Ocwen slips back into the red for the third quarter
Ocwen Financial improved its liquidity position from the second to the third quarter, showing its balance sheet optimization efforts are working. But the company swung back to a net loss for the most recent period.
The company's preliminary results report a net loss of $9.4 million for the third quarter. This compared with net income of $2 million for the second quarter and a net loss of $42.8 million for the third quarter of 2019.
During the quarter, Ocwen logged $13.8 million in corporate re-engineering and COVID-19 related expenses, $5.8 million for legal and regulatory reserves and $4.4 million of mortgage servicing rights valuation adjustments. Because of those items, Ocwen had a pretax loss for the quarter of $11.4 million. Without those costs, Ocwen is reporting adjusted pretax income of $13.5 million.
After the quarter ended, Ocwen announced a settlement with the Florida Attorney General's office for $11 million, which wrapped up a series of state actions regarding the company's servicing practices. It is expected to start mediation with the Consumer Financial Protection Bureau, which brought the initial case in tandem with Florida, on Oct. 23.
"Our performance across the business is progressing consistent with our expectations," Glen Messina, president and CEO, said in a press release. "Our total liquidity position has improved from last quarter and we are making good progress on our plans to implement an MSR asset vehicle to support our continued growth and diversification efforts."
For the third quarter, Ocwen had $413 million in total available liquidity, including $321 million in cash, a company presentation showed. For the second quarter, it had $314 million in cash.
During the third quarter, the company had to make far fewer servicing advances than projected, advancing $833 million where it had expected to do $1.14 billion. In the second quarter, it advanced $901 million.
Meanwhile, forbearances are tracking along with industry trends. At the end of the third quarter, Ocwen owned the servicing or subserviced in a forbearance plan for 106,000 loans, compared with 131,000 on June 30. But the company's presentation included an update, which showed a further decline to 75,000 loans as of Oct. 9 as plans expired and borrowers did not request extensions.
But Ocwen's servicing segment had a $28 million pretax loss in the third quarter, compared with pretax income of $10 million in the second quarter and a pretax loss of $13.2 million in the second quarter of 2019.
In total, the MSR portfolio shrunk to $185 billion on Sept. 30 from $206 billion three months prior. However, that was entirely because of the reduction in loans being subserviced for New Residential, which is now $86 billion, down from $109 billion at the end of the second quarter. Earlier this year, New Residential notified Ocwen it would bring its $42 billion agency subservicing portfolio to its in-house servicing business.
The MSR portfolio of loans Ocwen services for itself or subservices for other parties grew slightly to $100 billion at the end of the third quarter from $97 billion on June 30.
Pretax income for the origination segment was slightly higher compared with the second quarter, $30 million versus $29 million. For the same period last year, this segment earned $8.9 million.