Ocwen Financial sees profit rise as loan delinquency rates fall
Mortgage servicer Ocwen Financial Corp. (OCN) saw its fourth-quarter profit rise 5.3% as the company reported a drop in loan delinquency rates and a $237-million decline in expenses paid on servicing advances for the period. Even still, Ocwen's acquisition of HomEq Servicing in September reduced its fourth-quarter profit, with Ocwen incurring $17.5 million in closing and transitional expenses. Despite those costs, Ocwen posted a profit of $9.9 million, or 9 cents per share, on revenue of $113.2 million for the fourth quarter. That's improved from 2009 when Ocwen's 4Q earnings hovered at $9.4 million, or 9 cents per share, on revenue of $72.7 million. On the servicing side of its business, revenue rose 57% in 4Q, the firm said. Meanwhile, the total unpaid principal balance on loans serviced by Ocwen jumped to $73.9 billion in December, up from $50 billion last year. News of Ocwen' 4Q profit arrived as it announced plans to sell mortgage servicing rights that it had acquired just last year through its purchase of servicing firm HomEq Servicing. Those MSRs will be offloaded to a newly formed corporation -- Home Loan Servicing Solutions, which was incorporated by Ocwen's chairman of the board, William Erbey, in early December. Home Loan Servicing Solutions announced plans this week to raise money for the transaction through a $316 million public offering. Going forward, the West Palm Beach, Fla.-based company does not expect additional material expenses from its HomeEq line of business after this year, according to its earnings report. On a positive note, Ocwen said it was able to reduce the servicing advances it paid out by 10% in 4Q. It also modified 19,999 loan modifications -- 20% of which were adjusted through the government's Home Affordable Modification Program. Ocwen also improved its debt situation by making a $135 million voluntary prepayment on a senior secured term loan. For the entire 2010 fiscal year, Ocwen posted a profit of $38 million, or 38 cents per share, compared to a profit of $300,000 in 2009. Meanwhile, the company's annual revenue fell to $360.3 million in 2010, down from $380.7 million a year earlier. Write to Kerri Panchuk.