: The company had a net loss of $128.5 million for 2017, which Faris noted was $70.9 million less than 2016’s loss.

Settlement costs related to the company’s ongoing regulatory issues were the biggest culprit for the losses; without the $49.8 million in litigation expenses, the company said, Ocwen would have generated $4 million in pre-tax income for the quarter.

Ocwen’s stock rose 6.21% in early Wednesday morning trading.

Written by Alex Spanko