Ocwen: Revenue jumps 70% after boarding new servicing portfolios
Mortgage servicer Ocwen more than doubled its 2012 profit as revenue soared 70% above 2011 levels.
The company’s expansive revenue growth came after Ocwen spent the year, gobbling up mortgage servicing rights.
With just the closing of the firm's two major acquisitions – a deal to acquire Homeward Residential and the purchase of servicing rights from ResCap – Ocwen (OCN) increased its servicing portfolio by 270%, excluding master servicing, the firm said in its fourth-quarter earnings report.
The Atlanta-based servicer captured numerous headlines for executing an expansive growth policy in 2012, which showed the servicer aggressively staking out its place in the future mortgage market.
Despite analysts with ratings agencies, including Fitch, citing concerns about Ocwen's rapid growth and penchant for snatching up new mortgage-servicing rights, the firm completed the fourth-quarter and fiscal year 2012 with solid growth in both profits and revenue.
Fourth-quarter income hit $65.2 million, or 47 cents a share, on revenue of $236.4 million. That compares to a year earlier when Ocwen’s 4Q profit hit a more modest $9.7 million, or 8 cents a share.
The company's income for the entire 2012 fiscal year reached $180.8 million, or $1.31 a share, up from $78.3 million, or 71 cents a share, in 2011.
Revenue alone shot up 70% from 2011, reaching $845 million in fiscal 2012.
Last year, Ocwen completed its acquisition of Homeward Residential Holdings, making the firm a subsidiary that added loans valued at $76.7 billion in unpaid principal balance to Ocwen's servicing portfolio.
The company also boarded non-performing loan subservicing portfolios with UPB of $3.3 billion, accounting for 11,200 loans previously serviced by a large bank, the servicer said.
The same year, Ocwen offloaded $1.9 billion of rights to servicing fees to Home Loan Servicing Solutions. Ocwen's rapid growth continued in 2013, with the firm completing its acquisition of assets belonging to Residential Capital, the former mortgage division of Ally Financial, which went through Chapter 11 bankruptcy.
Altogether, Ocwen says it acquired $107.3 billion in mortgage servicing rights linked to private label, Freddie Mac and Ginnie Mae loans. Another $42.1 billion in master servicing agreements were acquired along with $25.9 billion in subservicing contracts.
Ocwen also nabbed subservicing rights from ResCap to service $91.4 billion of Fannie Mae and $31.5 billion Freddie Mac loans.
"Ocwen is well-positioned for the eventual recovery of the housing market, which should expand margins as delinquencies decline reducing interest expense on advances and operating cost on loss mitigation activities," said Bill Erbey, Ocwen’s chairman. "Furthermore, our acquisitions have added key capabilities in originations and prime loan servicing."
Erbey added that "Ocwen has grown its servicing book of business each year by 22% or greater with the exception of 2004 and, during the depths of the credit crisis, 2007 and 2008 when we elected not to expand."