Ocwen Financial (OCN) reported a $42m net loss, or $0.51 a share, in Q309, compared to a $15m net income in Q308. A $50.6m one-time tax expense from the spin-off of its technology and business outsourcing line, Ocwen Solutions, cut into the $23.5m in pretax income for Q309. Income for Ocwen Financial’s servicing operations dropped 39.1% from Q308 to $17.7m. Lower unpaid principal balances (UPB) and a decrease in revenues associated with loan modifications under the Home Affordable Modification Program (HAMP) drove the losses. Ocwen is set to receive up to $655.9m in potential incentive payments through HAMP, a program in which the US Treasury allocates capped incentives to servicers for the modification of distressed loans. The incentive amounts include portions to be distributed from the servicer to the participating borrowers and lenders/investors. Ocwen offered 10,537 loan modifications under HAMP in Q309, an increase of 109%. As of September 2009, 4,731 HAMP trial modifications were active in Ocwen’s portfolio. A smaller amount of trial modifications offered in Q209 reduced the number of completed modifications in Q309, according to the earnings report. As of October, Ocwen touted 13.9% of its HAMP modifications had rolled from the three-month trial stage into permanency. Ocwen added $4.4bn in UPB of loans serviced under a special servicing agreement in August 2009. Ocwen also entered into a subservicing agreement in October 2009, adding $9.7bn in UPB of loans. Ocwen’s CEO William Erbey said Ocwen does not recognize revenue on delinquent loans until they become current, either through modifications or sold as real-estate owned (REO) property. That revenue is deferred instead of lost, but all expenses are recognized, he said. “Therefore, there is a significant opportunity for further increases in revenue and reductions in the level of assets dedicated to the business by reducing the inventory of delinquent loans,” Erbey said. Erbey added that in October, and for the first time since HAMP launched in March 2009, delinquencies as a percentage of the portfolio declined. Write to Jon Prior.