OCN - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Ocwen Financial Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. I would now like to turn the conference over to Steve Swett. Mr. begin. may you Swett,

Stephen Swett

acquisition thank has full joining website which year focus also and our Corporation's a and our on note fourth XXXX available been QX will for your released quarter for special results planned Financial Ocwen and XXXX slide on Relations PHH. you morning, review. Please us that presentation for typical Ocwen's have of also Good Shareholder earnings are call and

CEO, call, Ron Michael the have we and President and and on CFO, Faris; Speaking Bourque. Ocwen's EVP

As contain of a reference by the statements to terminology. forward-looking Harbor reminder, today the forward-looking presentation and use identified of forward-looking the to our comments a provisions federal may These be pursuant securities future laws. statements period made may by Safe or

that different address by uncertain. degrees, nature Forward-looking statements their are, to matters

Our business which has change, substantial been such has uncertainties. magnified undergoing

when these not bear in place factors reliance should on undue should You such statements. such mind statements and considering

cause uncertainties a involve have number statements again. could forward-looking actual those past, In differed Forward-looking to statements risks, from results may suggested of and differ this happen the by materially. that actual and assumptions, results

any any Our they are disclaim otherwise. the forward-looking of update a obligation of whether statement date to future speak or we and statements events or as made only revise result forward-looking information, as new

our discussions and measures of financial a others. normalized adjusted expense, believe the presentation financial debt adjusted expense, We available analysis operating illustrative pre-tax as cash non-GAAP provide to operations, before income, such corporate among addition, servicing to In pre-tax measures and our references supplement these flow, flow adjusted condition. comments pro liquidity financial adjusted income from contain adjusted liquidity forma cash useful non-GAAP and

States. measures aspects generally for under financial as alternate be United measures alternative should not an instructive. in believe of viewed the financial provide Non-GAAP accepted also view results accounting company's an We addition principles business and in that our to is to the these way non-GAAP reported

the elaboration transaction, just in Form discussed, please and PHH on our for to are refer an SEC, company's our with which earnings as when XX-K the including our as XXXX For well of the factors as presentation I investor filings today's release press the available presentation well website. filed as release Ocwen's

to will turn the I Now, call over Ron.

Ronald M. Faris

Steve. and you, for morning, joining call all Thank the Good you thank today.

last acquire book As $XXX GAAP PHH to announced million are XX% you cash, a reached agreement aware, XX, December representing night an at Corporation XXXX. Ocwen for we to in discount that PHH's value

regulatory very about our for is forward believe was deal company an the our to and for year another excited conditions, minutes. approvals, industry. PHH I'll industry. other closing of a and approval in talk this subject more While transaction about we're evolution the PHH's continued few important challenging and various Ocwen our and in XXXX shareholder step including and marks it

However, progress many team well to fronts. the Ocwen continued on execute and we made

exiting here nobody our versus the we did results, is happy size year While and last about core mortgage Services. Capital exit forward our subservicing, servicing towards businesses reverse we portfolio back made a of liquidity financial by million have reported fourth recapture, to Automotive our quarter, our loss and strategic reduce we channels and improved lending, In $XX of decision the shift and position. the the making origination other

review, investor accompanying remain million to success. the on a These settlement with of strategic deck. each the million results litigation points On presentation we in provided hit net a included are $XX in we accruals. few building in spend of year decided want We and XXXX. have lot quarter reported adjusted we coming of pre-tax note in Note off We won't a morning XXXX. of million an million the a did our but a mortgage We $X the lot that in reverse claims our benefit of I website, time business on and in a bit focus, strong $XX of connection after for and a earned our have which financial available slide future regulatory this which key recovery previously on fourth included reconciliation move businesses excited loss forward that its information announced. to our narrower are future these income CIT deck basis in is with about lending results, to a settlement OneWest Bank $XX earnings excited for

a full-year million. despite expenses For we improvement legal XXXX $XX in recorded and increase the of versus XXXX, regulatory loss million, an million $XXX settlement $XX.X of net a of

operating adjusted still we however, legal regulatory or overhead $XX.X in million reductions that despite expenses expenses I were million had these excluding note, and X%. corporate down Our $XXX settlements. non-technology over would

PHH. we Both important spend I for remain this incurred overhead $XXX Additionally, about discuss also of opportunities technology-related improvement. about million more when spending. technology and corporate I'll talk further

quarter business posted pre-tax income the consecutive continued portfolio Servicing of perform of challenges well and runoff. to six Our continued despite

significant have Our income business. and lending improve Lending pre-tax recorded XXXX mortgage we XXXX, reverse our to the $XX taken Forward steps in million disappointing business of performance of

would I significant certain highlight quarter. updates like to since Next, last

First, each resolving XX actions April similar the relatively of other. on plus we to Columbia continue terms XXXX in make with having progress states the now generally regulatory taken to District resolved

two and terms be more with continue remaining caution or to other require matters But appropriate of and states states additional We the some do the may terms or remaining to general. similar to able may on two the terms, costly. so attorneys may and different challenging settle resolving be we that work not which

we litigation, recent CFPB this which be later most upcoming and the we expect to and our to out XX-Q to time you XX-K have we this refer filing at week. updates no material As

complete MSRs we Second, work the New continue diligently to or to Residential NRZ. to of transfer

concepts we from of required the implementation signed has with on in consents July good to accelerate the agreements made XXXX the and obtaining front challenging, agreements. been While XXXX this progress remains have the we January

governed most effective this part As changes terms entire and is now modified economic the contractual other X, portfolio XXXX. of recent January the by agreement,

Importantly, million January. remaining in $XXX received we cash the in

with and continue Until to servicer to main the and we we work in certain remaining greatly obtain then, remain MSRs. position the are liquidity NRZ We closely NRZ transfer on a acquired improved to now consents portfolios. cash

Assuming PHH providing even become an partner client we more will important to acquisition of great service NRZ closes, the them committed and competitive announced Ocwen, prices. and are at

as cash million XX, received including $XXX NRZ XXXX, the December forma January XXXX. of we over Third, from adjusted transaction in the of liquidity pro had

a the which of that would cash this need received Clearly, fees, cash the from over some we working to going for capital. we are can cash also NRZ other shareholders. be some PHH of acquisition, time, we of attractive used forward returns and As will list pull represents that but on (X:XX) otherwise working provide turned our of have collectively for to options think a is investment

are the to fair We are if sheet especially of capital decided while today, our writing of we election to our opening and the government on adjusts our the accounting as there acquisition. portfolio the XXXX, equity. our superior January MSR This specifically remainder also see well asset alternatives balance in value considering structure the of X, MSRs. see value not as you elect acquired have agency looking as for Fourth, yet included insured PHH at debt our and up financials XXXX,

million and value by value, Given this increases January fair our our on book basis the $XX XXXX. difference between X, current

reflected will of fair in Going these forward, MSRs the changes amortization be by value.

not volatility higher do Given the value expenses treatment. rate amortization to we XXXX, about currently MSRs, accounting may Since in given also we interest in XXXX additional sensitivity from change changes rate these forecast changes. to asset P&L $XX fair of MSRs the our to we the value prior akin experience higher million of compared hedge

QX rate the an in increase estimated MSRs XX the $XX For a million of positive basis which swap pre-tax that would benefit example, level. alone, in drove P&L XX-year valuations if XXXX January at value the remain be these point and in increase

most reduce and continue RMBS through loan importantly, modifications. Finally homes their keep families losses struggling and we servicing and in effective to

loan quarter. in we As the additional modifications an completed X,XXX fourth reported

close retain Overall, reinstatements. we XXX,XXX we modifications, helped XX,XXX pre-foreclosure to loan families For limited the not families full through modifications. year, including, struggling through home various but forbearance helped their resolutions over our to affordable and

NHS with event Jersey in Citizens including outreach on and quarter. We City fourth various borrower York the and non-profit Action organizations New also the NAACP partnered New

meaningful benefits the but capabilities. turn the approved, we view of to servicing right will industry only scale, struggle service strategic to current same acquisition and financial you in capacity provides all in the non-performing lacks much loans. delinquencies, risk compliance infrastructure provides of FHA, and modest to invest technology, this needed the see the to highest borrowers. and industry. ultimately will servicing these At necessary, and quality the struggle the many order to Consolidation the non-bank a I under in a achieve our in capacity today's stakeholders. economies is economies operational servicing inevitable, management credit to and servicers if the will largest and higher-touch and PHH my capacity in especially If strategic environment. Now, industry its maintain required of that servicers its Ocwen my not circumstances are have is believe even and it non-conforming time, VA, in We opinion, providing by and are rationale. adequate continue or mortgage of industry start both step direction to grow Smaller Most and I'll because scale. acquisition, restore us abandoned for increase servicers maintain to struggling and

and forma XXXX. basis company industry-leading of as loss First, a and servicing on the increases expertise X.X PHH's service transaction combination. combined a servicing December the portfolio loans is as million our powerful mitigation leading scale pro The Ocwen's combination of retention platform would XX,

we and opportunity best and operations, costs. originations have management, eliminate the other migrate and to practices redundant technology servicing the Within will to

eventually cost Knight's By from new with Second, the accelerating business risks and industry-leading to compliance operational growth system reducing foundation combining our respective significantly Ocwen's to us and MSP our and revenue portfolio an transaction our run-off. to a the new Black scratch. system transition established and to enable the servicing servicing system, strength, platform accelerates complementary we offset implementing activities resume associated servicing the transition and

financial opportunities for from to additional synergies Ocwen. the standpoint, tremendous a Finally, transaction financial for generate provides us

its have earlier, previously $XXX a with of that As overhead biggest all. corporate corporate over is and spend in had we and finished PHH in million XXXX it of Therein technology technology basis. We spend. approximately announced standalone I the estimate will lies overhead $XX restructuring, once opportunity million on mentioned

operations part best technology, redundant find corporate As management, risk the and we and other eliminate and non-essential of costs. integration, compliance must practices for

knowledgeable business efficient together. the and great Additionally, prospect with PHH are combined team the to experienced and of joining of excited we many build a by

purchase price transaction will turn approximately in receive shareholders of corporate let's per $XXX Now, assume of for the $XXX the acquisition. total million PHH of also to will agreement, million part the details. a Ocwen $XX as share cash. PHH debt Under

is of expected XX% this are losses they unique is deal function Ocwen This equity out for the for balance the price available sheet continue brief restructuring price PHH's $XXX One PHH PHH cash The of of secure the PHH Ocwen in the million a their transaction being and cash the for million sources On and less of acquiring servicing the a cash purchase X the than some for essentially evolution paid that also distribution. for to their announced as of a lay discount about company financing their year-end is structure. that uses summary of plans balance purchase we built-in X.X XXXX against be $XXX their elements the presentation, cash book is funded we PHH at previous advance closing. of otherwise expected slide of to by advances. million to of on with and $XX will transaction. currently paying

may second the I the to sale our $XX of deal note reduced million that $XX in deal PHH's XXXX our positive be before assumptions from is PHH and in items $XX other won't buy facility. in $XX the approval (XX:XX) anticipate NRZ one that further time. over existing recovered of shareholder to lenders of received PHH's existing million closing We indications participate expenses would approvals. including the will million have various in structuring this the deal Ocwen's be advance made subsequently will contribution and Ocwen remaining close should before closes. that and up will the other ours million. MSR deal regulatory in our which Should close includes contribute advanced by does, that remaining that – cash and close We following deal satisfaction conditions that to half lenders

the of mortgage these transaction transaction and to scale X reverse The mortgages. presentation, portfolio add lending. focus areas intended is all PHH to subservicing, back business on to Ocwen reverse its to PHH Moving slide will retention continue except servicing, of

is can the XXXX expect June is pro mortgage date. liquidity $XXX The our teams the to than and including would On of billion are of the servicing in for in more available cash and growth of further anticipated are company the we and number net two plan of We which number have to you I of December side mortgage about combined loans, cash. the excess slide, represents figures XXXX. currently million company future. a $X right the over recapture to principal this All for will Together, XX, of update operating loans of annually some of unpaid basis loans reverse company. combined about identify platform on see for exploring except that closing X.X opportunity XXXX the XX, million expected synergies. originations, key which forma balance $XXX December best more and/or provides this debt in repayments, as assuming service combined practices our originate we the as other note stats mortgage-related investments can XX, totaling billion the for and cash the about a amount as $XXX million

operating PHH's a from be we MSP and assist efficiencies lower from employee Black driving systems the On significant expertise achieved. will also platform management process what extensive well-planned, can side, pool. appropriate servicing with We benefit where expertise expect cost Knight's to talent and believe transition can where we be PHH's robust, in our

of in summarize presentation the to To for right the be opportunity will following. While which the is our any future. some acquisition outlined believe we've of invest we in this the time this materials, risks, size and has our right priorities us

to as soon possible. First, required work with PHH obtain approvals and transaction all as close the

of practices identify and implement Second, best both organizations.

to Third, and technology servicing quickly non-essential portfolio PHH And costs. eliminate loans Ocwen's and corporate Fifth, growth. eventually migrate platform overhead. and as servicing origination servicing as Fourth, safely possible. MSP sixth, redundant non-essential the and eliminate and resume redundant

PHH's ensure companies. our for combination valued conclude, intend to closely All and also to transaction. and work and platform extensive We believes smooth with is this Ocwen To both servicing a subservicing successful clients win-win a PHH advantages lower more with by from of scaled as synergies. and expertise greater well should from benefit larger, stakeholders the overhead company cost as competitive and other the MSP the provided

successful high Ocwen a a in to On confidence of time the we'll We to have we degree our and take ability questions. interest happy today team, be of execute your your Operator? and management behalf transaction. appreciate

Operator

you. Thank

KBW. comes with question first line Bose the from George Our of

Your is now line open.

Bose George

of transaction, Hey, like morning. good but guys. Good sounds had couple that. a a It questions very on

you have process, from can you First, the talk already started? approval and just need approval regulatory these about who do conversations

Ronald M. Faris

signing of until yes, the after So, process have transaction. but the the formal begun, begin really cannot conversations

that So, now process. we (XX:XX) can begin

we the include Freddie currently in there's We required states. require only our very estimate Fannie Mac, Mae, XX provided over approximately federal at traditional regulatory those We certain They'll that be we that be Mae. anticipate to will – from transparent, having regular that information. intend with We be note Ginnie consents slide There Hart-Scott-Rodino and all communications is states but with will – approvals did states deck that there's not level. for filing also approval. partners. that You'll the the and

from. those obtaining think primary approval that entities the are will I So, require

Bose George

in well origination actually or capacity, company Okay. as capacity add plan forward, through combined forward to going acquisition Great. Thanks. any organic? then origination of terms there the And is

Ronald M. Faris

slide something well far lending we'll that portfolio capabilities, would as additional the basically adding explore But are I forward. retail recapture the retention that in something as explore going So, to do at on existing we both opportunities actually that's think that I lending hope there servicing Right intend retail looking deck be is portfolios. would beyond to together. and that only with their now, as we thoroughly particularly come that performing once type companies companies noted the ability expand

Bose George

And less of Thanks. price costs should or deal, the the other $XXX about to are sort of we in Okay. book PHH accretion actually build at from discount into that of purchase million value to should value book just look terms then this there calculation? we that book

Ronald M. Faris

Well, keep expected that and mind going losing restructuring in PHH with money could continue. has been they're it's their that that through,

book will sorry, it the premium as that as not by or So, the we be to as discount, the deal will closes, large today today. large not expect it would the as is is be value – time

number a will is say that closing exactly we and there's exactly through of know factors play. until date. will the to into what when do come how difficult it precisely So, will performance up It's that more be

Bose George

Thanks. MSP one at origination I happen does encompasses the their because more on me, is sense. take is plan there Okay. transition, on also the – after the just Makes that the side, plan while close to just that? Actually, PHH that from switch And little as a – timeline a or well? to that think to does

Ronald M. Faris

So, that to basis. that it prepared risk new of trying the in after a time transfer is probably stage. But onto our at that integration none of platform really closing. until we platform to we of yes, can our accelerates reduces for a after mentioned the this and, de period novo current platform, ability PHH significantly is do of the thinking loans But there closing on certain a and with MSP I would associated the do from do move occur none believe planning this as remarks, to

kind from compared to operations looking over and, what time, we will to in be and to product origination is those PHH select using the as well. combine we migrating perspective at would that best hope We of the use an technology

Bose George

Thanks, Great. guys. Okay.

Operator

you. Thank

Our Coffey next question from comes Wedbush. Henry with

now line is Your open.

Henry J. Coffey

as you large larger morning, everyone client. be? might sense of Yes. Big both NRZ opportunity, concentrations big very Could and congratulations. a what you of have Good a some us other the merger, give

Ronald M. Faris

first to all, of to again. good Henry, you So, talk

really a single NRZ say significant is is the PHH that significant I on of an right a client any absolutely Ocwen bigger combined You're basis, necessarily, under even both other for there that become structure. would client customer and will combined and risk. concentration isn't

closely as all. really, for transition I customers with think work existing customers as So, focus to a want to subservicing PHH's while smooth ensure our is the we existing well

that concentration really NRZ I a focus. from is think primary perspective, the

Henry J. Coffey

The process of going together, probably to or When get to to it into is do PHH profitability X.X years. think putting look at another you X.X path is what PHH take two can you long there? year and how what the takes you accomplish

Ronald M. Faris

last not to long. going Yes, I year. cost talked how technology of or of $XXX and remarks, in I'm we But numbers the had prepared about that my forecast million corporate kind

expect company ways $XX large so a PHH of overhead to duplicate costs, us That's to public We opportunity have or corporate for cost. technology-related eliminating corporate synergies, cost. for duplicate million and find

will reduce on and So, to and separately. be reduce fixed to as cost both the there burden opportunities a finding those as focus But costs. lot they of opportunities practices companies sit overhead best together, significant the sits be come should that they in

focus of the strongest PHH the well for loss mitigation do performing, FHA, some loans. a that existing conforming with be out VA, Once we big platforms I loans our on initially. So, A be platform, non-performing that servicing come off of of and loans our think into will combine as both one PHH platform our platform. will as expertise the onto non-conforming, focus transitioning big we

basis strong get that be Henry, capabilities think point. to but once standalone we're basis, take you're industry in get it there, positioned I will – to once time right, a I think the be the we a competitor have on or some combined we So, whether to

Henry J. Coffey

many is and approvals. Mac, or You've through to obviously of Or question servicing the Fannie obstacles of people the of to lot with complexities all sign community getting experience getting so off? lot either it had challenges Ginnie all a a just Freddie Mae the a regulatory there transfer deal more and of in this approved? just Are working

Ronald M. Faris

while really discussions, briefly been in early I as very Well, mentioned preliminary some process. there have it's very, that

will As transaction believe other that from that need I get remarks, going the and approval health the only know are move this for Ocwen it's understand not understand all from for believe or industry to industry. to mentioned forward. GSEs is And come in will good of we're that good the and that and will And – but that. hopeful be we're you parties going the PHH, I to we I my to parties support either that

it's confident we're in it's So, predict exactly that point and the get long to this this close year. half can difficult will really it that to But – how we second take. of transaction

Henry J. Coffey

thank much you and right. Well, congratulations. All very

Ronald M. Faris

Thank you, Henry.

Operator

Thank you.

question comes Jaffray. with Our from Piper Kevin next Barker

Your line now open. is

Kevin J. Barker

Good detail cash the worth that is morning. net had a question requirement at what (XX:XX) could amount as affect well? you PHH. around the I minimum Can that how of and

Ronald M. Faris

with. don't we we've So, regulatory with Maybe my meet follow have transaction, can requirements. of team as capital But worked to something company resulting information Kevin, that's have will the team our and that up all worked the this I the PHH that ensure structuring at fingertips. part that

Kevin J. Barker

you closes net have what adjustments keep PHH the have a minimum before could what to minimum to net or if worth. number required transaction As part is be worth transaction, Do price? the of that to be have there were on to a the they actual

Ronald M. Faris

fact the about remarks, we that of the price I we than don't the effectively would PHH. through do that, have time. In cash not. But at be I talked available million to other any about information purchase $XXX funded this at other prepared expect

Kevin J. Barker

cash change cash would in remove essentially If does I you're your transaction, a the NRZ have because it's financial million in close the contribution Okay. that, they contribution they And contributing. then $XX cash to that regards infusion? believe and that

Ronald M. Faris

the remarks, that million additional remaining $XX to estimate I if as prepared cash. part would not that NRZ generate close, the yet is were approximately that closed indicated of transaction, in So, our the closed, PHH that hasn't is

reduce were the basis substantially contribution combined would first. occur $XX that million on it to if a So,

Kevin J. Barker

the merger Okay. September could what And indicate in expectation it then of on push and closing the appear the Could December? into the your end to you December. September when date dates will for the from the docs or transactions closing of give be end

Ronald M. Faris

So, pole the yes, tent the – in if long primary is that approvals I the you think to various the getting call want it that way.

we it close will the we that going second in And year. as on transaction close of potentially could said, now. we're or It I depend only into the the will As in go begin primarily. summer believe half the early the could fourth to process that approval all quarter, the mentioned, process but

Kevin J. Barker

Okay. buybacks is I'm be repayment allocations whether debt or any is any can And suspended they PHH then do changes, it of capital that assuming from or that correct?

Ronald M. Faris

of their going restrictions on But this forward. kind deal point a be forward PHH of better to That ability standard question how to going be kind standard for restrictions directly. they will from There's might you operate be there to – on them. for ask

Kevin J. Barker

about you selling you value estimate it quarters, the the And that Reverse And the off. Reverse still could current so, previous Okay. if then business? the of in spinning case? talked potentially Is or tangible book business

Ronald M. Faris

HUD on operating decided remarks challenging us reverse opportunities some we're mortgage the So, forward. in the the business the to It first business, but amount platforms rule key year, mentioned maybe about our capital in forward. the significant generated of follow with have Reverse I for we've one last that business and you Lending continue to of XXXX. I not changes still year It's for as after mortgages, are we excited strategy. effect reverse go-forward have a business But deployed year performed in I believe into well $XX on. about we as and us that And are premier that going last that my million that expected of business going mentioned a that went that which of excited profit pre-tax my That's a we something in to analyzing last fingertips. part up is for allocation reduce very volumes off, business, the can strategic don't environment prepared capital

Kevin J. Barker

the then amount combined? do forma for are when on of pro basis, losses a net between two these Okay. total an they estimate And businesses have you operating

Ronald M. Faris

giving forecast that. not We're like

Kevin J. Barker

right. you. I'll get Thank queue. Okay. in All back

Ronald M. Faris

Thanks, Okay. Kevin.

Operator

Thank you.

we have of Bose with KBW. George from Next a follow-up line the

Your now line is open.

Ronald M. Faris

Bose?

Bose George

Hi, guys.

mute Sorry, on. my I had

does result of terms as the In relationship a with this of Altisource, transaction? change anything

Ronald M. Faris

with So, on have Altisource acquisitions. we past the a will, done we those of we've course, existing with in basis contracts we and other place go-forward when in comply as have closely us that working the been We've closely continue will going system move MSP to following to Altisource and Knight that to Black the they with announcement we're work with on transition.

them So, the I we with relationships partner. we about think contractual and of to as all it comply way to to that ongoing existing is we intend having to with continue an our think we'll have Altisource and look forward

Bose George

couple a increase made as just a the well, comment January. just that in And earnings the in you book million Great. Okay. about actually, on Thanks. $XX then value

fair that So, overall the to was that's right, the portfolio opposed valued. piece on as now,

is overall correct? million Is Now on the increased that everything's has in that the fair valued, basically the value MSR January. $XX what

Michael R. Bourque, Jr.

just we've the the January. made for for MSRs, in which election That's Bose. those No, incremental

Bose George

you how do for there? is And about Okay. what have that estimate piece, an the happened – other for

Michael R. Bourque, Jr.

big don't structure. we because the have NRZ a Well, in MSRs the that. are increase to increase provide remaining But big of you value to have fair the in keep value, the part mind the liability in of of a fair you majority tend just tend when

because we're number. to rates – some NRZ it'd impact going bit of be part up, have be PLS, And that positive that offset a still providing the if we of MSRs not large so, a there little a still are a be there'll aren't that just still transaction, would but

Ronald M. Faris

to value impact already the cause as fair changes the rate portfolio at of value, the on don't that fair of dramatic impact those. And an interest PLS was

took what will was on now on more be the So, our portfolio Ginnie it our basis. tends and – a election we to most here volatile was of it be the since – mark-to-market the Mae, and of it GSE portfolio

Bose George

the of line terms couple of item, in talk through a about this can line were that? just expense little then quarter And The items thanks. you great, Okay interest what's flowing noisy. earnings

Ronald M. Faris

Yes.

if So, did in we movement September the that closing has first a add creates portion I mind the there. think But I'll and transaction anything income change economics in NRZ in I transaction. statement back to around think because the the keep of some on of close that see some so of of that and Michael

Michael R. Bourque, Jr.

What interest we've had Bose, reconciliation prior change of as deck. the as kind up in the is quarter. well in a So, expense kind the you ended you just versus the got happening values of MSR the of change back changes given in big for slide big a

I think kind of of you MSR The part of slide on value vast deck, that on of and the origination expense, is $XXX the fair for the $XXX energy – about in quarter-to-quarter. So, offset change majority over the million see servicing line. expenses. instance interest XX million can That's

So from quarter. it's just was really where change big it geography a the prior

laid a spend in of million kind out of value you got of in So, the that some as net the changes. the a was some and quarter. well you for of we've impact the those of for net deck of net few out $X.X can maybe you minutes fair just related There and back as kind

but see fair analysis. lot that a XX geographies traditional impact has that the on the in of can slide value you be the MSR So, noise would our and that

Bose George

Great. Okay. Thanks.

Operator

you. Thank

Piper with line question Kevin a Next Barker Jaffray. follow-up we have the of from

Your open. line is

Kevin J. Barker

$X.X value correct? had from basis. on on net the The $XX Thanks. you million also gain you're about But detail a mark-to-market Is that million NRZ transaction. right, at gains, the fair

Michael R. Bourque, Jr.

kind There recall initial is gain. quarter. we about true-up way in Kevin or of the NRZ you'll we a the quarter worked So, the transaction on mark $XX – million third a transfer the the in was fourth gain had had

see number on you So, the is to slide up $XX X, now million.

So, XXXX the million a slide reflected on $X will that million remainder of right maybe quarter. the first through that's incremental holds the $XX be The in assumptions, that'll rest the transaction NRZ of cetera, the benefit. of laid – assuming side of gain actually be out et X, quarter

be will third the already And quarter majority we've the up so, quarter broken of in first that the the XXXX. is of And impact recorded. between

a only So, impact small in QX.

Kevin J. Barker

quarter-over-quarter. expenses a slide slide servicing also servicing origination then drop primary million the driving you in servicing for What – called in expenses about in was out or factor and that's $XX in was back And Okay. there lending? the your XX. believe XX the I drop

Michael R. Bourque, Jr.

Let Kevin. there, me just get

Kevin J. Barker

Sorry, XX. it's slide

Michael R. Bourque, Jr.

Yes.

matter you have look if So, that. there and elements to at to you – is in be that, do rippling two the change CIT There's XX. it's of offset I in expense. that But the on some value service – expense the so largely fair it you The going area. see again or Bank recorded can recovery biggest interest be through would also believe slide OneWest

So, credit. that a $XX million was

Kevin J. Barker

value that Okay. NRZ gains, besides or million $XX Is other that? one-times aware the the $XX million or larger of, should anything (XX:XX) above fair transaction there any we be

Ronald M. Faris

Well, we mentioned accruals. the legal regulatory $XX million settlements of and

So, we the mentioned quarter. that that was in an expense

Kevin J. Barker

Thank right. All questions. for Okay. my taking you

Ronald M. Faris

Thanks, Kevin.

Operator

you. Thank

next question John United Devaney Our comes Capital from Markets. with

open. is line Your

D. John Devaney

Hey there, Congratulations on transaction. Ron. this

for investment excellent Ocwen. an is this think I

Ronald M. Faris

Thanks, John.

D. John Devaney

and continue real drew – I'm a with been expertise money of currently and is, company holder to do your and I'm X%-plus in to far equity I'm I as by worked what an and and looking to away looking March. to to Ocwen this NRZ that's every coming it servicing company. by in is what I investor, But in day know investors my invest far, the necessarily the I years the whether know a in losses in I've servicer borrowers for and blows There's world. or investor for been RMBS question well. me big subprime hasn't competency backwards now backwards in that My cost. taken this I'm mean, what Ocwen's thing opportunity your has I've the three up and think for is I about in investor to look in trying out backwards close sure time core

Those Citibank, In fact, America, of big deeper bank XXXX big were incinerating Fargo, in the every and there away blows banks (XX:XX). program out Wells a Ocwen XXXX started of Bank XXXX, Ocwen JPMorgan, doing bonds. RMBS before

to wound a as are the guessed trading investor. wiped in were big experience dollar weren't I $X.XX what of in tens I up $X.XX with they made enough really correctly, a that's on a and money the They going me And entire dollar I doing. mean, I which were millions years And that XXXX work took stake in. Ocwen. these Ocwen's $X.XX dollars. good I to tens I were deal made of $X.XX, XXXX take Ocwen and drew bonds XX and and on at being there. of $X.XX strategy bet the subprime mods and on So there and even the out. bought at mods a and bonds

protects know during doesn't is borrowers. them Ocwen's at-risk Ocwen home Now, far because period. their They two- is don't whole forward far have record. what to regulators working that and I keeping like It it by understand protect to kind three-year biggest going broken the attacked want like (XX:XX) Ocwen it's in expertise of feel the the a They in investors. this by homeowners

You guys same saying the keep thing.

standpoint Fargo, to NRZ non-agency for has that agency more going advances. this has where protect delinquency it servicing of a to reducing owner in money Ocwen who to levels MSR history want hire question matter delinquency the the or Ocwen investment. Wells Is to my help others asset, of others, lie is When how does forward? for their should kind obligation subservicing in this Bank advance of my and the want and go levels. owns MSR the down, Similar Now, a should use all Citibank, from the expertise asset-light selling Anybody to of of to opportunity America? an

or more So, you've that anybody matter got history money made Ocwen of delinquencies. reducing has for NRZ a way because

PHH, regulatory going MSR the that you where stuff lot going and is owner. you providing as are should or and in from Ocwen the best smart can this owner that business – returns of future some realize those to think the investment expertise looking RMBS win forward So, goes the behind the is is into of you transform a how market to at the picking now the is and up opportunity do where combination question the people you people

Ronald M. Faris

comments as So, faster in on and and servicing performance the RMBS still improving investors quality have MSR keeping for John, do first their I the work platform us right We get help off way. there move this a onto and our be homeowners industry-leading servicing our as traditional home the to We platform. of investors. value in will We appreciate still think PHH the done. well to existing more need transaction of

back place see and we're there's we fact in delinquency service only has of be be I a conversations have that go than in troubled who participants requirements uptick in were because those they or and themselves nobody when to alignment from platform. but using will some will that doing be our And mentioned to loans Knight a who or going total interested really delinquent think that again before I with the familiar think we're or by not can of I utilizing ability helpful other it industry will FHA think bank have delinquency away we of kind loans the much there levels. or Black easier in regulatory out large from as perspective, large may started to where where services if even handle maybe loans that we there higher very an be profile the that, I

be complete a MSRs do participants. likes well large get our best We're servicer positioning subservicer when to industry-leading our to So, just to of maybe mitigation a traditional with loss not out with expertise when to the opportunities, on if I well as a think integration, as there partner NRZ ourselves available for to in we that – that combining we're a ability platform. complete act the to acquire on transfer, the they're positioned we fee-based but only industry should as And with portfolio portfolio, bigger be very we going platform.

to. it's for, that you better could striving think to than I get anticipated, a path longer lot had us apologize, to stronger be us there. taking there once John, get So, I get transaction really but do this I hoped of that's back we're a to and put and helps where any know have on we

D. John Devaney

goes are Do of Another you your cost or bit is Fargo could forces delinquency cost question Wells in like banks become then Wells larger compare XX-plus a you very service saying a FHA do those you, fair these or delinquent real expertise service like that loan cross-section that Citibank your the it to Citibank tried if less BofA. right, cost little Is items, you that you Citi which pay that once and or a a of just opinion Fargo, those say be delinquent? could day pay plus you're the could or large an items Wells sum two think edge bank the believe for example loans than more or discuss subservicing non-performing your some what Ocwen to could themselves? because quick, service of that to a loans two of say borrowers delinquent of profit and a a have

Ronald M. Faris

Yes.

really a particularly exact get able of big it, do market, that loan So, as cost technology focused participant banks. multiples or and most John, equipped modifications even the I not five aspect have efficiently over over Ocwen loans of work XX,XXX though the servicers, other that and but economics have the and not platforms, servicing delinquent effectively every view. be Most that my – does years. on from in do I I even this standard many believe to last going do to you are produce can't many, they the standpoint technology past of into to think advantage six a in compliantly kind I'm the servicing in year We've to

in industry. And performance cost a the so, quality modifications have than advantage, perform from those better of a others advantage, I do the we believe see we that

to well, the remain and performed help going smaller of and groups are reiterate Ocwen produce in help from out non-profit as were questions smaller they to fact, and the cash paying, homes, in in the they anything the homes. Ocwen's week to RMBS with homeowners keeps to families well. pleased continue struggling as asked who's country their for if made all new smaller, you very Community Council, their As – is loan back there the portfolios leading with not keeping get me investor like, And met service. in Ocwen struggling getting getting flow just mentioned, well you're they up our me the which know ability homeowners to I servicer have is around Advisory how past

I'm our can hopeful performance that comes we acquisition if that presume that more to even and with help new families improve this more ability So, with and over investors. time time business, for

over have lot challenges, I a think shy its from that of the in mark larger if there be seen well product. in to of us for few our forward a players particular there we'll because FHA as opportunity but It time an the particularly spent big and away We've does lot question a honing the bigger that's out players years industry. from of is going have have see that exploring away many the something skills that's we last shied that.

D. John Devaney

pay. They're a question just ultimately, there's one provider. And loss, that's Ginnie, a say if going right, and an point and good (XX:XX) right, bad Fannie other loans to and they're go insurance

it's in sure, non-agency. proven history, know on, a know the has sure the in from data all that data – I So, I it's looking for Ocwen in in a the much mean, everyone reasons the category world margin which is in I money else XXXX that over subprime outperformed by I one good on of so (XX:XX). mods very bonds made the lower very, Ocwen's Ocwen's dollar for

of would that Ocwen the these FHA if on is because make? if government logic this less that would the want lose mods Ocwen Ocwen Now, say that a better, fair then Is servicer to on history has to FHA, the to servicer the would comment doing be the putbacks. money encourage

Ronald M. Faris

loss PHH together the whether if the to a Mae combining that's lot the say banks spectrum our the we're can to a struggled or handle pools and of in clearly where I'm job that's I and GSEs business that that mitigation or label FHA same homeowners, headed. everybody that over we're said of that with do loss the reduce loans. platform, a will and investors helping can mitigation that our for the last years the in this full or it private strength way that few they're Ginnie losses as think aspects can Mae hopeful We've hopeful private look before, So, mean, does we to I'm I expertise moving a new large with servicer should for compliant the pieces with better it's obviously other of of Ginnie acquisition. result platform that They're service. and and I efficient, come And able

D. John Devaney

the And Ron. then with acquisition,

them. which companies Mortgage all used? these You don't of two of So, mortgage going for be licenses servicing... are to need stakes both the

Ronald M. Faris

to You're correct, John, over of have I and than its that time, Ocwen's today we current our look one. hope we holds more and But We structure can we licenses, that or multiple over a to to continue I hopefully structure simpler have own on day on the and something structure licensing But licenses. place. on to, than would hopefully combined regulatory we partners combined planning that today need work will time, entity. as right we that sets would a has have would licensing have have PHH have our as with a get agree streamlined that is doing simpler we

D. John Devaney

maybe a a year, looking year And be before to acquire then, we're out able I MSRs. mean

done, to to deal you get this need You get need integrated.

saying and cease can't New mean, So, can't give at on others, I can buy that one final and you now be this desist answer a got we're take you right right that as to a got another for moment be for question is that go year now on whether Now, allowable? have can a and expertise, you MSR to subservicing and subservicer? you states now question you've you York you've would hired two if buy on could order this the waiting MSR buy have you is MSR?

Ronald M. Faris

they're just to that be our of depend partners circumstances. to make constant various for mentioned, you this Ocwen that's them the understand PHH to dialogue can. team of going their and can management the go pipeline state with migrating everything looking hopefully But and those answer. John, what And our we're that circumstances specific a they comfortable the on platform. not And to opportunities laws in doing, know of I sure it any difficult agreements see but related question forward regulatory be think sub-servicing everything transaction, have we're loans really will be a new with we're really regulations, with clients. if regulatory does the to and PHH doing team signed. And I potential to doing, some their complies the getting we're as that will approvals to on we've going is only that focus

would sooner than the it if to So, eventually which moving hope our acquiring sooner there's but questions. an their think by term PHH – John, easy we and otherwise allow to to point on we that us I do growth own, blanket than should long would platform, be will to answer, we own. don't but happen that it your do our on the able to thanks get for resume in

Okay?

D. John Devaney

which a what career, best. all been whole guys in Great. whole Ocwen I took I And team. servicing have Great seen by of been fan of the job. years. career and of you I've the company over to lien really these backed can my RMBS manager. trading I'm I a sticking just with my I've over and see that the wish hope guys really you a lot me regulators I bonds really I servicing non-agency second introduced believe been you bonds started servicing. in Ocwen as ILTV Ocwen

keep scapegoated think good work. unfairly the you've sort I on But been up politically many somewhat of fronts.

Ronald M. Faris

Operator? you. Thank

Operator

Thank you. Yes.

We Bose KBW. George have follow-up a from with question

open. Your now line is

Bose George

Hey, guys. Thanks.

we falls couple that of follow-up that you number, just $XX that, presumably When the a litigation there it still with pretty last be of after Just is work think going to states million while out going some general. And on the expense. quick forward attorneys sharply? that of and this

Ronald M. Faris

first and the mind we reported of litigation in in that off, that a a settled that keep to securities quarter. So, on big chunk Bose, was matter related

get it big you'll an hopefully, the So, small when update of you get actually, we'll XX-K, get matters. regulatory that But although is. I just related some to expense to very put that. regulatory it a think perspective was our little And as of in headed. chunk perspective, is a litigation to related significant where on And amount of we're that

in We put behind that those to the But of cost a legacy do in we fact hope many and lot as and progress continue to start would those did up to things us We're as not XXXX numbers have XXXX. versus go to there over can. made we we try completely decline. time work of

Bose George

Okay, great. Thanks.

Ronald M. Faris

Thank you.

Operator

Thank you.

with question from Cooperman Lee next comes Omega Advisors. Our

is now open. Your line

Leon G. Cooperman

to Thank buy was you. the today? now I apologize if this joined call what mode, get asked seeing before. a essence into MSRs, of this Are I growth question because yourself we're is able are tied I the you to you up guys late. was able

Ronald M. Faris

So, that. no, Leon, wouldn't I conclude

regulatory May have with various to ability that states have year. from State We York. restrictions this the settlements We until New MSRs still acquire our of of restrict

in platform. to limited our are our also ability onto We new (X:XX:XX) existing board loans

potentially that. be evaluate point. we with to need May, position So, things we which a New I need heavy And have terms make those in to lot before accelerates. we potentially for it some growth. to lifting and to we have of a past PHH progress that need a grow this think York, to is work get to think lot a of new in we platform, have do you There we believe to to to on we'll done, transaction once opportunity servicing of could to we still get and are But migrate resume

Leon G. Cooperman

you luck. much. good Thank Okay. Well,

Ronald M. Faris

Leon. Thanks,

Operator

and attending, concludes conference Ladies nice a for this call. and you. Thank today's gentlemen, have Thank you day.

Ronald M. Faris

Thank you, everybody.

Onity (ONIT) 28 Feb 182017 Q4 Earnings call transcript