In the midst of an earnings call that saw the company post a small profit, Ocwen Financial Corporation (NYSE: OCN) touted the performance of its reverse mortgage arm, Liberty Home Equity Solutions.
“Our reverse mortgage lending business had a record quarter, recording a $9.8 million pre-tax profit, and the servicing business had its seventh consecutive profitable quarter,” CEO Ron Faris said during a Wednesday morning call with shareholders and analysts.
The West Palm Beach, Fla.-based financial services corporation recorded net income of $2.6 million in the first quarter of 2018, a $35 million boost from the same quarter last year.
After a 2017 that saw the company endure extended regulatory issues with state governments and the Consumer Financial Protection Bureau, 2018 has been more positive for Ocwen — which also snapped up mortgage lender and servicer PHH Corp. for $360 million in cash in February.
Ocwen formally scrapped plans to potentially sell the Liberty business on its fourth-quarter 2017 earnings call in February, and Faris used the first-quarter call to identify the growth of its reverse mortgage business as a key area of focus for the near future. The CEO — who will retire at the end of next month and cede control to former PHH CEO Glen Messina — also pointed to Home Equity Conversion Mortgage-backed securities as a key upside in the first quarter.
Faris acknowledged an “overall slowdown in activity” in the greater reverse mortgage market, hinting at the post-October 2 slowdown in originations, but said demand for HMBS helped to improve margins and generate $9 million in income for Ocwen’s lending segment; the company lost $4 million in that channel over the entirety of 2017, Faris said.
In response to a question from an analyst, Faris pointed to Liberty’s three-prong approach — correspondent, wholesale, and direct-to-consumer — as a reason for its success.
“We don’t spend as much money on advertising as some of the competitors do to drive some of their retail business, but that’s very expensive,” Faris said. “So we have a more balanced business model that has all three channels, and we’re very focused on [ensuring] that all three channels are performing well and performing profitably.”
Liberty currently sits in fourth place on Reverse Market Insight’s list of top Federal Housing Administration-approved lenders, with 3,468 HECMs originated during the 12 months ended April. Like multiple other lenders, Liberty has seen declines in the wake of the October 2 surge, but Faris said his company’s structure will help insulate it from fluctuations.
“We think that we have a really good business model there, because we have all three channels,” he said.
Written by Alex Spanko