September 19, 2021

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Mortgage News

Ocwen takes $10M loss in Q2 2021

Ocwen Financial posted another net loss in the second quarter, in part due to costs related to strategic measures to generate future profits.

The company’s net loss of $ 10 million followed Return to profitability in the first quarter when it made $ 9 million. In the second quarter of 2020, Ocwen generated a net income of nearly $ 2 million.

However, when Ocwen’s profits are adjusted for one-time charges, the quarterly numbers look more consistent and the company’s recent investments position the company for growth in the second half, executives said on a conference call.

“We achieved a lot during the quarter: record service and seller growth, improved scalability in … new business, cost reduction, strong operational growth in executing channels, services and products with higher profit margins; All of this has given us a strong boost, ”said President and CEO Glen Messina.

To drive growth and reduce costs by scaling, Ocwen is investing in Mortgage Service Rights, directly to the consumer and Correspondence Loans and reverse mortgages used by borrowers aged 62 and older to withdraw home equity. The purchase of a $ 48 billion MSR-MSR portfolio helped drive total service growth to a record high of $ 69 billion in the second quarter. By comparison, service additions were $ 9 billion for the same period last year and $ 14 billion for the first quarter.

The expansion of the company’s business also includes plans for non-delegated services to be rolled out in the fourth quarter, Messina said. (Non-delegated correspondent tenders include loans that are sold and subscribed according to the buyer’s guidelines.)

Overall, the origination margins are “normalizing“At Ocwen after rising to an exceptional high in response to record-low interest rates put in place as a form of economic stimulus,” CFO June Campbell said during the conference call. The average origination margin in the second quarter was 54 basis points, slightly more than a third of the previous year’s value of 149 and slightly lower than in the first quarter when it was 67 basis points. Down Shift at Ocwen – Part of the decline was due to margins on third-party origination channels. Reverse mortgage and direct-to-consumer margins were also lower. However, the reverse margins are high compared to other channels.

Ocwen also invests in re-developing assets like Forbearance mortgages bought from securitized pools insured by the government agency Ginnie Mae. The company is also investing in call rights for private label mortgage-backed securities, Messina said. Call rights allow the holder to repay the relevant securities at face value in exchange for the underlying collateral.

In addition to costs related to strategic transactions, Ocwen has included legal and regulatory related costs on its Notable List. The company struggled federal, State, and local Allegations regarding its service practices. It was also checked proposed changes to capital standards at Ginnie Mae. (Service is a business known for having regulatory sensitivities, and Ocwen in particular has a track record of dealing with and resolving numerous allegations.)

“The regulatory focus is increasing, I think that’s as expected, and the focus seems to be on convenience fees, capital requirements, forbearance compliance and foreclosure moratoriums,” said Messina.

Unless the legal and regulatory environment changes materially and industry projections are correct, Ocwen will likely be able to achieve a positive year-end result on generally accepted accounting principles, he said.

Ocwen stock was trading at nearly $ 27 a share on the East Coast on Tuesday lunchtime, roughly from where it opened the day after falling about a dollar early that morning.