Florida-based mortgage servicing company Ocwen Financial — the parent company of entities including PHH Mortgage Corp. and Liberty Reverse Mortgage — recorded a pre-tax loss of $26 million in Q2 2022 compared to income of $6 million one year prior. The company attributes those losses to higher mortgage interest rates and spreads as well as asset sales, according to a company earnings presentation Thursday.
Net income in Q2 2022 sat at $10 million, down from the $58 million recorded in Q1. While the losses are apparent, company CEO Glen Messina argues that the company’s diversified business model has worked to limit potential losses in the final quarterly results.
“Our balanced and diversified business model continues to help us offset the impact of a higher interest rate and spread environment and provide flexibility to adjust to a dynamic mortgage market,” Messina said in a statement. “Our results were driven by [the] appreciation of our owned MSRs and a shift to higher margin originations products in Correspondent, partially offset by losses and transaction costs of planned asset sales, and lower revenue in reverse originations due to widening spreads and higher rates.”
In the past, Ocwen has held up its reverse mortgage business channel as an example of its portfolio diversification efforts and continued profitability, however that segment has not been immune from changing market conditions.
Messina also described expense reduction initiatives that company management is undertaking to more adequately react to the reduced demand for forward mortgage originations.
“We […] expect to realize the full run rate benefit of our efforts in the fourth quarter,” he said. “I am pleased with the performance of our stock repurchase plan, buying back $17 million worth of shares through July.”
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On the earnings call, Messina reiterated several times that the company believes its stock price is not reflective of its financial position, earnings power or the overall strength of the business.
Ocwen’s adjusted expenses in Q2 2022 were $145 million, up modestly from $137 million one year prior. Total company liquidity increased to $266 million, up from $257 million in Q2 2021.
Messina spoke specifically about a more challenging operating environment, as substantial volume declines and potentially stagnant growth are forecasted by industry analysts.
“We will continue to leverage the strength of our balanced business model as we seek to drive prudent growth adapted for the environment, reduce our cost structure, optimize liquidity and diversify financing sources, and allocate capital to maximize value for our shareholders,” Messina said.
After the Q2 earnings presentation Thursday morning, Ocwen’s stock price had reduced over 18% as of 2 p.m. EST at $28.81, a reduction of $6.40. Shares opened at $35 on Thursday. Earnings per share were $1.12, over a dollar down from analyst estimates according to Investing.com.