Ocwen Financial Announces Strong Results for the Fourth Quarter

• Achieved Net Income of $34.9 million for the fourth quarter of 2019
  
  
• Increasing 2020 volume target for lending and flow channels to $15 - 20 billion reflecting continued strong growth and business momentum across originations platform
  
  
• Expense savings from cost re-engineering initiatives were significantly ahead of expectations through the fourth quarter
  
  
• Ended the year with $428 million of cash and $412 million of total stockholders' equity, or a book value per share of $3.06
  
  
• Cooperating with NRZ to support the termination of the legacy PHH subservicing agreement, which generated an estimated pre-tax loss of approximately $3 million in the fourth quarter after direct servicing costs and allocated overhead
  
  
• Expect there to be no material financial impact from right sizing and transition costs, net of deboarding fees, related to exiting the legacy PHH subservicing portfolio with NRZ

WEST PALM BEACH, Fla., Feb. 26, 2020 (GLOBE NEWSWIRE) -- Ocwen Financial Corporation, OCN ("Ocwen" or the "Company"), a leading non-bank mortgage servicer and originator, today reported a net income of $34.9 million, or $0.26 per share, for the three months ended December 31, 2019; compared to a net loss of $(2.3) million, or $(0.02) per share, for the three months ended December 31, 2018, a $37.2 million improvement.

For the full year 2019, Ocwen reported a net loss of $(142.1) million, or $(1.06) per share.

Glen A. Messina, President and CEO of Ocwen, said, "We made terrific progress in 2019 on improving profitability, building a sustainable business model and reducing enterprise risks. We have built a significant originations platform that we expect to generate enough volume to grow our owned servicing portfolio in 2020, as well as to take advantage of opportunities to grow and diversify our subservicing, excluding NRZ, with the support of potential capital partners."  

Mr. Messina added, "We believe our progress on growth and cost re-engineering creates a solid foundation for our transformation into a diversified mortgage originator and servicer that can perform through the mortgage industry cycle. We are excited about the opportunities available to us to increase shareholder value through building multiple origination sources, continued strong operational execution and our continuous cost re-engineering initiatives. In this context, we do not view the unprofitable NRZ subservicing portfolio we are exiting as core to the sustainable business model we are building. We look forward to executing the next phase of our plans targeted at improving our long-term competitiveness and financial performance."

Fourth Quarter and Full Year 2019 Results

Pre-tax income for the fourth quarter of 2019 was $37.2 million, which compares to a $(7.8) million pre-tax loss from continued operations for the fourth quarter of 2018. Pre-tax results for the quarter were impacted by a number of significant items including but not limited to: $28.4 million of favorable interest rate and valuation assumption driven fair value changes, net of the NRZ financing liability, reverse mortgage servicing and hedge positions, $15.0 million in recoveries from a mortgage insurer and a service provider of amounts recognized as expenses in prior periods and $(14.0) million in severance, retention and other re-engineering costs.

The Servicing segment recorded $58.9 million of pre-tax income for the fourth quarter of 2019. Our servicing business recorded $31.1 million of interest rate and valuation assumption driven favorable MSR fair value changes, net of the NRZ financing liability fair value change and hedge positions in the quarter.

For the full year 2019, the Servicing segment recorded $(70.8) million of pre-tax loss.

The Lending segment recorded $3.6 million of pre-tax income for the fourth quarter of 2019. Our reverse mortgage lending business recorded pre-tax income of $4.3 million, which included $(2.7) million of interest rate and valuation assumption driven unfavorable fair value changes. Our forward lending business incurred a $(0.7) million pre-tax loss.

For the full year 2019, the Lending segment recorded pre-tax income of $40.7 million, an increase of $29.6 million versus 2018. The forward lending business had a pre-tax loss of $(9.0) million, which was more than offset by $49.7 million of pre-tax income in our reverse mortgage lending business, which included $25.5 million of interest rate and valuation assumption driven favorable fair value changes.

The Corporate segment recorded $(25.3) million of pre-tax loss for the fourth quarter of 2019. The quarter included $(14.0) million in severance, retention and other re-engineering costs and $(13.5) million of interest expense on corporate debt.

For the full year 2019, the Corporate segment recorded $(96.5) million of pre-tax loss. This included $(65.0) million of severance, retention and other re-engineering costs, $(58.9) million of interest expense on corporate debt and $34.7 million in recoveries of amounts previously expensed from service providers and a mortgage insurer.

Additional Business Highlights

• Our combined volume in 2019 from lending and flow channels was $2.8 billion. January annualized origination volume from combined lending and flow channels was approximately $9 billion.
  
  
• We ended the year with a servicing portfolio with total unpaid principal balance ("UPB") of $212 billion and an owned servicing UPB of $77 billion. Grew owned MSR UPB originations from all sources to $17 billion in 2019 from $2 billion in 2018.
  
  
• Ocwen completed 25,754 loan modifications to help struggling families stay in their homes, 19% of which included debt forgiveness totaling over $150 million in 2019.
  
  
• The constant pre-payment rate ("CPR") decreased from 17.7% in the third quarter of 2019 to 16.7% in the fourth quarter of 2019.  In the fourth quarter of 2019, the prime CPR was 19.6%, and the non-prime CPR was 14.5%.
  
  
• Our reverse mortgage portfolio ended the year with an estimated $47.0 million in discounted future gains from future tail draws on existing loans. Neither the anticipated future gains nor future funding liability are included in the Company's financial statements. We recognized a favorable $47.0 million adjustment to shareholders' equity associated with the adoption of the new credit loss accounting standard referred to as CECL in the first quarter 2020 relating to these reverse mortgage future tail draws.
  
  
• Ocwen's Board of Directors has authorized an up to $5 million open market share repurchase program. The timing and execution of any related share repurchases will be subject to market conditions, among other factors. No assurances can be given as to the volume of shares, if any, that we may repurchase in any given period.
  
  
• We continue to evaluate the profitability of our servicing portfolio by client and loan type and have revised the amount of estimated allocated cost we believe is attributable to the total NRZ servicing portfolio.  As a result, we have revised our estimate of pre-tax fourth quarter loss from the NRZ portfolio from $8 million to $10 million after direct and allocated overhead costs and excluding any benefit from the amortization of NRZ lump-sum payments.
  
  
• The NRZ subservicing portfolio subject to termination represented approximately $42 billion in UPB as of December 31, 2019.  It also represented 8% of total net servicing fees and 22% of NRZ-related net servicing fees for the fourth quarter of 2019.  At this time, NRZ has not taken any action with respect to our remaining servicing agreements.

Webcast and Conference Call

Ocwen will host a webcast and conference call on Wednesday, February 26, 2020, at 8:30 a.m., Eastern Time, to discuss its financial results for the fourth quarter 2019. The conference call will be webcast live over the Internet from the Company's website at www.Ocwen.com. To access the call, click on the "Shareholder Relations" section. A replay of the conference call will be available via the website approximately two hours after the conclusion of the call and will remain available for approximately 30 days.

About Ocwen Financial Corporation

Ocwen Financial Corporation OCN is a leading non-bank mortgage servicer and originator providing solutions through its primary brands, PHH Mortgage Corporation and Liberty Home Equity Solutions, Inc. (Liberty). PHH Mortgage is one of the largest servicers in the country, focused on delivering a variety of servicing and lending programs. Liberty is one of the nation's largest reverse mortgage lenders dedicated to education and providing loans that help customers meet their personal and financial needs. We are headquartered in West Palm Beach, Florida, with offices in the United States and the U.S. Virgin Islands and operations in India and the Philippines, and have been serving our customers since 1988. For additional information, please visit our website (www.Ocwen.com).

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminology. Forward-looking statements are typically identified by words such as "believe", "expect", "foresee", "forecast", "anticipate", "intend", "estimate", "goal", "strategy", "plan" "target" and "project" or conditional verbs such as "will", "may", "should", "could" or "would" or the negative of these terms, although not all forward-looking statements contain these words.

Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Our business has been undergoing substantial change which has magnified such uncertainties. Readers should bear these factors in mind when considering such statements and should not place undue reliance on such statements.

Forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. In the past, actual results have differed from those suggested by forward looking statements and this may happen again.  In particular, the estimates provided in this press release regarding the impact of the termination by New Residential Investment Corp. ("NRZ") of the legacy PHH subservicing agreement and other aspects of our relationship with NRZ are estimates based on currently available information and these estimates may not be accurate.  Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, uncertainty relating to the future of our long-term relationship and remaining servicing agreements with NRZ; our ability to execute an orderly transfer of responsibilities in connection with the termination by NRZ of the PHH subservicing agreement, including NRZ's and our ability to obtain any necessary consents and approvals; the reactions of regulators, lenders and other contractual counterparties, rating agencies, stockholders and other stakeholders to the announcement of the termination by NRZ of the PHH subservicing agreement; our ability to adjust our cost structure and operations as the loan transfer process is being completed in response to the termination by NRZ of the PHH subservicing agreement, including unanticipated costs and the timeline on which we can execute on these actions; our ability to devote sufficient management attention and financial resources to our growth and other strategic objectives as we work through the loan transfer process and adjust our cost structure and operations; uncertainty related to our ability to execute on continuous cost re-engineering efforts and the other actions we believe are necessary for us to improve our financial performance; our ability to acquire MSRs or other assets or businesses at adequate risk-adjusted returns and at sufficient volume to achieve our growth goals, including our ability to allocate resources for investment, negotiate and execute purchase documentation and satisfy closing conditions so as to consummate such acquisitions; uncertainty related to our ability to grow our lending business and increase our lending volumes in a competitive market and uncertain interest rate environment; uncertainty related to claims, litigation, cease and desist orders and investigations brought by government agencies and private parties regarding our servicing, foreclosure, modification, origination and other practices, including uncertainty related to past, present or future investigations, litigation, cease and desist orders and settlements with state regulators, the Consumer Financial Protection Bureau (CFPB), State Attorneys General, the Securities and Exchange Commission (SEC), the Department of Justice or the Department of Housing and Urban Development (HUD) and actions brought under the False Claims Act regarding incentive and other payments made by governmental entities; adverse effects on our business as a result of regulatory investigations, litigation, cease and desist orders or settlements; reactions to the announcement of such investigations, litigation, cease and desist orders or settlements by key counterparties, including lenders, the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Government National Mortgage Association (Ginnie Mae); our ability to comply with the terms of our settlements with regulatory agencies and the costs of doing so; limits on our ability to repurchase our own stock as a result of regulatory settlements and other conditions; increased regulatory scrutiny and media attention; any adverse developments in existing legal proceedings or the initiation of new legal proceedings; our ability to effectively manage our regulatory and contractual compliance obligations; our ability to interpret correctly and comply with liquidity, net worth and other financial and other requirements of regulators, Fannie Mae, Freddie Mac and Ginnie Mae, as well as those set forth in our debt and other agreements; our ability to comply with our servicing agreements, including our ability to comply with our agreements with, and the requirements of, Fannie Mae, Freddie Mac and Ginnie Mae and maintain our seller/servicer and other statuses with them; the adequacy of our financial resources, including our sources of liquidity and ability to sell, fund and recover advances, forward and reverse whole loans, and HECM and forward loan buyouts and put backs, as well as repay, renew and extend borrowings, borrow additional amounts as and when required, meet our MSR or other asset investment objectives and comply with our debt agreements, including the financial and other covenants contained in them; the impact on Ocwen of our implementation of the CECL methodology for financial instruments (ASU 2016-13 and ASU 2019-04); our ability to fund future draws on existing loans in our reverse mortgage portfolio; our servicer and credit ratings as well as other actions from various rating agencies, including the impact of prior or future downgrades of our servicer and credit ratings; as well as other risks and uncertainties detailed in Ocwen Financial Corporation's reports and filings with the SEC, including its annual report on Form 10-K for the year ended December 31, 2018, its current and quarterly reports since such date and, when available, its annual report on Form 10-K for the year ended December 31, 2019. Anyone wishing to understand Ocwen's business should review its SEC filings. Our forward-looking statements speak only as of the date they are made and, we disclaim any obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise.

FOR FURTHER INFORMATION CONTACT:

(1) Performing loans include those loans that are less than 90 days past due and those loans for which borrowers are making scheduled payments under loan modification, forbearance or bankruptcy plans. We consider all other loans to be non-performing.

(2) Constant Prepayment Rate for the prior three months. CPR measures prepayments as a percentage of the current outstanding loan balance expressed as a compound annual rate.

(3) Average CPR for the three months ended December 31, 2019 includes 19.6% for prime loans and 14.5% for non-prime loans.