Ocwen Financial improved its liquidity position from the second to the third quarter and showed that its balance sheet optimization efforts are working. However, the company has made a net loss recently.
The company's preliminary results show a net loss of $ 9.4 million for the third quarter. This compared to net income of $ 2 million in the second quarter and a net loss of $ 42.8 million in the third quarter of 2019.
During the quarter, Ocwen posted $ 13.8 million in corporate restructuring and COVID-19-related expenses, $ 5.8 million in statutory and regulatory provisions, and $ 4.4 million in adjustments to the valuation of mortgage servicing rights. As a result of these items, Ocwen had a pre-tax loss of $ 11.4 million for the quarter. Excluding these costs, Ocwen reports adjusted pre-tax income of $ 13.5 million.
After the end of the quarter, Ocwen announced a $ 11 million settlement with the Florida Attorney General that completed a series of government actions related to the company's maintenance practices. Mediation is expected to begin on October 23 with the Consumer Financial Protection Bureau, which linked the first Florida case.
"Our performance across the company is in line with our expectations," said Glen Messina, President and CEO, in a press release. "Our overall liquidity position has improved from last quarter and we are making good progress on our plans to introduce an MSR asset vehicle to support our continued growth and diversification efforts."
For the third quarter, Ocwen had a total of $ 413 million in available cash, including $ 321 million in cash, according to a company presentation. For the second quarter, the company had $ 314 million in cash.
During the third quarter, the company had to make far fewer service advances than planned, moving $ 833 million from where it expected $ 1.14 billion. $ 901 million was allocated in the second quarter.
Meanwhile, indulgences are following industry trends. At the end of the third quarter, Ocwen had maintenance or shortages in an indulgence plan for 106,000 loans, compared to 131,000 on June 30. However, the company's presentation contained an update that showed a further drop to 75,000 loans as of October 9th as the plans had expired and borrowers did not apply for renewals.
Ocwen's services segment posted a pre-tax loss of $ 28 million in the third quarter, compared to a pre-tax profit of $ 10 million in the second quarter and a pre-tax loss of $ 13.2 million in the second quarter of 2019.
Overall, the MSR portfolio shrank from $ 206 billion three months ago to $ 185 billion on September 30. However, this was entirely due to the reduction in loans to New Residential, which is now $ 86 billion, down from $ 109 billion at the end of the second quarter. Earlier this year, New Residential Ocwen announced that it would add its $ 42 billion agency subservicing portfolio to its in-house services business.
The MSR portfolio of loans that Ocwen offers to itself or to other parties increased slightly to $ 100 billion at the end of the third quarter, from $ 97 billion on June 30.
Origination segment profit before tax was slightly higher at $ 30 million compared to $ 29 million in the second quarter. During the same period last year, this segment earned $ 8.9 million.