Ocwen's third-quarter 2014 adjusted earnings lagged the Zacks
Consensus Estimate due to higher operating expenses. A decline in
revenues and higher net other expenses were other dampeners. Though
market volatility and contraction in subprime MSR market remain
causes of concern, Ocwen continues to be steadfast on loan
modifications. Moreover, given its strong liquidity position, we
believe that the company will avail the opportunities to acquire
servicing portfolios. However, sluggish economic recovery, elevated
expenses and new regulations make us apprehensive. Also, ongoing
regulatory probes pertaining to Ocwen's business conduct may mar
its growth prospects.
Founded in 1988 and headquartered in Atlanta, GA, Ocwen
Financial Corporation is engaged in a variety of businesses related
to residential and commercial mortgage servicing, real estate asset
management, asset recovery, global outsourcing, as well as
marketing and sale of technology solutions to third parties. The
company also provides special servicing and receivables management
In the past, Ocwen operated as a savings and loan holding
company, but terminated its status as Thrift' in Jun 2005 after an
extended "de-banking" initiative. The company has offices in
Florida, New Jersey, Pennsylvania, Texas, U.S. Virgin Islands and
Washington D.C., and ancillary operations in India, the Philippines
In 2000, Ocwen began shifting its focus from a capital-intensive
business model, involving the purchase and origination of loans, to
a fee-based, servicing-only model. The company acquires
mortgage-servicing rights (MSRs) for performing, sub-performing and
nonperforming residential mortgage loans, from which it earns
annual servicing fees and late fees. The company has been approved
for loan servicing by the Department of Housing and Urban
Development, Freddie Mac and Fannie Mae.
As of Sep 30, 2014, Ocwen owned all the common stocks of Ocwen
Mortgage Servicing, Inc. (OMS). The company either directly or
indirectly owned all outstanding stocks of its primary operating
subsidiaries: Homeward Residential, Inc. (Homeward), Liberty Home
Equity Solutions, Inc. (Liberty), Ocwen Loan Servicing LLC (OLS)
and Ocwen Financial Solutions Private Limited (OFSPL).
Ocwen operates through the following segments:
The Servicing segment provides loan servicing for a fee,
including asset management and resolution services, primarily to
owners of subprime residential mortgages. It mainly comprises the
company's core residential servicing and sub-servicing
The Lending segment originates and purchases conventional,
government-insured forward mortgage loans and Home Equity
Conversion Mortgages (HECM or reverse mortgage loans) insured by
Federal Housing Authority through direct, wholesale and
correspondent lending channels. These loans are packaged and sold
in the secondary mortgage market.
The Corporate Items and Other segment includes items of revenues
and expense that are not directly related to a business, business
activities that are individually insignificant, interest income on
short-term investments of cash and other corporate expenses. The
segment also included the diversified fee-based businesses that
were acquired as part of the Homeward and ResCap acquisitions, and
subsequently sold to Altisource.
Since its inception, Ocwen continues to streamline its
operations through mergers, acquisitions, divestments or spin-offs.
In 2007, Ocwen closed Funding America LLC, its subprime loan
origination operations. In Aug 2009, the company separated from
Ocwen Solutions in a tax-free spin-off to Ocwen shareholders,
following which Ocwen Solutions became a separate publicly traded
company. This spin-off excluded BMS Holdings and Global Servicing
Since 2009, Ocwen disposed its investment in Bankhaus Oswald
Kruber GmbH & Co. KG and closed the sale of MSRs to HLSS
Further, since 2010 the company's major acquisitions include
HomEq servicing portfolio and platform from Barclays Bank, Litton
Loan Servicing from Goldman Sachs, specified MSRs and the related
assets from Saxon Mortgage Services Inc., specified MSRs related to
non-prime loans from JPMorgan Chase Bank, N.A. and Aurora Bank
FSB's commercial servicing rights portfolio.
Additionally, In Dec 2012, Ocwen completed the acquisition of
Homeward Residential Holdings Inc. an integrated mortgage firm with
prime lending and mortgage servicing operations from WL Ross &
Co. LLC for $766 million.
Further, in 2013, Ocwen continued with its restructuring
strategy. The company acquired Residential Capital LLC's (ResCap)
MSRs in collaboration with Walter Investment Management Corp.,
Genworth Financial Home Equity Access, Inc. from Genworth
Financial, Inc. and UPB related to Freddie Mac and Fannie Mae loans
from OneWest Bank. Moreover, the company divested rights to MSRs
and associated servicing advances for a servicing portfolio of
subprime and Alt-A residential mortgage loans to HLSS Holdings and
sold diversified fee-based businesses acquired from Residential
Capital LLC and Homeward to Altisource Portfolio Solutions S.A.
Ocwen Financial Corp. (OCN): Read the Full Research
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