- Net loss of
$64 million for 2023, driven by$89 million reduction in unrealized MSR value change due to rates and assumptions, net of hedge - Adjusted pre-tax income of
$49 million for 2023, driven by strong servicing performance - Achieved GAAP operating expense reduction over
$120 million , or 23%, compared to 2022 - Total liquidity of
$242 million as ofDecember 31, 2023 , an increase of 10% overDecember 31, 2022
The Company reported GAAP net loss of
Messina continued, “Our strong growth in adjusted pre-tax income in 2023 reflects the successful execution of our strategic priorities and demonstrates the strength of our enterprise and resilience of our team. I believe our balanced and diversified business, anchored by our best-in-class servicing platform and broad originations capabilities, positions us to deliver strong results in 2024 and beyond.”
Additional Full Year 2023 and Fourth Quarter 2023 Operating and Business Highlights
- Increased number of MSR capital partners in FY 2023 vs. FY 2022 from three to five
- Leveraged special servicing and asset management capabilities to execute accretive asset recovery transaction in Q2 2023
- Grew FY 2023 average servicing UPB to
$292 billion , an increase of over$10 billion from FY 2022 - Achieved Fannie Mae’s 2023 STAR Performer recognition for servicing excellence for third consecutive year
- Increased percentage of MSR originations coming from higher margin products from 21% in 2022 to 39% in 2023
- Retired
$15 million in senior secured notes in 2023; received Board approval to retire up to an additional$40 million in senior secured notes in 2024 - Reduced legacy MSR servicing advances by 14% compared to
December 31, 2022 - Book value per share of
$52 as ofDecember 31, 2023
Webcast and Conference Call
Ocwen will hold a conference call on
About
Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminology. Forward-looking statements are typically identified by words such as “expect”, “believe”, “foresee”, “anticipate”, “intend”, “estimate”, “goal”, “strategy”, “plan” “target” and “project” or conditional verbs such as “will”, “may”, “should”, “could” or “would” or the negative of these terms, although not all forward-looking statements contain these words, and includes statements in this press release regarding our growth opportunities. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Readers should bear these factors in mind when considering such statements and should not place undue reliance on such statements.
Forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. In the past, actual results have differed from those suggested by forward looking statements and this may happen again. Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the potential for ongoing disruption in the financial markets and in commercial activity generally as a result of geopolitical events, changes in monetary and fiscal policy, and other sources of instability; the impacts of inflation, employment disruption, and other financial difficulties facing our borrowers; the impact of recent failures and re-organization of banking institutions and continued uncertainty in the banking industry; our ability to timely reduce operating costs, or generate offsetting revenue, in proportion to the industry-wide decrease in originations activity; the impact of cost-reduction initiatives on our business and operations; the amount of senior debt or common stock or that we may repurchase under any repurchase programs, the timing of such repurchases, and the long-term impact, if any, of repurchases on the trading price of our securities or our financial condition; breach or failure of Ocwen’s, our contractual counterparties’, or our vendors’ information technology or other security systems or privacy protections, including any failure to protect customers’ data, resulting in disruption to our operations, loss of income, reputational damage, costly litigation and regulatory penalties; our reliance on our technology vendors to adequately maintain and support our systems, including our servicing systems, loan originations and financial reporting systems, and uncertainty relating to our ability to transition to alternative vendors, if necessary, without incurring significant cost or disruption to our operations; our ability to interpret correctly and comply with current or future liquidity, net worth and other financial and other requirements of regulators, the Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac) (together, the GSEs), and the
Note Regarding Non-GAAP Financial Measures
This press release contains references to adjusted pre-tax income (loss), a non-GAAP financial measure.
We believe this non-GAAP financial measure provides a useful supplement to discussions and analysis of our financial condition, because it is a measure that management uses to assess the financial performance of our operations and allocate resources. In addition, management believes that this presentation may assist investors with understanding and evaluating our initiatives to drive improved financial performance. Management believes, specifically, that the removal of fair value changes of our net MSR exposure due to changes in market interest rates and assumptions provides a useful, supplemental financial measure as it enables an assessment of our ability to generate earnings regardless of market conditions and the trends in our underlying businesses by removing the impact of fair value changes due to market interest rates and assumptions, which can vary significantly between periods. However, this measure should not be analyzed in isolation or as a substitute to analysis of our GAAP pre-tax income (loss) nor a substitute for cash flows from operations. There are certain limitations to the analytical usefulness of the adjustments we make to GAAP pre-tax income (loss) and, accordingly, we use these adjustments only for purposes of supplemental analysis. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, Ocwen’s reported results under accounting principles generally accepted in
Notables
Beginning with the three months ended
In the table below, we adjust GAAP pre-tax income (loss) for the following factors: MSR valuation adjustments, expense notables, and other income statement notables. MSR valuation adjustments are comprised of changes to Forward MSR and Reverse mortgage valuations due to rates and assumption changes. Expense notables include significant legal and regulatory settlement expenses, expense recoveries, severance and retention costs, LTIP stock price changes, consolidation of office facilities and other expenses (such as costs associated with strategic transactions). Other income statement notables include non-routine transactions that are not categorized in the above.
(Dollars in millions) | FY’23 | FY’22 | Q4’23 | Q3’23 | Q4’22 | |||||||||||||||||||
I | Reported Net Income (Loss) | (64 | ) | 26 | (47 | ) | 8 | (80 | ) | |||||||||||||||
Income Tax Benefit (Expense) | (6 | ) | 1 | (2 | ) | (1 | ) | (1 | ) | |||||||||||||||
II | Reported Pre-Tax Income (Loss) | (58 | ) | 25 | (46 | ) | 10 | (79 | ) | |||||||||||||||
Forward MSR Valuation Adjustments due to rates and assumption changes, net(a)(b)(c) | (121 | ) | 151 | (64 | ) | 13 | (72 | ) | ||||||||||||||||
Reverse Mortgage Fair Value Change due to rates and assumption changes (b)(d) | (3 | ) | (48 | ) | 13 | (12 | ) | 4 | ||||||||||||||||
III | Total MSR Valuation Adjustments due to rates and assumption changes, net | (124 | ) | 103 | (51 | ) | 0 | (68 | ) | |||||||||||||||
Significant legal and regulatory settlement expenses | 21 | 7 | (3 | ) | (3 | ) | (1 | ) | ||||||||||||||||
Expense recoveries | - | 4 | - | - | (0 | ) | ||||||||||||||||||
Severance and retention (e) | (7 | ) | (19 | ) | (2 | ) | (0 | ) | (6 | ) | ||||||||||||||
LTIP stock price changes (f) | 3 | 6 | (1 | ) | 2 | (6 | ) | |||||||||||||||||
Office facilities consolidation | 0 | (4 | ) | 0 | 0 | (1 | ) | |||||||||||||||||
Other expense notables (g) | 2 | 1 | 1 | 1 | 1 | |||||||||||||||||||
A | Total Expense Notables | 18 | (5 | ) | (5 | ) | (1 | ) | (13 | ) | ||||||||||||||
B | Other Income Statement Notables (h) | (1 | ) | (3 | ) | (1 | ) | 0 | (1 | ) | ||||||||||||||
IV | Total Other Notables [A + B] | 17 | (9 | ) | (5 | ) | (0 | ) | (14 | ) | ||||||||||||||
V | Total Notables (i) [III + IV] | (107 | ) | 94 | (56 | ) | (0 | ) | (83 | ) | ||||||||||||||
VI | Adjusted Pre-tax Income (Loss) [II – V] | 49 | (70 | ) | 11 | 10 | 4 | |||||||||||||||||
(a) MSR Valuation Adjustments that are due to changes in market interest rates, valuation inputs or other assumptions, net of overall fair value gains / (losses) on MSR hedge, including FV changes of Pledged MSR liabilities associated with MSR transferred to MAV, RITM and others and ESS financing liabilities that are due to changes in market interest rates, valuation inputs or other assumptions, a component of MSR valuation adjustment, net. The adjustment does not include valuation gains on MSR purchases of
(b) The changes in fair value due to market interest rates were measured by isolating the impact of market interest rate changes on the valuation model output as provided by our third-party valuation expert.
(c) Beginning with the three months ended
(d) FV changes of loans HFI and HMBS related borrowings due to market interest rates and assumptions, a component of gain on reverse loans held for investment and HMBS-related borrowings, net.
(e) Severance and retention due to organizational rightsizing or reorganization.
(f) Long-term incentive program (LTIP) compensation expense changes attributable to stock price changes during the period.
(g) Includes costs associated with but not limited to rebranding, MAV upsize and other strategic initiatives.
(h) Contains non-routine transactions including but not limited to gain on debt extinguishment, early asset retirement, and fair value assumption changes on other investments recorded in other income/expense.
(i) Certain previously presented notable categories with nil numbers for each period shown have been omitted.
Condensed Consolidated Balance Sheet
Assets ($ in millions) | 2023 | 2023 | 2022 | |||||
Cash and cash equivalents | ||||||||
Restricted cash | 53.5 | 71.8 | 66.2 | |||||
Mortgage servicing rights (MSRs), at fair value | 2,272.2 | 2,859.8 | 2,665.2 | |||||
Advances, net | 678.8 | 564.6 | 718.9 | |||||
Loans held for sale | 677.3 | 948.3 | 622.7 | |||||
Loans held for investment, at fair value | 7,975.5 | 7,783.5 | 7,510.8 | |||||
Receivables, net | 154.8 | 164.7 | 180.8 | |||||
Investment in equity method investee | 37.8 | 39.5 | 42.2 | |||||
Premises and equipment, net | 13.1 | 16.1 | 20.2 | |||||
Other assets | 449.2 | 369.3 | 364.2 | |||||
Total Assets | $12,513.7 | $13,011.7 | $12,399.2 | |||||
Liabilities & Stockholders’ Equity ($ in millions) | 2023 | 2023 | 2022 | |||||
Other financing liabilities, at fair value | 900.0 | 1,380.3 | 1,137.4 | |||||
Advance match funded liabilities | 499.7 | 403.0 | 513.7 | |||||
Mortgage loan financing facilities | 710.6 | 1,034.7 | 702.7 | |||||
MSR financing facilities, net | 916.2 | 901.7 | 953.8 | |||||
Senior notes, net | 595.8 | 594.1 | 599.6 | |||||
Other liabilities | 692.3 | 639.2 | 708.5 | |||||
Total Liabilities | $12,111.9 | $12,566.6 | $11,942.5 | |||||
Total Stockholders’ Equity | $401.8 | $445.1 | $456.7 | |||||
Total Liabilities and Stockholders’ Equity | $12,513.7 | $13,011.7 | $12,399.2 | |||||
Condensed Consolidated Statement of Operations
($ in millions) | 2023 | 2022 | ||||||
Revenue | ||||||||
Servicing and subservicing fees | ||||||||
Gain (loss)on reverse loans held for investment and HMBS-related borrowings, net | 46.7 | 36.1 | ||||||
Gain on loans held for sale, net | 40.6 | 22.0 | ||||||
Other revenue, net | 32.0 | 33.2 | ||||||
Total Revenue | 1,066.7 | 953.9 | ||||||
MSR Valuation Adjustments, net | (232.2 | ) | (10.4 | ) | ||||
Operating Expenses | ||||||||
Compensation and benefits | 229.2 | 289.4 | ||||||
Servicing and origination | 57.3 | 64.9 | ||||||
Technology and communication | 52.5 | 57.9 | ||||||
Professional services | 22.3 | 49.3 | ||||||
Occupancy, equipment and mailing | 31.8 | 41.8 | ||||||
Other expenses | 19.0 | 29.1 | ||||||
Total Operating Expenses | 412.1 | 532.4 | ||||||
Other Income (Expense) | ||||||||
Interest income | 78.0 | 45.6 | ||||||
Interest expense | (273.6 | ) | (186.0 | ) | ||||
Pledged MSR liability expense | (296.3 | ) | (255.0 | ) | ||||
Earnings of equity method investee | 1.3 | 0.9 | ||||||
Gain on extinguishment of debt | 7.3 | 18.5 | ||||||
Other, net | 2.8 | (10.2 | ) | |||||
Total Other Income (Expense), net | (480.5 | ) | (386.2 | ) | ||||
Income (loss) before income taxes | (58.1 | ) | 24.9 | |||||
Income tax expense (benefit) | 5.6 | (0.8 | ) | |||||
Net Income (loss) | ($63.7 | ) | $25.7 | |||||
Basic EPS | ( | ) | ||||||
Diluted EPS | ( | ) | ||||||
For Further Information Contact:
(856) 917-0066
mediarelations@ocwen.com
Source:
2024 GlobeNewswire, Inc., source