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Ocwen Reports Second-Quarter Income of $67M

commercial-falling-moneySecond-quarter profits at Ocwen Financial fell short compared to last year as costs came up.

The company reported net income of $67.0 million last quarter, a decline of nearly $10 million from the year ago period.

While revenue was up 2 percent year-on-year to $553.1 million, normalized pretax earnings took a 7 percent hit, which Ocwen chairman Bill Erbey explained was the result of higher regulatory and compliance costs and interest expense.

The firm's origination numbers improved over the first quarter, owing in part to a pickup in demand for mortgages after a slow winter. Ocwen reported originating $1.2 billion unpaid principal balance in forward loans, with business growing 26 percent over Q1.

Meanwhile, the company's reverse mortgage business came to a balance of $145 billion, delivering a pretax loss of $2 million—a $5 million improvement from the first quarter.

"We continue to believe that the loans originated by our Reverse Lending business during the past two quarters will generate significant future profits as homeowners utilize their available credit lines," Erbey said.

Overall, lending operations delivered $7.1 million in pretax profit, up from the first quarter but down from a year ago.

Meanwhile, servicing net income (pretax) was $91.5 million, down from $137.7 million in Q2 2013 as higher expenses wiped out a small gain in revenue.

At the same time, Ocwen reported an increase in modification offers, possibly indicating stronger servicing results in the future.

In the area of new business, Erbey said the company expects to begin investing in residential mortgage-backed securities where Ocwen is the service in the third quarter of this year. He also hinted at the launch of a second new business platform that will be revealed in the coming quarters.

Ocwen is one of the nation's largest mortgage servicers, falling only below some of the biggest banks.

As a non-bank operating in an increasingly regulated field, the company has drawn scrutiny in recent months over its quick growth and business practices. Earlier this year, New York's Department of Financial Services halted a servicing rights agreement between Ocwen and Wells Fargo as the department reviewed possible conflicts of interest between the company and its vendors.

In response, Ocwen pledged to cooperate to resolve any potential problems, and president and CEO Ron Faris said Thursday the company is continuing its efforts to help the housing industry.

"We continue to work closely with national and local non-profit consumer advocacy groups to better serve our customers, neighborhoods and communities," Faris said. "Our ability to continue to lower delinquencies, lower losses and keep families in their homes, benefits all stakeholders including our shareholders, lenders, loan investors and consumers."

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