Beleaguered Ocwen Financial (OCN) has been on a quest since December 2014 to get rid of its massive agency mortgage servicing rights holdings.
Last month the company said it is selling a $25 billion MSR portfolio to Nationstar Mortgage (NSM), just over a month after agreeing to sell another $9.8 billion portfolio of agency servicing to Nationstar.
That announcement is the latest in a string of agency MSR sales for Ocwen, which said in December that it plans to exit agency servicing entirely.
This year hasn’t been as bad for Ocwen as 2014, but the company has been facing a tough go of it. Back in 2014 the New York Department of Financial Services was all over Ocwen – freezing a number of MSR deals at the start of the year and ending the year forcing the subprime servicer to pay $150 million for actions that likely caused "significant harm" to certain mortgage clients. A bigger coup for the New York regulator: They took a scalp in the form of forcing former Chairman William Erbey to walk away from the company he founded.
It was a long time coming – the Consumer Financal Protection Bureau had Ocwen in its sights since at least 2012 for the sheer bulk of mortgage-related complaints that Ocwen generated.
Ocwen dragged its heels on its annual and fourth quarter filings for so long that word around the New York Stock Exchange is that plenty want the company delisted – a fate that is befalling Ocwen affiliate Home Loan Servicing Solutions (HLSS) over at the NASDAQ.
Ocwen dragged its heels so much on its year-end and 4Q that barely two weeks after those earnings went out, they’re planning to post their first quarter numbers this Thursday afternoon. The year-end results were ugly. Ocwen posted preliminary net loss of $546 million in 2014. On a per share basis, the loss was $4.18 per share.
That’s a stark reversal from 2013, when Ocwen reported net income of $310.4 million, or $2.13 per share.
But, the massive loss wasn’t due to a drop in revenue. In fact, Ocwen generated preliminary revenue of $2.1 billion, up 4% compared to $2.0 billion in the prior year, and its preliminary income from operations was $76.1 million for 2014.
On a pre-tax basis, Ocwen reported a preliminary loss of $443.2 million, compared to $352.5 million pre-tax income in 2013. Ocwen’s preliminary pre-tax income on a normalized basis for 2014 was $284.9 million, compared to the $550.4 million normalized pre-tax income in 2013, the nonbank said Tuesday morning.
They’ve been paying out the wazoo in legal settlements, fines, and general make-goodery, and despite all these legal issues and costs detailed in their filings and that are in the headlines, the company is still awash in cash – an average daily cash balance in excess of $200 million, and they make no bones about being confident they can keep that safety net.
The thing is, despite the dodgy issues they dealt with last year and the fact that the company has gone out of its way to minimize how much dirty laundry it shows – as little as the law and regulations will allow and maybe a touch less, by the looks of it – the company’s road ahead is nowhere near as bad as the road they’ve already been down.
Shedding all the agency MSRs eliminates so much of what got them in the frying pan in the first place. The Street reacted pretty positively in the days after their financials were announced a few weeks ago.
Call it an instinct thing – they’ve got too many resources and too many smart people for the company to stay down and out in the long run. Thursday’s financials might hold some surprises – they may be on the road to getting their house in order. Thursday's earnings will be the first time we see how the company is faring post-Erbey, anyway.
Or to put it like a backhanded compliment – it’s hard to imagine things getting worse for Ocwen.