Ocwen Financial Corporation Announces Second Quarter 2010 Financial Results
"We have also reached the stage where loans modified under the federal government's HAMP initiative are now reaching their one year life, entitling us to additional success fees. We recorded $0.7 million in HAMP success fees in the second quarter and expect this revenue stream to increase over the next few quarters," said Ronald Faris, President of Ocwen.
Faris also added, "We are on track to close the HomEq transaction as scheduled on September 1, 2010. With the closing of HomEq and Saxon, we will have deployed over $440 million in effective equity into the servicing business this year doubling our investment. As our objective is to earn a 25% or better pre-tax return on the equity deployed in the servicing business, we have substantially increased the earnings capabilities of the servicing business. For the remainder of the year, however, we will see a sizeable negative impact on reported pre-tax earnings of approximately $50 million due to the set-up and transition costs associated with acquiring the HomEq platform. These costs were built into our investment analysis and anticipated cumulative returns, but they are required to be expensed as incurred and can not be capitalized."
In comparison to the second quarter of 2009, revenue was 21% higher, and the average unpaid principal balance serviced increased from $39.6 billion at June 30, 2009 to $53.9 billion at June 30, 2010. Operating expenses increased by 25% primarily due to a $5.1 million accrual related to the MDL legal settlement along with professional services of $1.2 million and additional ramp-up expenses related to the acquisition of HomEq of $1.5 million. Pre-tax income for Servicing of $21.4 million was 38% higher than the same quarter last year even with the above one time charges.Loans and Residuals Loans and Residuals incurred a loss from continuing operations before taxes of $0.9 million as compared to a loss of $2.8 million in the second quarter of 2009. The balance of assets in this segment was $112.9 million at June 30, 2010 which includes $72.5 million of non-recourse assets associated with the four securitization trusts that we first included in our financial statements in 2010. The improvement in operating results reflects lower unrealized losses associated with a slower decline in loan and real estate valuations and a portfolio that is, excluding the securitization trusts, 30% smaller than in the second quarter of 2009.
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