Ocwen posts high 3Q profit, historic margins suppressed by loan transfers
Bill Erbey: We have been quite cautious in our servicing transfers
Ocwen Financial Corp. (OCN) remains highly profitable, posting a profit of $67 million, or 44 cents a share, in the third quarter.
That is up from $51.4 million, or 37 cents a share, from 2Q of 2012. The firm’s revenue also shot up 128% from last year, reaching $531.2 million.
Despite strong earnings and revenue, the firm admitted its historic margins felt the impact from the boarding of new loans, particularly loans boarded from OneWest.
"Notwithstanding our record revenues, revenues were suppressed due to delays, that have now been resolved, in boarding the OneWest transaction. As expected, margins were below historical levels due to the timing involved in transitioning ResCap and OneWest," said Bill Erbey, chairman of Ocwen.
"We have been quite cautious in our servicing transfers making certain that we have sufficient resources to support the transition of these portfolios. In the case of OneWest, we were fully-staffed well in advance of boarding the loans. We feel very comfortable that once we have completed the ResCap transition to the Ocwen technology platform, we will return to our historical margins."
Servicers, especially mega shops like Ocwen, have been in the limelight ever since the ratings agencies and the Consumer Financial Protection Bureau released advisories suggesting the mass movement of loans creates the potential for widescale servicing issues.
As late as April, the CFPB advised servicers that consumer laws and other applicable statutes may apply in situations where servicing transfers end up harming borrowers.
One of the areas of key concern is whether the "servicer has prepared for the transfer of the rights" and has taken the appropriate steps to protect borrowers during the transfer process, a CFPB advisor said at the time.
Based on Ocwen’s earnings report, it seems the company is taking this advice seriously and being extra diligent in the servicing transfer process.
One bonus for the mega servicer is the fact that prepayments fell from the second quarter, which often equates to future revenue opportunities.
The company isn’t slowing down in boarding new loans, its pipeline of potential new business now sits at $400 billion in unpaid principal balance.
"We anticipate that at least $100 million in UPB will be awarded by sellers before the end of the year," said Erbey.