Citing lower revenue expectations coupled with higher expected operating, interest and tax expenses, Ocwen Financial (OCN) now expects to post a loss in 2015.
The nonbank made the proclamation in a September investor presentation that was filed with the Securities and Exchange Commission Tuesday.
If the company does post a loss in 2015, it would make the second straight year of losing money for Ocwen. In 2014, Ocwen recorded a net loss of $546 million, a stark reversal from 2013, when Ocwen reported net income of $310.4 million.
In April, Ocwen said that the 2014 loss was due to “preliminary normalized expenses,” namely a $420.2 million charge-off of goodwill. In March, Ocwen estimated the charge-off to be between $370-$420 million, and the actual result came in slightly higher than that estimate.
Additionally, Ocwen recorded a loss of $186.1 million in legal and settlement expenses, primarily related to the $150 million settlement with the New York Department of Financial Services.
Ocwen actually posted profits – albeit small ones – in the first and second quarters of this year. In the first quarter, Ocwen reported net income of $34.4 million, while in the second quarter, Ocwen reported net income of $10 million.
At the end of July, Ocwen Chief Executive Officer Ron Faris told investors that the second half of 2015 will be “challenging” from an income perspective for Ocwen – a statement that Ocwen’s new filing reiterates.
And it appears the small profits from the first and second quarters won’t be enough to keep Ocwen out of the red in 2015, the company said in its SEC filing.
Ocwen said in the filing that it is continuing in its previously stated massive cost-cutting initiative, which is designed to trim Ocwen’s expenses by more than $150 million.
As part of that cost-cutting plan, Ocwen said that it terminated its FiServ servicing system contract, and expects to record a $10 million loss in the third quarter because of the cancelation of the contract.
Despite taking a loss on the FiServ contract in 2015, Ocwen said that the cancelation of the deal positions Ocwen to reap a cost savings of $18 million in 2016.
Ocwen may be facing a loss for the second straight year, but the company identified one area that could serve as a “driver for future growth” – residential mortgage lending.
In fact, Ocwen said that it believes it has the commercial and operational foundation to become a top 10 mortgage originator, focusing on “innovative, high margin” products.
Ocwen’s presentation states that Ocwen's approach is built on five factors:
- Aligning its loan fulfillment process across channels, which will drive quality, speed and cost productivity
- Improving pricing, cycle time, service and lead generation
- Creating a network of third parties to allow for nimble pricing and product distribution
- Filling-out product suite to drive partner loyalty, increased share of purchase market and new product timeline
- Executing long-term investments in technology, branding and process re-engineering
Additionally, Ocwen said its plan to grow its lending operation will be built on retail lending. To do so, Ocwen will:
- Establish an online presence focused on ease of consumer use and document automation
- Actively hire and on-board sales talent and equip them with training, coaching and metrics
- Drive Lean Six Sigma in process designs for lead generation, distribution, monitoring and consumer follow-up
- Include all presently available loan programs with real-time competitive pricing comparisons to drive lead conversions
