The Real Deal Miami

Ocwen stock tumbles after reporting huge loss in Q3

The West Palm Beach-based company reported a nearly $14M loss on its mortgage servicing segment alone
By Keith Larsen | November 06, 2018 04:30PM

Ocwen CEO Glenn Messina

UPDATED Nov. 6, 4:35 p.m.: Ocwen Financial, one of the largest mortgage service providers in the country, saw its stock drop more than 17 percent on Tuesday after it reported a net loss of $41 million, or $0.31 per share, in the third quarter of 2018.

The West Palm Beach-based company’s net loss far exceeded its $6.1 million loss in the third quarter of 2017. The results underscore the mortgage service industry’s continued challenges to remain profitable amid weaker margins and intense regulatory scrutiny.

Ocwen said in a statement that nearly a third of its pre-tax losses, or $13.9 million in the quarter, were attributable to its servicing segment. It said the business was hurt by less revenue from a smaller portfolio and having to pay higher professional fees.

Ocwen also saw revenue fall 16 percent to $238.3 million during the third quarter from $284.6 million in the third quarter of 2017.

The company acquired PHH Corp. in October for $360 million, after its third quarter ended on Sept. 30. Ocwen’s CEO Messina, who took the position in October, said in an a conference call with analysts that the company would see $100 million in cost savings from the acquisition. He also said it would finish integrating PHH into Ocwen in 9 to 12 months.

Ocwen once had a market capitalization of more than $6 billion and made a fortune servicing subprime mortgages from banks after the financial crisis. U.S. Commerce Secretary Wilbur Ross was a member of its board of directors, and its founder Bill Erbey’s net worth was valued at $2.8 billion in 2013, according to Forbes.

In the last few years, however, the company has faced numerous financial and legal challenges.

Regulators alleged that Ocwen mishandled consumers’ mortgage payments and illegally foreclosed on people’s homes. In 2013, Ocwen reached a $2.1 billion settlement with the federal government and 49 states to address such allegations of mortgage servicing misconduct.

At 4 p.m., the company’s stock closed at $3.13, down more than 17 percent since its opening price on Tuesday.