Financially, it has not been a good year for Ocwen Financial Corp. [1] through the first six months. After reporting a net loss of $111 million for the first quarter of 2016, the nonbank servicer came back in the second quarter with a net loss of $87.2 million (71 cents per share), according to Ocwen’s Q2 earnings report [2]released Wednesday.
Q2’s net loss brought Ocwen’s total net loss for the first half of 2016 up to $198.4 million, compared with a net income of $44.3 million for the first half of 2016. After substantial losses in the third and fourth quarters, however, Ocwen posted a net loss of more than $200 million for the full year of 2015 (the silver lining was, it was an improvement from 2014’s reported net loss of $546 million).
Ocwen’s pre-tax net loss of $96.4 million in Q2 were impacted by $40 million in legal defense costs and settlement expenses related to a $30 million settlement in the two Fisher cases to resolve allegations that Ocwen had falsely certified its compliance with certain federal mortgage programs. Ocwen had been battling the two Fisher lawsuits since 2012.
Also having an adverse effect on Ocwen’s Q2 financial results were a $15 million reserve for a potential future regulatory settlement, $11.4 million of unfavorable interest rate driven fair value changes related to Ginnie Mae and GSE mortgage servicing rights, and $4.3 million in interest expense under Ocwen’s agreements with New Residential Investment Corp. related to an S&P ratings downgrade of Ocwen.
As for the positives of the Q2 earnings report, Ocwen saw a quarter-over-quarter increase in revenue of $42 million—the first time revenue had increased over-the-quarter in a year. The company also experienced a 35 percent over-the-quarter increase in origination volume. Also, Ocwen completed 19,729 loan modifications to assist homeowners facing foreclosure during Q2, which was a 19 percent increase from Q1.
“We are pleased to see the progress being made in our core businesses and new initiatives. We also continue to put additional legacy issues, such as the Fisher cases, behind us. While we still have more to do on various fronts, we are moving towards returning to profitability in our core operations while growing our asset-generation activities,” commented Ron Faris, President and CEO. “We continue to invest in risk management, compliance, service excellence and technology. We maintain our leadership in helping families struggling with their mortgage payments as evidenced by our number one status in the Home Affordable Modification Program (HAMP) and our numerous, well-regarded community outreach efforts. Our growth in mortgage lending and Automotive Capital Services are gratifying early indicators of potential success in new initiatives that can allow us, over time, to drive earnings growth.”
Click here [3] to view a presentation on Ocwen's Q2 earnings.