• Reported a Net Loss of $(2.3) million for the fourth quarter of 2018 and a Net Loss of $(70.8) million for the full year 2018
  • Completed the acquisition of PHH Corporation, ended the year with a total servicing portfolio of 1.6 million loans representing unpaid principal balance (“UPB”) of $256 billion
  • Completed our cost re-engineering plan and have commenced execution
  • Completed the first two major servicing loan transfers to Black Knight’s MSP® system, which involved approximately 240,000 loans
  • Successfully bid on MSR acquisitions of $5.4 billion in UPB in the fourth quarter of 2018 and first quarter to date
  • Ended the year with $555 million of total equity and $329 million of cash 

WEST PALM BEACH, Fla., Feb. 27, 2019 (GLOBE NEWSWIRE) -- Ocwen Financial Corporation, (NYSE:OCN) (“Ocwen” or the “Company”), a leading financial services holding company, today reported a net loss of $(70.8) million, or $(0.53) per share, for the full year 2018 compared to a net loss of $(128.0) million, or $(1.01) per share, for the full year of 2017, a $57.2 million improvement.

For the three months ended December 31, 2018, Ocwen reported a net loss of $(2.3) million, or $(0.02) per share.

Glen A. Messina, President and CEO of Ocwen, said, “We made solid progress in the quarter as we work to realize the scale and cost savings benefits of combining Ocwen and PHH and position the Company for future profitability. We are focused on executing our key business initiatives in order to address our most critical near-term business challenges, improve our financial performance, and establish a stronger foundation for the future. We continue with our disciplined and prudent approach to our integration efforts and are encouraged by the overall progress we are making.”

Fourth Quarter and Full Year 2018 Results

Pre-tax loss from continuing operations for the fourth quarter of 2018 was $(7.8) million and included a PHH post-acquisition pre-tax loss of $(31.5) million. Pre-tax results for the quarter were impacted by a number of significant items, including but not limited to: $64.0 million in bargain purchase gain, $(16.4) million in PHH transaction, integration and restructuring costs and $(10.1) million in expense related to significant litigation and regulatory settlements.

The Servicing segment recorded $(40.6) million of pre-tax loss for the fourth quarter of 2018 and included a PHH post-acquisition pre-tax loss of $(21.2) million. The business was negatively impacted by lower revenue from a smaller servicing portfolio due to portfolio runoff and de-boarding of previously announced subservicing clients as a result of terminations and transfers. For the full year 2018, the Servicing business recorded $(31.9) million of pre-tax loss.

The Lending segment recorded $3.0 million of pre-tax income for the fourth quarter of 2018. Our forward lending business incurred a $(5.3) million pre-tax loss that included a PHH post-acquisition pre-tax loss of $(2.4) million. Our reverse mortgage lending business recorded pre-tax income of $8.3 million. The Lending businesses were $5.1 million favorable to prior quarter largely driven by favorable valuation changes on our reverse mortgage lending portfolio as a result of falling interest rates. For the full year 2018, the Lending business recorded pre-tax income of $11.2 million, an increase of $15.6 million versus 2017. The forward lending business had a pre-tax loss of $(9.2) million, which was more than offset by $20.3 million of pre-tax income in our reverse mortgage lending business.

Additional Business Highlights

  • In 2018, Ocwen completed 39,545 loan modifications to help struggling families stay in their homes, 17% of which included debt forgiveness totaling over $200 million.
  • Delinquencies decreased from 7.8% at September 30, 2018 to 4.9% at December 31, 2018, primarily driven by acquisition of lower delinquency PHH portfolio and ongoing consumer assistance efforts.
  • The constant pre-payment rate (“CPR”) decreased from 13.7% in the third quarter of 2018 to 12.9% in the fourth quarter of 2018. In the fourth quarter of 2018, the prime CPR was 14.8%, and the non-prime CPR was 11.8%.
  • For the full year 2018, Ocwen originated forward and reverse mortgage loans with UPB of $0.9 billion and $0.6 billion, respectively. The Company intends to re-enter the correspondent forward lending channel and successfully launched a proprietary jumbo reverse mortgage pilot program.
  • Our reverse mortgage portfolio ended the year with an estimated $68.1 million in discounted future gains from future draws on existing loans. Neither the anticipated future gains nor future funding liability are included in the Company’s financial statements.

Webcast and Conference Call

Ocwen will host a webcast and conference call on Wednesday, February 27, 2019, at 8:30 a.m., Eastern Time, to discuss its financial results for the fourth quarter and full year 2018. The conference call will be webcast live over the internet from the Company’s website at www.Ocwen.com. To access the call, click on the “Shareholder Relations” section. A replay of the conference call will be available via the website approximately two hours after the conclusion of the call and will remain available for approximately 30 days.

About Ocwen Financial Corporation

Ocwen Financial Corporation is a financial services holding company which, through its subsidiaries, originates and services loans. We are headquartered in West Palm Beach, Florida, with offices throughout the United States and in the U.S. Virgin Islands as well as in India and the Philippines. We have been serving our customers since 1988. We may post information that is important to investors on our website (www.Ocwen.com).

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by a reference to a future period or by use of forward-looking terminology.

Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Our business has been undergoing substantial change which has magnified such uncertainties. Readers should bear these factors in mind when considering such statements and should not place undue reliance on such statements.

Forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. In the past, actual results have differed from those suggested by forward looking statements and this may happen again.

Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the following: uncertainty related to our ability to successfully integrate PHH’s business, and to realize the strategic objectives, synergies and other benefits of the acquisition at the time anticipated or at all, including our ability to integrate, maintain and enhance PHH’s servicing, subservicing and other business relationships, including its relationship with New Residential Investment Corp. (NRZ); our ability to transition loan servicing to the Black Knight Financial Services, Inc. LoanSphere MSP® servicing system within the time and cost parameters anticipated and without significant disruptions to our customers and operations; uncertainty related to our cost re-engineering efforts and the other actions we believe are necessary for us to improve our financial performance; uncertainty related to claims, litigation, cease and desist orders and investigations brought by government agencies and private parties regarding our servicing, foreclosure, modification, origination and other practices, including uncertainty related to past, present or future investigations, litigation, cease and desist orders and settlements with state regulators, the Consumer Financial Protection Bureau (CFPB), State Attorneys General, the Securities and Exchange Commission (SEC), the Department of Justice or the Department of Housing and Urban Development (HUD) and actions brought under the False Claims Act by private parties on behalf of the United States of America regarding incentive and other payments made by governmental entities; adverse effects on our business as a result of regulatory investigations, litigation, cease and desist orders or settlements; reactions to the announcement of such investigations, litigation, cease and desist orders or settlements by key counterparties, including lenders, the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Government National Mortgage Association (Ginnie Mae); our ability to comply with the terms of our settlements with regulatory agencies and the costs of doing so; increased regulatory scrutiny and media attention; any adverse developments in existing legal proceedings or the initiation of new legal proceedings; our ability to effectively manage our regulatory and contractual compliance obligations; our ability to interpret correctly and comply with liquidity, net worth and other financial and other requirements of regulators as well as those set forth in our debt and other agreements; our ability to comply with our servicing agreements, including our ability to comply with our agreements with, and the requirements of, Fannie Mae, Freddie Mac and Ginnie Mae and maintain our seller/servicer and other statuses with them; the adequacy of our financial resources, including our sources of liquidity and ability to sell, fund and recover advances, repay borrowings and comply with our debt agreements, including the financial and other covenants contained in them; our ability to timely transfer mortgage servicing rights under our agreements with NRZ; our ability to maintain our long-term relationship with NRZ under these arrangements; our ability to realize anticipated future gains from future draws on existing loans in our reverse mortgage portfolio; our servicer and credit ratings as well as other actions from various rating agencies, including the impact of prior or future downgrades of our servicer and credit ratings; as well as other risks detailed in Ocwen’s reports and filings with the SEC, including its annual report on Form 10-K for the year ended December 31, 2018 once filed. Anyone wishing to understand Ocwen’s business should review its SEC filings. Ocwen’s forward-looking statements speak only as of the date they are made and, we disclaim any obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise.

   
FOR FURTHER INFORMATION CONTACT:  
   
Investors: Media:
Stephen Swett John Lovallo
T: (203) 614-0141 T: (917) 612-8419
E: shareholderrelations@ocwen.com
 E: jlovallo@levick.com


Residential Servicing Statistics
(Dollars in thousands)
 
 At or for the Three Months Ended
December 31,
2018
September 30,
2018
June 30, 2018March 31,
2018
December 31,
2017
Total unpaid principal balance of loans
  and REO serviced
$256,000,490 $160,996,474 $167,127,014 $173,388,876 $179,352,554 
      
Non-performing loans and REO serviced
  as a % of total UPB (1)
4.9%7.8%8.3%9.0%9.3%


Prepayment speed (average CPR) (2) (3)
12.9%13.7%14.3%12.9%14.4%
 
(1) Performing loans include those loans that are less than 90 days past due and those loans for which borrowers are making scheduled payments under loan modification, forbearance or bankruptcy plans. We consider all other loans to be non-performing.
(2) Constant Prepayment Rate for the prior three months. CPR measures prepayments as a percentage of the current outstanding loan balance expressed as a compound annual rate.
(3) Average CPR for the three months ended December 31, 2018 includes 14.8% for prime loans and 11.8% for non-prime loans.


Segment Results
(Dollars in thousands)
 
 For the Three Months Ended
December 31,
 For the Twelve Months Ended
December 31,
 2018 2017 2018 2017
Servicing       
Revenue$276,991  $238,943  $951,224  $1,041,290 
Expenses249,406  78,978  772,467  716,384 
Other expense, net(68,201) (131,315) (210,705) (278,226)
Income (loss) from continuing operations
before income taxes
(40,616) 28,650  (31,948) 46,680 
        
Lending       
Revenue28,556  32,018  93,672  127,475 
Expenses25,870  27,430  82,906  128,058 
Other income (expense), net362  (1,947) 388  (3,848)
Income (loss) from continuing operations
before income taxes
3,048  2,641  11,154  (4,431)
        
Corporate Items and Other       
Revenue5,382  5,809  18,149  25,811 
Expenses27,543  61,895  77,123  154,203 
Other income (expense), net51,966  (20,519) 8,292  (57,830)
Income (loss) from continuing operations
before income taxes
29,805  (76,605) (50,682) (186,222)
        
Consolidated loss before income taxes$(7,763) $(45,314) $(71,476) $(143,973)


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)

 For the Three Months Ended
December 31,
 For the Twelve Months Ended
December 31,
 2018 2017 2018 2017
Revenue       
Servicing and subservicing fees$276,241  $227,853  $934,336  $989,376 
Gain on loans held for sale, net16,608  26,426  77,743  103,402 
Other revenue, net18,080  22,491  50,966  101,798 
Total revenue310,929  276,770  1,063,045  1,194,576 
        
Expenses       
Compensation and benefits86,816  86,244  298,036  358,994 
Professional services54,733  83,800  165,554  229,451 
MSR valuation adjustments, net61,762  (62,484) 153,457  52,962 
Servicing and origination39,845  13,435  131,297  141,496 
Technology and communications30,935  20,960  98,241  100,490 
Occupancy and equipment22,262  16,450  59,631  66,019 
Other expenses6,466  9,898  26,280  49,233 
Total expenses302,819  168,303  932,496  998,645 
        
Other income (expense)       
Interest income4,008  3,864  14,026  15,965 
Interest expense(85,440) (150,767) (275,041) (363,238)
Bargain purchase gain64,036    64,036   
Gain on sale of mortgage servicing rights, net1,022  2,674  1,325  10,537 
Other, net501  (9,552) (6,371) (3,168)
Total other expense, net(15,873) (153,781) (202,025) (339,904)
        
Loss from continuing operations before income taxes(7,763) (45,314) (71,476) (143,973)
Income tax expense (benefit)(4,012) (51) 529  (15,516)
Loss from continuing operations, net of tax(3,751) (45,263) (72,005) (128,457)
Income from discontinued operations, net of tax1,409    1,409   
Net loss(2,342) (45,263) (70,596) (128,457)
Net (income) loss attributable to non-controlling interests  780  (176) 491 
Net loss attributable to Ocwen stockholders$(2,342) $(44,483) $(70,772) $(127,966)
        
Earnings (loss) per share attributable to Ocwen
  common stockholders – Basic and Diluted
       
Continuing operations$(0.03) $(0.34) $(0.54) $(1.01)
Discontinued operations$0.01  $-  $0.01  $- 
        
Weighted average common shares outstanding       
Basic133,912,425  130,893,025  133,703,359  127,082,058 
Diluted133,912,425  130,893,025  133,703,359  127,082,058 


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
 
 December 31,
2018
 December 31,
2017
Assets   
Cash$329,132  $259,655 
Restricted cash (amounts related to VIEs of $20,968 and $21,922)67,878  42,905 
Mortgage servicing rights ($1,457,149 and $671,962 carried at fair value)1,457,149  1,008,844 
Advances, net249,382  211,793 
Match funded assets (related to variable interest entities (VIEs))937,294  1,177,357 
Loans held for sale ($176,525 and $214,262 carried at fair value)242,622  238,358 
Loans held for investment, at fair value (amounts related to VIEs of $26,520 and $0)5,498,719  4,715,831 
Receivables, net198,262  199,529 
Premises and equipment, net33,417  37,006 
Other assets ($7,568 and $8,900 carried at fair value) (amounts related to VIEs of $2,874
  and $5,437)
379,567  511,886 
Assets related to discontinued operations794   
Total assets$9,394,216  $8,403,164 
    
Liabilities and Equity   
Liabilities   
HMBS-related borrowings, at fair value$5,380,448  $4,601,556 
Other financing liabilities ($1,057,671 and $508,291 carried at fair value) (amounts
  related to VIEs of $24,815 and $0)
1,127,613  593,518 
Match funded liabilities (related to VIEs)778,284  998,618 
Other secured borrowings, net382,538  545,850 
Senior notes, net448,727  347,338 
Other liabilities ($4,986 and $635 carried at fair value)703,636  769,410 
Liabilities related to discontinued operations18,265   
Total liabilities8,839,511  7,856,290 
    
Equity   
Ocwen Financial Corporation (Ocwen) stockholders’ equity   
Common stock, $.01 par value; 200,000,000 shares authorized; 133,912,425 and
  131,484,058 shares issued and outstanding at December 31, 2018 and December
  31, 2017, respectively
1,339  1,315 
Additional paid-in capital554,056  547,057 
Retained earnings (accumulated deficit)3,567  (2,083)
Accumulated other comprehensive loss, net of income taxes(4,257) (1,249)
Total Ocwen stockholders’ equity554,705  545,040 
Non-controlling interest in subsidiaries  1,834 
Total equity554,705  546,874 
Total liabilities and equity$9,394,216  $8,403,164 


OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 
 For the Years Ended
December 31,
 2018 2017
Cash flows from operating activities   
Net loss$(70,596) $(128,457)
Adjustments to reconcile net loss to net cash provided by operating activities:   
MSR valuation adjustments, net153,457  52,962 
Gain on sale of mortgage servicing rights, net(1,325) (10,537)
Provision for bad debts49,180  76,828 
Depreciation27,202  26,886 
Loss on write-off of fixed assets, net  8,502 
Amortization of debt issuance costs2,921  2,738 
Reversal of valuation allowance on deferred tax assets(23,347) (29,979)
Decrease in deferred tax assets other than provision for valuation allowance20,058  30,710 
Equity-based compensation expense2,366  5,624 
(Gain) loss on valuation of financing liability(19,269) 41,282 
(Gain) loss on trading securities(527) 6,756 
Net gain on valuation of mortgage loans held for investment and HMBS-related
  borrowings
(18,698) (23,733)
Bargain purchase gain(64,036)  
Gain on loans held for sale, net(32,722) (53,209)
Origination and purchase of loans held for sale(1,715,190) (3,695,163)
Proceeds from sale and collections of loans held for sale1,625,116  3,662,065 
Changes in assets and liabilities:   
Decrease in advances and match funded advances258,899  330,052 
Decrease in receivables and other assets, net144,310  199,209 
Decrease in other liabilities(69,207) (100,650)
Other, net3,986  7,135 
Net cash provided by operating activities272,578  409,021 
    
Cash flows from investing activities   
Origination of loans held for investment(920,476) (1,277,615)
Principal payments received on loans held for investment400,521  444,388 
Net cash acquired in the acquisition of PHH64,692   
Restricted cash acquired in the acquisition of PHH38,813   
Purchase of mortgage servicing rights(5,433) (1,658)
Proceeds from sale of mortgage servicing rights7,276  4,234 
Proceeds from sale of advances and match funded advances33,792  9,446 
Issuance of automotive dealer financing notes(19,642) (174,363)
Collections of automotive dealer financing notes52,598  162,965 
Additions to premises and equipment(9,016) (9,053)
Proceeds from sale of real estate9,546  3,147 
Other, net2,464  (707)
Net cash used in investing activities(344,865) (839,216)
    
 
 
OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (continued)
(Dollars in thousands)
 
 For the Years Ended
December 31,
 2018 2017
Cash flows from financing activities   
Repayment of match funded liabilities, net(220,334) (282,379)
Proceeds from mortgage loan warehouse facilities and other secured borrowings2,991,261  7,215,264 
Repayments of mortgage loan warehouse facilities and other secured borrowings(3,417,398) (7,431,763)
Repurchase of senior notes, net(18,482)  
Payment of debt issuance costs  (841)
Proceeds from sale of mortgage servicing rights accounted for as a financing279,586  54,601 
Proceeds from sale of reverse mortgages (HECM loans) accounted for as a financing
  (HMBS-related borrowings)
948,917  1,281,543 
Repayment of HMBS-related borrowings(391,985) (418,503)
Issuance of common stock  13,913 
Capital distribution to non-controlling interest
(822)  
Purchase of non-controlling interest(1,188)  
Other(2,818) (1,478)
Net cash provided by financing activities166,737  430,357 
    
Net increase in cash and restricted cash94,450  162 
Cash and restricted cash at beginning of year302,560  302,398 
Cash and restricted cash at end of year$397,010  $302,560 
 
(1) Cash and restricted cash as of December 31, 2018 and December 31, 2017 includes $329.1 million and $259.7 million of cash and $67.9 million and $42.9 million of restricted cash respectively.