Ocwen Financial (OCN) Stock Slumping Today After Reaching DFS Settlement

NEW YORK (TheStreet) -- Shares of Ocwen Financial Corp. (OCN) are falling by 19.68% to $17.59 in mid-morning trading on Monday, as it announces that the founder and executive chairman of the mortgage company will resign in January as part of a legal settlement with the New York Department of Financial Services (DFS).

Ocwen has been accused of mishandling foreclosures and abusing delinquent borrowers, the Wall Street Journal reports.

As part of the agreement the company will pay a civil monetary penalty of $100 million to the DFS by the end of this month.

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Ocwen will also pay an additional $50 million in restitution to current and former New York borrowers who had foreclosure actions filed against them by Ocwen between January 2009 and December 19, 2014, Ocwen said in a statement.

Terms of the agreement also say the company's activities will be scrutinized by an outside monitor, who will lead the "oversight of Ocwen's operations, interactions with related parties, and certain corporate governance measures."

Ocwen will not be able to make any MSR acquisitions unless it meets specific benchmarks and DFS approval, the company said.

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 -9.65%.
  • Despite the weak revenue results, OCN has outperformed against the industry average of 23.7%. 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 61.61%, 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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