It’s been a rough year for Ocwen Financial, but the company’s executives said Thursday that they believe they have the company pointed in the right direction.
Thursday morning, Ocwen reported that it posted a net loss of $6 million in the third quarter, an improvement from the net loss of $44.4 million in the second quarter, but a decline from last year’s third quarter, when the nonbank posted a profit of $9.5 million.
The profit Ocwen turned in 2016’s third quarter was its first quarterly profit since the second quarter of 2015.
But since then, it’s been four straight quarters in the red, including the third quarter’s loss of $6 million – although Ocwen’s management says that the company’s recent changes will help solidify the company’s future.
“We continued to make progress during the third quarter on a number of fronts. We transferred the first tranche of mortgage servicing rights under our July agreements with New Residential Investment Corp., and we made progress settling some of our regulatory matters,” Ron Faris, president and CEO of Ocwen, said in a statement.
“Our servicing business continues to perform well despite portfolio runoff and achieved its fifth consecutive quarterly pre-tax profit. We continue to focus on helping homeowners in need, including those recently impacted by the hurricanes through a variety of targeted programs,” Faris continued. “I would also note that our own offices, especially those in the United States Virgin Islands, sustained substantial damage, but we have been able to maintain operations with only minimal interruption.”
Overall, Ocwen generated revenue of $284.6 million, down 20.8% compared to last year’s third quarter, primarily driven by the impact of portfolio run-off and lower Home Affordable Modification Program fees due to the expiration of the program, the company said in its earnings release.
Broken down by segment, Ocwen’s servicing operation recorded $5.7 million of pre-tax income, a $29.8 million decline compared to the third quarter of 2016, driven by $25.8 million less in HAMP fees.
On the other hand, the Ocwen’s lending segment recorded $7.6 million of pre-tax loss for the third quarter of 2017, an $8.9 million decline compared the third quarter of 2016.
The loss was due in part to Ocwen’s seismic shifts in its lending business.
Back in August, Ocwen revealed that it planned to exit correspondent lending to focus on its “higher margin” channels – retail and wholesale. Last month, Ocwen disclosed that it planned to exit its wholesale forward lending business, shutting down its largest mortgage origination channel.
And just a few days ago, Ocwen said that it is considering selling its reverse mortgage business. If that sale does eventually go through, Ocwen would have reduced its six mortgage originations lines of business down to one – eliminating correspondent and wholesale in both forward and reverse mortgage lending, and retail reverse mortgage lending.
That would leave mortgage servicing and retail forward lending as the company’s only active mortgage lines of business.
Ocwen’s various exits from lending segments are already being felt in the company’s lending operations. According to the company, its total mortgage lending volume fell by 46% in the third quarter compared to the third quarter of 2016.
The company’s exit from forward correspondent lending comes into sharp focus when reviewing the company’s loan production by channel (as shown in an accompanying filing with the Securities and Exchange Commission).
In 2016’s third quarter, Ocwen originated $441.97 million in loans through its forward correspondent channel, compared to only $16.09 million in the same time period this year – a decline of 96% in one year.
The company’s wholesale forward channel also declined by 55% year-over-year in the third quarter.
On the other hand, Ocwen’s focus on retail forward lending is already showing dividends, as the company’s retail channel originated $228.25 million in loans in the third quarter, compared to $113.11 million last year. That’s an increase of 102%.
Ocwen also provided some additional details on the company’s shift from its proprietary REALServicing platform to Black Knight’s LoanSphere MSP servicing system, a deal that was announced Wednesday.
Under the terms of the contract, Ocwen will use MSP to service residential mortgages and home equity loans and lines of credit.
In an SEC filing, Ocwen said Thursday that it currently anticipates a 24-month implementation timeline for its transition onto the MSP servicing system.
The deal will also impact Altisource Portfolio Solutions. REALServicing runs on an information technology system that Ocwen licenses from Altisource.
“Based on substantive discussions with Altisource prior to entering into our agreements with Black Knight, Ocwen plans to negotiate mutually acceptable agreements that provide for Ocwen’s transition to the MSP servicing system and the termination of the statement of work for the use of the REALServicing system,” Ocwen said in the SEC filing.