Preliminary second quarter results at Ocwen Financial Corp. indicate that the company was able to make a profit during this period after experiencing a net loss in the first quarter.
Based on Ocwen's early figures, net profit for the second quarter was $ 2 million, after a net loss of $ 25.5 million in the first quarter and a net loss of nearly $ 90 million in the second quarter of last year .
The mixed effects that the corona virus has had on Ocwen so far show that a key question for investors may need to be considered: Will the company's expertise and commitments as a non-performing servicer be negative or positive for the company?
Glen Messina, the company's CEO, clearly positions them as strengths, but acknowledged that these are some of the challenges Ocwen is working on.
"We believe that the current environment will increase the demand for service and subservicing for operators experienced in managing late payments," said Messina during a call about the company's preliminary results on Friday.
However, he admitted that the company has some restrictions on access to cash sources.
"Our main limitation … will be our available capital," said Messina.
The outflow of record lows and the need to provide funds to cover suspended payments have weighed on Ocwen's liquidity.
While forbearance rates have dropped and around 35% of borrowers who have applied for suspensions continue to pay, Messina has found that he wants to remain conservative when it comes to estimating the level of stress the company will suffer from the spread of the virus could.
Manufacturing operations that became gangbusters in response to lower interest rates were a bailout for Ocwen and some other mortgage companies that are both lenders and service providers.
Although Ocwen has a growing home business, its roots are in delivering emergency services in bulk, an activity that has been a series of regulatory and business challenges for the company since the Great Recession.
Still, the company has a reputation for being like a cat with nine lives when it comes to addressing those concerns.
Especially after Ocwen was sued by a large group of state and federal regulators in 2017, Ocwen has reduced 30 compliance measures to two over time.
These two outstanding lawsuits have now been combined and are expected to be resolved through a lawsuit that is expected to end in mediation in the fall, Messina said.
Although the CFPB is no longer as active as it used to be, it is expected that it will continue to keep an eye on the servicers. At 19%, mortgage problems were the largest category of complaints the office received between January and May. Fifty-five percent of these complaints concerned payment concerns.
Messina said he positioned the company to find the right balance between compliance and business requirements in the future.
"We believe that the compliance environment, our compliance culture, and our control environment enable businesses to maintain quality while increasing volume," said Messina.