Just as the company predicted one year ago, Ocwen Financial suffered another year deep in the red in 2017, posting its fourth straight yearly loss of more than $100 million.
But, at least Ocwen’s net losses are trending in the right direction.
Ocwen reported Wednesday morning that it posted a net loss of $128.5 million in 2017. That’s up $70.9 million from the net loss of $199.4 million that Ocwen posted in 2016.
For the fourth quarter of 2017, Ocwen posted a net loss of $45.3 million, driven mostly by $49.8 million in “litigation and regulatory settlement-related expenses.”
For the full year 2017, Ocwen’s net loss included $94 million in litigation and regulatory settlement accruals, up $24 million from 2016.
The quarterly loss marks Ocwen’s fifth straight in the red. In the third quarter, Ocwen posted a net loss of $6 million, an improvement from both the company’s net loss of $44.4 million in the second quarter, and its loss of $32.6 million in the first quarter.
“2017 was another challenging year for Ocwen and our industry. However, we continued to make progress on a number of fronts, reducing our year over year loss by $70.9 million and helping over 45,000 struggling families retain their home through affordable loan modifications,” Ocwen President and CEO Ron Faris said in a statement.
“We are also in an improved cash and liquidity position following the closing of our amended agreements with New Residential Investment Corp. in January 2018,” Faris added. “Our servicing business continued to perform well despite the challenges posed by continued portfolio runoff and posted its sixth consecutive quarter of pre-tax income.”
As Ocwen noted, its bottom line was impacted throughout 2017 by various legal and settlement expenses.
Earlier this week, for example, the nonbank disclosed that it reached a settlement with the state of Maryland as part of a string of settlements with some of the 31 states that took regulatory actions against the nonbank last year over alleged escrow and other mortgage servicing issues.
While the Maryland settlement would not be included in the company’s 2017 financials, many of the other settlements reached by the company throughout last year would be.
Ocwen’s financial performance last year was also impacted by the company’s shifting business model.
Back in August 2017, Ocwen revealed that it planned to exit correspondent lending to focus on its “higher margin” channels – retail and wholesale. That focus lasted just two months, as Ocwen disclosed in October that it planned to exit its wholesale forward lending business, its largest mortgage origination channel.
A few days later, Ocwen said that it is considering selling its reverse mortgage business. If that sale does eventually goes through, Ocwen would have reduced its mortgage originations lines of business from six to one, leaving mortgage servicing and retail forward lending as the company’s only active mortgage lines of business.
As a result in Ocwen’s lending business changes, the company’s lending volume dropped by $1.4 billion in 2017.
In 2016, the company originated just over $5 billion in mortgages. Of that, $4.19 billion were forward mortgages, while $825 million were reverse mortgages.
By comparison, Ocwen originated approximately $3.56 billion in mortgages in 2017. Of that, $2.52 billion were forward mortgages, while $1.04 billion were reverse mortgages.
In its earnings statement, the company noted that the decrease in forward originations was due to the company’s decision to exit the “unprofitable correspondent and wholesale businesses.”
Ocwen’s business will change again soon, assuming that its $360 million deal to acquire PHH Corp. goes through. That deal was announced Tuesday after the markets closed.
According to details provided by PHH, the deal is targeted to close during the latter half of the year, but Ocwen has the option to terminate the deal if PHH’s unrestricted cash or net worth “decline below certain threshold amounts.”