[1]After a rough year highlighted by legal issues and repeated shedding of servicing rights, Atlanta-based Ocwen [2] Financial Corporation today reported [3] a half-billion dollar loss in 2014. The company lost $4.18 per share for a total write-down of $546 million, one year after reporting a $310 million profit.
Announcement of the loss hardly comes as a surprise. The firm announced in early February that it was anticipating a loss [4] in its then-coming earnings report. That announcement was followed by a spate of sales of servicing rights to several firms. In the past three months, Ocwen has sold its $9.8 billion mortgage servicing rights [5] portfolio, and later another $25 billion [6] in MSR to Nationstar Mortgage, a subsidiary of Nationstar Mortgage Holdings [7]; $45 billion [8] worth of Agency home loans to JPMorgan Chase [9]; and $9.6 billion worth of servicing rights to Green Tree. [10]
Amid this financial crash diet, Ocwen was the focus [11] of an investigation by the Office of Mortgage Settlement Oversight [12], which alleged that Ocwen did not comply with terms of the National Mortgage Settlement of 2012 and is seeking almost $2 billion in damages. Ongoing regulatory scrutiny and nagging allegations of servicing violations triggered the removal of Ocwen from Morningstar Credit Ratings [13]' Alert in February.
During 2014, Ocwen incurred $728 million in preliminary normalized expenses, which include $420 million of “goodwill impairment” and $186 million in legal and settlement expenses.
Despite the recent turmoil, Ocwen’s president and CEO, Ron Faris, said he expects his company to have a profitable 2015. "I am encouraged by the progress Ocwen has made so far,” Faris said. “We currently expect to … meet all of our ongoing financial and servicing obligations.”
Faris said the sales this year have generated substantial cash flow and that extending the company’s $1.8 billion advance receivable facility, which begins amortizing in October, will help put the company back in the black next year and beyond. Ocwen also announced that it would “continue meeting our regulatory requirements, execute on our plan to reduce our GSE servicing exposure, continue to comply with our debt covenants, and maintain our current servicer ratings,” according to Tuesday’s statement.
“We have already significantly advanced our Agency MSR sale strategy at attractive prices, entered into an amendment with Home Loan Servicing Solutions [14] that provides more stability for the company, and reduced our 2015 refinancing risk," Faris, said. "We are optimistic that the investments we have made and are making in these areas reduce significantly the substantial risks associated with non-compliance with laws and regulations and improves our service to homeowners, which will ultimately result in better overall returns to our shareholders."