Liberty Parent Touts Reverse Business While Inching Back to Profitability

Ocwen Financial Corporation, parent company to reverse mortgage lender Liberty Home Equity Solutions, touted the ongoing growth of the reverse mortgage business while reaffirming its scheduled return to overall profitability, according to financial documents released this week and a Tuesday morning earnings call.

“Our reverse mortgage lending business is now ranked as the number three lender by volume and we have been named as one of the best mortgage companies to work for by National Mortgage News for the second year in a row,” said Glen Messina, CEO of Ocwen on the earnings call.

In 2019, Ocwen’s reverse mortgage lending business delivered 23% year-over-year volume growth, the company is targeting approximately 25% volume growth in 2020, Messina said.

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Losses in the forward lending arm of the company were compensated for by the performance of Liberty, according to a press release announcing the company’s earnings.

“The forward lending business had a pre-tax loss of $(9.0) million, which was more than offset by $49.7 million of pre-tax income in our reverse mortgage lending business, which included $25.5 million of interest rate and valuation assumption driven favorable fair value changes,” the release said.

However, overall reverse lending revenue was lower, according to Ocwen CFO June Campbell.

“Reverse lending revenue of $15 million was $6 million lower than prior quarter,” Campbell said on the earnings call. “Excluding the unfavorable net fair value change, revenue for the fourth quarter was flat to the third quarter.”

Shareholder equity was also positively impacted by the reverse mortgage side of the business, according to Campbell.

“We realized a $47 million favorable impact to our shareholders equity in the first quarter of 2020 from the adoption of the seasonal accounting standard, which recognizes the future value of tail draws from the reverse mortgages originated prior to January 1 of 2019,” she said.

Liberty Home Equity Solutions is currently ranked as the fifth largest reverse mortgage lender by Home Equity Conversion Mortgage (HECM) volume, according to wholesale and retail data from December 2019 tabulated by Reverse Market Insight (RMI).

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