Catching up on some recent earnings reports, Ocwen Financial reported last week that it earned $27.2 million, or 39 cents a diluted share, on revenue of $117 million. For the same quarter last year, Ocwen earned $159.1 million, or $2.23 a diluted share, on revenue of $105 million. The steep drop in net earnings was driven by a tax benefit recorded by the company during 2006; second quarter results last year included a tax benefit of $174.7 million, due to the reversal of a deferred tax valuation allowance. As a result, looking instead at pre-tax earnings, Ocwen reported $42.0 million for the second quarter of 2007 as compared to $17.4 million for the second quarter of 2006 — actually on the surface not a bad result at all, especially so considering current market conditions. In terms of the company’s servicing operations:

“Our Residential Servicing segment continues to post strong operating results. Second quarter 2007 results were significantly impacted by decreasing prepayment speeds … As a result, amortization of servicing rights was down slightly, despite a 48% increase in the balance of mortgage servicing rights … operating income was $29.8 million, which represents an increase of $5.6 million or 23% over the second quarter of 2006. This strong growth in operating income was offset by a $9.1 million increase in other expense due to increased interest expense driven by growth in servicing advances and hedge losses of $3.1 million for the quarter. [attributed to William Erby, Ocwen CEO]

The company reported that non-performing loans represented 17.4 percent, or $9.2 billion, of the total unpaid principal balance of Ocwen’s $53.1 billion servicing portfolio at the end of the second quarter — up sharply from 11.3 percent one year ago.