Ocwen Financial plans to reduce its overall workforce by more than 2,000 employees over the course of this year, as the nonbank moves to reduce its costs after its $360 million acquisition of PHH.
Ocwen revealed last week that it is planning to cut its net staffing levels by 2,100 positions by the end of this year. But the actual total number of layoffs is higher than that.
According to Ocwen, the company has already laid off 700 employees and plans to lay off 1,600 more by the end of the year, for a total reduction of 2,300 employees.
Ocwen CEO Glen Messina said last week that the reduction of 2,100 staffers is based on a comparison between Ocwen’s expected staff number at the end of 2019 compared to Ocwen and PHH’s combined workforce at the end of the second quarter of 2018, when the companies had approximately 7,800 total employees.
By the end of the layoffs, Ocwen expects to have 5,700 employees, thereby reducing its overall workforce by a net of 2,100.
As part of the reduction, Ocwen plans to close six of its 10 primary locations in the U.S.
According to Ocwen, the locations that it will be closing are located in Waterloo, Iowa; Fort Washington, Pennsylvania; Addison, Texas; Atlanta, Georgia; Glendale, California; and Orlando, Florida.
Going forward, the company says that it plans to operate mainly out of four locations in the U.S.: West Palm Beach, Florida; Mount Laurel, New Jersey; Rancho Cordova, California; and St. Croix, U.S. Virgin Islands.
In fact, after the planned layoffs, much of Ocwen’s workforce will be offshore.
As of end of last year, approximately 4,600 of Ocwen’s total of 7,200 employees worked offshore, with the company employing approximately 4,100 people in India and approximately 500 in the Philippines. Of those offshore employees, approximately 80% work in mortgage servicing.
And with 4,600 of Ocwen’s employees offshore, that means the company only employed 2,600 people in the U.S.
According to the company, the layoffs will have a higher level of impact in the U.S. than in India and the Philippines. So the gap between the company’s offshore employment and its U.S. employment will likely only grow over the course of this year.
The company did not specify which area of the company the layoffs will be coming from, but in a presentation for investors, Ocwen said the cuts will come from “lower positions.”
Ocwen said that the moves are part of a “cost re-engineering” plan that it believes can save the company $340 million in the next 12-15 months.
The company said that it expects the moves to position it to return to profitability in that same timeframe.
And that part is needed considering Ocwen’s financial performance in the last few years. In 2018, Ocwen reported a net loss of $70.7 million, which is actually an improvement from its last several years of business when the company lost $100 million or more for four straight years.
Messina said that the company believes that these moves, albeit difficult, are necessary to get Ocwen back on firm footing.
“While the decision to reduce our workforce and close certain sites is difficult due to the impact on employees, they are necessary if we are to return to profitability,” Messina said during a call with investors last week. “We thank all our employees for their commitment to Ocwen success and we are committed to treating our employees with dignity and respect as we execute our re-engineering plans.”
According to Ocwen, many of the positions that are being eliminated are the result of redundancies after the PHH merger was completed.
Beyond that, some of the reduction will come as the result of Ocwen’s transition to Black Knight’s LoanSphere MSP servicing system, a move necessary after dozens of states stipulated that Ocwen must move away from its proprietary RealServicing platform, which caused many servicing and escrow issues for borrowers.
According to Ocwen, Black Knight’s platform automates several functions that were being done by hand through its RealServicing platform, thereby eliminating the need for those positions moving forward.
Ocwen said that it plans to notify all employees of their status by Mar. 15, 2019. All affected employees will receive no less than 60 days notice of their position being eliminated, Ocwen said. Additionally, the affected employees will be eligible for severance and career transition services.
And while Messina portrayed the layoffs in a positive light, the company’s 10-K filing with the Securities and Exchange Commission paints a different picture.
“While we believe these steps are necessary in order to drive stronger financial performance and, in the longer term, simplify our operations, the process of closing these facilities will add complexity to our operations in the short term and divert management and employee attention from our other initiatives,” Ocwen said in its SEC filing.
“In addition, the reduction in our workforce may negatively impact employee morale. It is possible that critical employees may seek other employment, or that employees needed to assist with the transition will depart prior to their scheduled departure dates,” Ocwen cautioned.
“Further, it is possible that we have misjudged the number or allocation of positions needed to run our operations efficiently and critical functions could be understaffed,” Ocwen added. “Finally, the potential negative publicity accompanying the site closures and workforce reductions may invite increased regulatory inquiries. Any of the above risks, or a combination of these risks, could impair our ability to realize anticipated integration synergies and result in a material adverse effect on our business and operating results.”