Coronavirus stifles Ocwen's momentum in 1Q, casts shadow on future
After a rocky 2019, Ocwen Financial established cost-cutting initiatives to steer it back toward financial viability. It posted a positive fourth quarter due to lump-sum payments from the sale of mortgage servicing rights and announced that it was on track to profitability by the third quarter of 2020.
However, the unexpected costs and volatility of COVID-19 derailed those plans as the company took a first-quarter hit, reporting a pretax loss of $87.3 million and a net loss of $25.5 million. These compared with profits of $37 million pretax and $35 million net in the fourth quarter of 2019 and losses of $41.1 million pretax and $44.5 million net year-over-year.
"While we are operating in an environment with increased risk, we believe there are increased opportunities in both origination and delinquent servicing," Glen Messina, president and CEO, said in a press release. "We believe we are well positioned to take advantage of the opportunity to invest in both high-quality MSR and delinquent servicing at very attractive returns. We expect to have adequate liquidity to operate our business and originate approximately $25 billion in new servicing additions with a target 50/50 mix of owned servicing and subservicing."
The West Palm Beach, Fla.-based company's servicing business lost $56.1 million pretax versus its pretax loss of $57.5 million one year prior. On the origination side, Ocwen recorded pretax income of $10.4 million compared to $19.9 million a year ago.
Ocwen's MSR portfolio fell to $208.8 billion in unpaid principal balance on March 31, compared with $212.4 billion on Dec. 31, 2019 and $251.1 billion on March 31, 2019. Delinquencies inched down to 6.1% from 6.3% at the end of the fourth quarter, but rose from 4.7% one year prior. The average constant prepayment rate followed the same pattern, dropping to 14.7% from 16.7% quarter-over-quarter, but growing from 12.5% annually.
With all the ambiguity surrounding the pandemic, Ocwen declined to release any forward-looking statements.
"Because of the uncertainties of operating in the current environment, we are not providing near-term earnings guidance," Messina said. "We are highly focused on exploring all strategic options to leverage our proven operating capability in this environment to create positive outcomes for consumers and fully realize the value of our platform for shareholders."