The move to direct customers has helped Ocwen Financial generate a profit based on its preliminary results for the first quarter.
The promising start to 2021, along with current industry conditions and a recent deal to acquire Texas Capital Bank's $ 14 billion portfolio and mortgage services correspondence platform, leaves the West Palm Beach, Florida-based company yet another Expect growth for the future.
"Assuming we succeed in delivering on our balance sheet plans, we believe we are on the right track to meet our profitability targets for 2021," said Glen Messina, President and CEO of Ocwen, in a notice of earnings .
The company, which creates and services non-mortgage loans, reported net income of $ 9 million for the quarter, compared with a loss of $ 7 million in the last three months of 2020. This also reflects a big improvement over the previous quarter echoed the pandemic-triggered first quarter of last year when Ocwen announced a loss of $ 25 million.
Ocwen's profit before tax was $ 12 million for the first quarter, compared to a loss of $ 1 million in the fourth quarter of 2020 and a loss of $ 87 million at the same time last year.
The origination segment had revenue of $ 66 million for the quarter, up from $ 54 million in the most recent quarter and $ 38 million in the prior year. The service arm had sales of $ 123 million, down from $ 116 million in the fourth quarter and $ 214 million a year ago.
Ocwen's share price rose after the earnings call on Wednesday morning, rising 7.8% to $ 29.02.
Origination was just under $ 14 billion, down $ 1.2 billion from $ 15.2 billion in the previous quarter. However, the company's shift to a larger portion of its production, sourced from the higher-earning direct-to-consumer channel rather than third-party suppliers, resulted in a weighted average margin increase from 56 basis points to 67 basis points. This helped offset the $ 10 billion decline in the MSR portfolio quarter-over-quarter to $ 179 billion.
With the acquisition of the MSR portfolio and correspondence business from Texas Capital Bank, Ocwen expects approximately 60,000 loans to be transferred to the service operations later this year. The current volume of correspondence credit will also almost double. The deal is expected to close in the second quarter.
Messina sees current trends as favorable to further movement in the mortgage industry. His company benefited from first quarter market momentum that supported both mergers and acquisitions and the sale of bulk service portfolios.
"We anticipate that merger-related activities are likely to continue," said Messina. "We also expect the robust mass market to continue."
The corporate debt restructuring has also improved Ocwen's outlook for 2021, according to Messina, and should diversify its investor base. The new terms mean no Ocwen debt will have to be paid back before 2025. As a result, Moody & # 39; s and Standard & Poor & # 39; s recently upgraded Ocwen's rating to stable, and Messina expects this to help the company in the future.
"We have put our balance sheet at risk by extending our debt maturities so that we can access the asset-based financing we need at a lower cost to support our growth goals," he said.