Ocwen earnings down on pretax origination losses
Ocwen Financial Corp. lost $6.1 million in the third quarter, as pretax losses from its origination business outweighed any profits generated from the servicing side.
The West Palm Beach, Fla.-based company's income this quarter was helped by a $23.2 million one-time tax benefit related to the release of reserves.
For the third quarter of 2016, Ocwen had net income of $9.5 billion.
"We continued to make progress during the third quarter on a number of fronts. We transferred the first tranche of mortgage servicing rights under our July agreements with New Residential Investment Corp., and we made progress settling some of our regulatory matters," President and CEO Ron Faris said in a press release.
"Our servicing business continues to perform well despite portfolio runoff and achieved its fifth consecutive quarterly pretax profit."
The lending segment had a pretax loss of $7.6 million, including a $6.8 million write-off of the carrying value of software used in its wholesale business. On Oct. 12, Ocwen said it was selling the business to an undisclosed buyer at the bottom of a 10-Q filing announcing a servicing settlement with Alabama and Minnesota.
Ocwen's origination unit had a pretax profit of $1.3 million for the same period last year.
Forward mortgage volume fell to $541.2 million from $1.2 billion one year prior, as the company exited the correspondent channel and volume in its wholesale channel fell by more than half to $296.9 million from $661.4 million.
It did increase retail production by 102% to $228.2 million from $113.1 million.
During the quarter, its origination mix was 68% refinance and 32% purchase. In the first nine months of the year, refis were 64% of Ocwen's total volume of $2.1 billion.
Reverse mortgage originations increased to $227 million from $213 million one year ago. Still, Ocwen is considering selling this business, the company's 10-Q filing said.
Going forward, Ocwen will be a retail forward mortgage lender.
Ocwen's servicing business recorded $5.7 million of pretax income, compared with $35.4 million in the third quarter of 2016. The drop was attributed to a $25.8 million reduction in fees the company earned through the Home Affordable Modification Program.
On Sept. 1, Ocwen completed the sale of $15.9 billion of mortgage servicing rights to New Residential Investment Corp. for a lump sum payment of $54.6 million. New Residential is considering accelerating the transfer of the remaining MSRs, which Ocwen has a five-year subservicing contract for.