Weaker demand for reverse mortgages drove the decline in revenues
Ocwen Financial reported a net loss of $29.8 million for the second quarter, compared to a net loss of $44.4 million in the year-ago period, as lending and servicing revenues dwindled.
The company said it generated revenue of $253.6 million and cash flows from operating activities of $97.2 million, ending the quarter with $228.4 million of cash.
Servicing revenues dropped to $230.5 million during the quarter from $271.8 million in the second quarter of 2017. Revenues in the company’s lending segment totaled $19.0 million, down from the $32.8 million revenues recorded in the year-ago quarter.
Despite the declines, the servicing segment recorded $2.1 million of pretax income, the eighth consecutive profitable quarter for the business. The lending segment recorded $1.4 million of pretax income, a $2.0 million increase over the second quarter of 2017. Ocwen’s reverse mortgage lending business recorded $3.1 million of pretax income and its forward lending recapture business incurred a $1.7 million pretax loss.
Ocwen Chief Accounting Officer Cathy Dondzila attributed the lending revenue decline to weaker demand in the reverse business. “Much of the decline was a result of the drop in reverse lending profitability, driven by higher competition for lower reverse mortgage volumes in the industry, higher interest rates, and wider investor spread, lowering investor pricing and execution margin in the second quarter,” she said during the company’s second-quarter earnings call.
Ocwen CEO John Britti said that during the quarter, the company focused on developing integration plans upon closing of its merger with PHH.
“We have made solid progress towards closing the transaction, and we are currently targeting closing the acquisition in the third quarter of 2018,” he said. “Our integration planning has progressed sufficiently for us to revise our annual synergy run-rate target up to $100 million over annualized Q2 2018 operating expenses for both companies combined.”
