Shares of Ocwen Financial Corp. ( OCN ) fell nearly 2.3% to close at $26.33 following the restatement of its historical results. The company was compelled to restate its full-year 2013 and first-quarter 2014 results owing to certain accounting issues.
Consequently, Ocwen's net income (GAAP basis) for first-quarter 2014 decreased $15.3 million or 11 cents per share to come at $59.5 million or 43 cents per share. Ocwen restated its prior-year quarter results as well. The company's first-quarter 2013 net income (GAAP basis) after restatement stands at $46.3 million or 33 cents per share.
Further, the accounting adjustment led to revisions in Ocwen's 2013 results too. The company's net income (GAAP basis) for 2013 increased $16.3 million or 11 cents per share to stand at $298.4 million or $2.13 per share. Notably, Ocwen does not expect any change in its second-quarter 2014 results.
The accounting changes stemmed from a certain transaction between Ocwen and Home Loan Servicing Solutions, Ltd. ( HLSS ). There were changes pertaining to how Ocwen recorded the value of $634 million worth of mortgage-servicing rights (MSRs) sold to Home Loan Servicing.
We believe that heightened regulatory scrutiny regarding Ocwen's business dealings with several affiliate firms including Home Loan Servicing, Altisource Portfolio Solutions S.A. ( ASPS ) and Altisource Residential Corporation, will continue to harm its creditability.
Further, Benjamin Lawsky, the superintendent of New York's Department of Financial Services, restricted Ocwen's deal (announced in February) to acquire mortgage servicing rights from Wells Fargo & Co. ( WFC ). This was prompted by doubts over the mortgage servicer's ability to handle the rise in servicing volumes.
Hence, the analysts have been bearish about Ocwen's future prospects. Over the last 30 days, the Zacks Consensus Estimate for 2014 has declined 18.7% to $2.78 per share. As a result, Ocwen currently carries a Zacks Rank #5 (Strong Sell).
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