Ocwen takes net loss due to legal costs, correspondent exit
Ocwen Financial Corp. took a net loss of $44.4 million in the second quarter related to legal and other expenses, including the wind down of its correspondent lending unit.
Ocwen last turned a profit in the third quarter of last year when it generated $9.5 million in net earnings. It has been beleaguered both in the long- and short-term by regulatory enforcement actions it has worked to resolve or fight.
"Despite the regulatory setbacks, we made progress during the second quarter on a number of fronts," said President and CEO Ron Faris in a press release.
"We signed our agreements relating to mortgage servicing rights transfer and subservicing with New Residential Investment Corp. We settled additional legacy litigation matters further reducing future uncertainty; and we specifically identified approximately $12 million in annual corporate overhead cost savings that we expect to realize in the second half of this year."
Significant components of Ocwen's loss included $33.6 million in legal settlement-related expenses, $5.6 million in regulatory matter-related defense costs, $3.7 million in negative changes related to Ginnie Mae and government-sponsored enterprise mortgage servicing rights, and $1.5 million in other expenses, including severance.
A number of the company's legal battles continue to play out in court, including its court challenges to a Consumer Financial Protection Bureau lawsuit and a lawsuit filed against Fidelity Information Services related to a regulatory audit of the company FIS conducted on the California Department of Business Oversight's behalf.
A judge this week granted Ocwen's motion to invite the U.S. Attorney General to share his view on constitutional issues related to the CFPB in conjunction with the company's motion to dismiss a CFPB lawsuit, according to company spokesperson John Lovallo. FIS case filings in California's Superior Court in Sacramento show it proceeding with hearings scheduled for next month, including one related to a motion for an order sealing the record.
The company's servicing segment generated $9.2 million in pretax income but its lending segment took a $600,000 pretax loss as its volumes declined 26.1% year-to-year and it exited the correspondent loan channel.
Ocwen's servicing results marked a $21.4 million improvement over 2Q 2016 and its lending results represented a $5.6 million decline compared to 2Q 2016.