Ocwen Financial (OCN) Rises on Report Top Financial Regulator Could Step Down

NEW YORK (TheStreet) -- Shares of Ocwen Financial  (OCN) closed up 4.92% to $23.04 on Tuesday after Bloomberg reported Benjamin Lawsky, New York's top financial regulator who has accused the mortgage services company of backdating letters to its borrowers, would probably leave his position in 2015 to take a job in the private sector.

Governor Andrew Cuomo appointed Lawsky as New York's Superintendent of Financial Services in 2011. It's not clear who Cuomo would name as a successor if Lawsky were to step down, Bloomberg reports. It's also unclear how the successor would approach Ocwen and if he or she would be more or less strict with the company.

News broke in October that Lawsky, is investigating if Ocwen's mortgage servicing procedures are unfair to homeowners, particularly those in dire financial straits.

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Lawsky's wrote a letter last month to state that Ocwen ignored the backdating even after an Ocwen employee found and reported it. Lawsky claimed Ocwen had not rectified the issue nearly one year after the employee discovered it. Ocwen could avoid making mortgage modifications by backdating its correspondence with homeowners.

Ocwen said in a statement that it regretted the mistake and added that 283 borrowers in New York had received letters with incorrect dates.

Separately, TheStreet Ratings team rates OCWEN FINANCIAL CORP as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate OCWEN FINANCIAL CORP (OCN) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has significantly increased by 143.32% to $348.99 million when compared to the same quarter last year. In addition, OCWEN FINANCIAL CORP has also vastly surpassed the industry average cash flow growth rate of -34.57%.
  • Despite the weak revenue results, OCN has outperformed against the industry average of 25.6%. Since the same quarter one year prior, revenues slightly dropped by 2.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for OCWEN FINANCIAL CORP is currently very high, coming in at 74.21%. Regardless of OCN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, OCN's net profit margin of -14.61% significantly underperformed when compared to the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Thrifts & Mortgage Finance industry. The net income has significantly decreased by 224.4% when compared to the same quarter one year ago, falling from $60.57 million to -$75.38 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 58.01%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 248.71% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, OCN is still more expensive than most of the other companies in its industry.
  • You can view the full analysis from the report here: OCN Ratings Report

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