OCN - Earnings call transcript Q4 2018

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Operator

Greetings, and welcome to Ocwen Financial Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. to of conference Investor like Arias, to now Director Managing Relations. would turn over the Hugo I Thank you.

You may begin.

Hugo Arias

fourth Please Good morning, fourth that and call. Ocwen’s our have available been site us joining earnings released our slide note and presentation and thank quarter for you XXXX your for quarter release XXXX on are for Web earnings review.

Officer, call be Glen Chief Accounting Officer, Ocwen’s Messina; Executive Speaking Cathy Chief will on the Dondzila. and

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

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

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

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

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

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

useful others. addition, among measures We In to our believe of to view condition. and non-GAAP liquidity and supplement contain and alternative discussions our transactions, non-GAAP financial comments these such measures references presentation the our financial an available analysis of a provide as the NRZ of financial impact

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

please our its once XXXX Commission, company's XX-K. as XXXX an Securities to elaboration and I XX-Q with release earnings and well filed filings Form the Exchange including refer presentation Ocwen's the today's as just discussed, the of factors For and Form

will I turn to the Glen over Messina. call Now,

Glen Messina

we’re fourth realize close some the Today, Thank for company benefits solid I morning PHH. we financial process remarks growth we of an will results. our you, position Please into key the to portfolio of initiatives address up and for to profitability. establish our as integration focus reengineer call focus, Good Slide update to opening consideration discussed will regarding us. PHH Hugo. the challenges restore resolve remaining is establish foundation structure, in and and legacy X. and and with the Dondzila the are for with we one-off value, cost into challenges us. the then commitments initiatives a fulfill to and opportunities our To key The and quarter funding our robust it cost progress brief to our create to a future prudent shortest future. transform execute stronger initiatives a follow the a Last are; you the end, this for pursuing quarter the timeframe quarter, most scale reduction the review replenish of to integration return taking work Cathy possible and ahead growth Ocwen for critical I’ll matters. combining provide joining in regulatory near-term primary integrate turn established profitability to undertaking and set company and of made thank we We’ve the before questions. Ocwen business

for Britell suited to value opportunities of added to of to on efforts team market succession We’ve our building our process. General support Kevin on track address and legacy Joe to better Yanoti experiences us orderly as Stein March and of key and onto we’ve or the initiatives. X We has and In we’re to LoanSphere well to Samarias are as be offset the the have April will parallel, the shareholders. Black quarter. MSP joining in conditions an on our as respective all commenced us Campbell Ocwen performance, boarding X maximize complete growth part company’s ahead. Loan challenges and dynamics Counsel our operations, migration executing Jenne added platform been role skills June CFO, Board. financial and second industry our position the and Knight, the We’ve loans the Their on Tim is Ocwen leader, assuming

UPB $X.X have We date. awarded acquisition MSR in closed MSR to been or billion reentered the have market and

executing efforts. to portfolio and correspondent forward lending We’re improve retention our re-enter plans

We opportunities we savings plan have to months. these and actions reengineering quarter to identified reduction started second our baseline. over over $XXX cost realize XX against XX next have the million XXXX fully in Cost annual

or initiatives are integration of integration Slide business. matters. Please our transform there update the grow consolidation and focused detailed commenced plans the changes XX We address prudently ahead, regulatory including we them. credit and have opportunities X. remain sound to in now adverse and to against no have servicing the position our commitments. manner. and reengineering work previous in leveraging We integration competency in believe full, and XX our a actions continue a core and to executed strengthen our our that with opportunities and proactively cost could to I With respect executing company forward. executing to in and our I’ll safe actions company next conditions to we’re legal the actions our the detailed regulators meet the potential taking months to provide going on we’re taking turn plans position available finalized be each necessary can profitability on growth sensitive initiative, may our in assuming challenges If for the market

at loan transfer all process. the to closely resources of in Similarly, source loans our aspects been the to boarding transition Black system and of These loan two have clarify portfolio We After support transferred platform. phase remaining defects. The is completed the testing, ongoing loan Ocwen been to XX% our of manage has outcome progress multiple We’ve conversion without have rigorous of and the with approximately loans be transfers. process. our the earlier vendors month. dedicated this relationship. good servicing to agreements involved major we MSP made has we’re our associated minimize operational to the critical substantial a in pre-boarding Knight update to worked from activity surge substantial provided we expected loan servicing support steps The first loans, transfers intimately transfer XXX,XXX the of team to with in total pleased transfers involved transferred getting initial the potential of boarding for and the and the roughly be

track process loan complete to on transfer We’re quarter. second the the in

the Residential Mortgage meet into Ocwen’s entity to our consolidation entities, timeline. operating and one the of the these Loan is unexpected of the encountered. merger three primary primary cost The timeline into Corporation. the extent Ocwen However, any PHH as could the entities the expected end conversion second Servicing quarter, licensed Homeward of we licensed By Execution complete to be of challenges are objective. PHH consolidation expect legal our extended progressing to entity reengineering supports

substantially Slide X. The a reengineer to PHH turn to please our catalyst is cost structure. Now acquisition

as as capture integration four-step potential to and synergies opportunities. reduction expense are all productivity We using well approach a

in clients, a regulators key continued and consumers, other reengineering constituents Our our ability was expectations the consideration of to evaluation. meet

basic the process three optimization practice organization an improvement We best have of completed of and synergies, assessment benchmarking. steps; combination and

of and identified by expense PHH quarter second actions base reduce set expenses on below have Ocwen XXXX million to operating combined for We annual forth Slide as $XXX the $XXX over adjusted XX. annualized million

an $XX million XXXX. end $XXX annualized in XXXX the an to least of by run the the We the end cost at approximately fourth quarter are of of savings quarter basis targeting million of by rate realize on fourth and additional

this us productivity the UPB We our amortization our coordination, have cost and believe resulted and our level that actions by redesign, of the of compared in capital improved and subservicing taken structure reengineering XXXX. our sum involve other fourth least reengineering discuss fragmentation million X. non-bank Fewer ends functional a including strategic review addressed including quarter this detail through overhead the section. utilization, profitability sourcing industry assuming $XXX to could will drive and cost of achieve greater proactively streams markets our current in actions competitive in fulfill rationalization. and reengineering leaders from The earnings financial second Cathy cost collaboration to XXXX. to geographic changes will and larger We impact Please work the in adverse less financial organizational $XX development impact and control competitors. our conditions we servicing regulatory elevated offshore benefits, and in payments of GAAP performance of each as at legal of matters. XX no process provide cost and the redesign, servicing stronger portfolio a quarter XX billion months cost of strategic NRZ operating Slide actions planning, and in of multiple allow annualized executing a to there and savings maintaining facilities control integration, led culture cost or to operations turn our lump feature in that addressing negotiated of that human foster to we objectives to We are plans of at and facilities believe larger

are plans reengineering cost Our broad based.

has my target its total actions, by As cash reduced by and retainer I part Board director XX%. our reduced compensation of fee the have XX%

companies. expect staffing have of the eliminated. from quarter already combined at approximately X,XXX We levels end XXX by net XXXX the of the XXXX positions staffing the reduced total second by levels will positions reduction, end for this Of be been

to In our primary addition, XX existing we from facilities locations intend footprint to U.S.-based reduce four.

St. locations Islands. Cordova, Beach, Croix, Virgin Laurel, will be Palm California; and Mount New Jersey; primary domestic Florida; Rancho U.S. West Our

optimizing While annual the be the fees, following also fourth available on improvements by To and the to dignity may to non-recoverable on we the with we million Ocwen category; and $XX the million other and success to sites the $XX be amounts. reengineering continue are $X respect in for focus upfront our reengineering in will We annualized and self-service call step $X estimated and phase features profitability. they we certain of employees our cost expenses; $XX on related digitization. customers’ in difficult other expect decision expenses facilities plans. estimated to reengineering savings million the to for this tools cost to to million borrowed other center our costs $XX entity employees, impact million tasks we benefits, licensed close in communications, all the with and To to process our professional and we which features capability. expenses. for the end, believe effort reengineering additional the servicer of their we and to This our for facilities in focus to will costs retention our there achieve workforce from is are repetitive plans, $XXX future. $XX is and commitment personnel to our $XX opportunities due higher combination compensation technology on for functionality of reductions reengineering of are usage We million other treating execute opportunity, necessary million $XX increased to $XX $XX as employees us to million MSP communication estimate million comprised Based committed mergers to improvements million million cost million and return million and digital have other in estimated occupancy thank million platform our and if enable expense charges legal additional costs. million $XX including targeting to current $XX certain to and $XX severance, operational to related following in automate among and introduce reduce

and We litigation entity made the because operational amount several in and expenses and is staffing and improvement Please over litigation These mergers, we of systems the and turn risk a as also resolve compliance targeting investments Slide of years. are reduction targeted significant include reductions. and limited dependent X. the facilities complex MSP is last consolidation the are matters to several organizational legacy redesign have actions. the non-routine we legal our full regulatory The but to conversion, and not reengineering cost on annual

run-off third is replenish to initiative restore our focus. Our portfolio growth and

annualized on maintain at $XX portfolio this our portfolio translates goal UPB. to least in to previously servicing mentioned, Based $XXX rates, replenishing a in As of billion current interest roughly runoff. billion is

MSR discuss is we this we of will and XXXX MSRs Our UPB progress We consistent expect the higher mix to-date acquisition end reasons for be additions to in moment. with and forward lending restarted in bulk a of a versus objective at acquired subservicing activity XXXX.

been with Mae February, and agency UPB or Ginnie of $X.X MSR we As billion. current of early closed awarded had

see competitive in seeing of of level of we continued with previously XXXX, at to range levels. far activity So XXXX and low highly market end robust we’re discussed levels target a the is XX%. X% our The consistent to return

adequate believe in We products. as success expertise our higher servicing enough returns loans availability volume are sensitive initial higher achieve our with such objectives make can maintaining a the of by continued us most investment. liquidity MSRs expanded credit and Ginnie our are on and non-agency credit in encouraged subject optimistic Mae, that operational credit risk investment and We MSR cautiously margin, to competitive servicing transactions, of more MSR for robust investment will we

also to return overall to MSR ancillary are roadmap our We desired cross-sell objectives. will opportunities to to consumers. believe part levels is acquire our achieving risk a portfolio our To element the return on investments. is profitability also from seek important support we of MSRs from our We an evaluating enhance X.X investments, revenues that MSR in meet million our agency core servicing and improve this economics

our to to plan, addition offerings. activity through origination our bulk MSR supplement investment we our channel are In MSR targeting purchase

in include sellers. is our and majority additions from highly of who anticipated systems and previously subservicing this forward plans competitive be we XXXX. subservicing don’t as the targeted through activity clients will quarter MSRs portfolio investment staffing purchases. subservicing Our process the of time, At to is recapture the now lending expect be holders than runoff price reentering performance in expected expect bulk The improvements. MSR improving enhancements to subservicing our product market and our and We PHH runoff portfolio MSR subservicing portfolio at higher correspondent historical offset are are second

recapture this portfolio volume half X. activities to full to currently the environment, to do it transaction MSRs material the second longer to the no origination for XXXX, make NRZ. related economics portfolio. of cost receiving have effect achieve profitability in recapture MSRs of the for we on our associated Please These any on believe to transfer retention, activities will portfolio certain we require we the expected Therefore, financial current In margin adverse of service difficult reduction us be this origination origination the will no the Regarding Slide of providing NRZ. while the process incur results. the turn in compensation

is establish for initiative funding to fourth Our growth.

several MSR business are of options support We exploring to funding objective our needs. replenishing our runoff and accommodate

provide mix As structures are and can we the rate, advance with such, focused flexibility. funding optimal of that on cost us funding

that portfolio. need step, a working are and funding in MSR match evolving today put our our MSR there up to of several to believe of types. ramp a As We first facilities the place expected actively are meet funding available for we mechanisms are to and variety needs optimize

liquidity investment investment $XXX million that of quarter. to or million replenish would of assuming We natural in would least from this that to available million conditions. change market next to on come on are acquire the funding an $XX structures, estimate We to Based our annually billion by assets. least our leverage we in second the existing major we rates targeting funding first XX require servicing our months. end would portfolio $XXX the of on to structure also UPB MSR at advance in MSR in close existing approximately believe runoff need MSR $XXX at incremental no the This need

we amount our any liquidity MSR do the our to further estimated term. requirements reengineering plan, objectives pursue unscheduled expense retirement achieve to debt for the the and not liquidity run cost share to the of our in business, needs repurchases restructuring execute ongoing expect needed investment Given to near

our in Our capital enough ability necessary sheet well runoff is achieving targeted other managing cash the in continued cost realizing long fund balance to at XXXX in markets. maintaining MSRs investment access growth to efficiently our and and reengineering plans, replenish portfolio flow invest to as productivity our as continue and generate to on to dependent future actions successfully levels in MSRs the term

we to framework. reasons, these MSRs our Slide XX. capital allocation and prioritizing For turn are Please reengineering in

fulfill remaining legacy initiative to fifth matters. Our regulatory is and resolve commitments

significant oversight investments of three defense and maintaining risk line years a compliance made management management building over past have a drive regulatory and model, improving We the several to framework with in board consistent management expectations. performance

technologies, performance and We certain controls, have made evaluating our ongoing several behaviors to reporting commitments forward, replacing actions legacy our going regarding on activities. and regulators and

address and achieving our on our of regulatory I and regulatory We it proactively also with regulatory matters Cathy who our commitments inform resolving now, our regularly the and over and plan concern. to with to steps it remaining discuss to progress are working are to the critical them we as results and growing we aspect And We our our relates Fulfilling investors and are them. business executing engaged support serve legal our commitments as as to progress a legal regulatory-related regulators our track turn key to commitments any regulators expenses to forward. our will to return our and well reducing is our going critical for mortgage We of clients quarter. will the profitability. believe

Cathy Dondzila

to you, all the to comparisons fourth be will on Glen. My prior focus October we closed will our PHH today comments impacted. quarter fourth quarter third as the Thank quarter. on results the compared X, acquisition the quarter Because

results presentation previously quarter our includes on and As more Web our fourth investor on details site. noted, available our is

today. Please regards also be information quarter our turn in expect which XX-K in to results to later will Form the additional XX. fourth Slide PHH find filed You to we

fourth XXXX gain purchase of loss of million the $XX bargain $XX of loss includes quarter favorably the the our net recognized million loss the with fourth compares $X million third in in connection quarter, our quarter net acquisition. While to

cash realized, PHH of of after from While incur the prior they those price acquisition be increased that $XXX book from are quarter, the losses due million to results Revenue post-acquisition value our losses in the acquisition to and million operations. by the acquisition was would the $XX revenue. the PHH included To million principally accretive will purchase on $XX extent and contemplated are date, date.

mortgage million expenses due portfolio impact the by $XX quarter. PHH Excluding was $XX revenue were higher by quarter, the expenses. valuation in revenue, of fourth reverse from interest lower non-MSR-related servicing runoff million offset decline post-acquisition million due in PHH to rates Non-MSR portfolio $XXX to our driven million the continued the $X prior million $X favorable of than

cost to improvements resulted respect our Our acquisition, rate in in the valuation restructuring-related of reduction quarter the and largely agency in the the offset MSR of value and Mae Ginnie integration quarter, were higher higher lower unfavorable a With costs. interest by adjustment fourth MSRs.

the provided year additional quarter fourth the on declined swap in valuation MSR deck. have slide points to We of ended Page but XX the higher. XX-year points related information basis XX rates XX impacts basis the

of or to according for servicing cash of at MSR conventional remain record show sources. servicing in assets flow Secondary industry near prices multiples, market excess annual Xx trading

While of had from unlikely by valuation Similarly, valuations there in the upside offset recognize did are the potential liability modestly unfavorable NRZ the favorable our we rates MSR on see as the impact recent valuation demand financing here. end. rate impacts. impact MSR interest increases rise driven by seems muted significant expense the The of dynamics drops if near quarter, MSR that was valuations agency offsetting we year much it from valuations, would majority gains rate not in a improve may that MSR

amortization earnings in change to in and from composition has $XX the have positive $XXX majority respectively, XXXX. is MSR XXXX means of the changes economics through million commenced sensitivity approximately agreements. NRZ April of to MSRs, earnings reminder, the adjustments amortization new be of portfolio interest in which to expected we XXXX from to contractual to the million to and of increased the substance changes under XXXX, fully expense. transactions continue of income we ongoing view received economics benefit quarter of impact of second the primarily PHH our XXXX will This the not MSRs reflected a will quarter. XXXX, related the Under subservice and interest that of sold The a of rates. have agency valuation of provided XX, full in original the This under that of realized and as closely pre-tax agreements the cash earnings the January continue been XXXX flow of XXXX PHH million year. the in we an of to perspective, are rates under to payments and exchange XXXX result contributing impacts term adjustments and we servicing the to of for MSR beginning of were July in in the NRZ ends align the NRZ was the initial the the in agreements. multiyear million the sum and a This economic a a sensitive agreements. XXXX by are statement impact will our a original subservicing the increase portfolio enacted through alternative transactions reduction On NRZ the positive more payment until more in be and has the of comprised the have Slide portfolio sold lump As monetizing changes The $XXX through our next is amortization the of $XXX in whereby agreements our portion September amortizing interest to on we while in of NRZ April reduced with unfavorable

payment I now to on cash include Our million and lending lump segment provide like fourth amortization. our servicing would results. comments quarter of effect results of $XX sum positive the

and UPB runoff PHH $XX and loss in pre-tax our pre-tax recorded segment the related the million acquisition which experienced to the a runoff $XX X loss. XX PHH to The to billion and prior loss disclosed outlined PHH to billion We transfers As of million of legacy portfolio quarter prior included portfolio was on close. compared of portfolio. PHH servicing quarter, Slide portfolio legacy billion related Ocwen a de-boarding post a XX XX million UPB acquisition billion in included XX, fourth the $XX the

restated basis year. have acquisitions earlier, quarter, rate replenishing some servicing totaling As of a of remains in the type this run resulted to we XX highlighted XX% modifications the on solutions fourth million. on at segment We which later MSR providing over in in Glen qualifying I $XX of bulk debt quarter in sustainable modification rates Slide million where The details. completed forgiveness we income a fourth portfolio for The already at business recorded in decline our minimum more deck focused aimed borrowers need. in in impacted X,XXX runoff the refer lending to the $X interest quarter. loan favorably you pre-tax

as pull-through business lending our included rate a loan PHH impacted million conversion volume lower loss by forward funded or The post-acquisition of recorded pre-tax was business Our and underperformed. $X $X of loss. million

rates on are We pull-through by and our correspondent reentering retention expanding platform focused improving portfolio channel. and our the

the drove headwinds. in continued lower lending to and third the business than response and work more market-based marketing HUD more valuations. loan other are decline in jumbo continued program automation capture trends reverse mortgage continuing to products readily fourth the proprietary were reverse in income pilot for endorsements, program with control HUD on rates pre-tax a business also available favorable is of interest continue volume, to Funded these alternatives products successfully new available of the launched Our in to and million measure quarter. originations XX% Proprietary lower and through under becoming of as to market response program. volume $X line industry market. HUD explore to We recorded and The process a to efficiencies quarter sales cost in decline changes.

the costs. and $XX paid. the Our PHH $XX $X and value of reported debt-related overhead, income exceeding million we including pre-tax in a million bargain from price segment net assets Corporate PHH’s expense fourth of unallocated certain loss results quarter, and the which also pre-tax purchase gain of regulatory million resulted purchase fair include legal corporate

outlined margins reduce cost will core by our improve corporate previously eliminating As our to and Glen, focus area be in redundancy costs a of effort efficiency reengineering functions. improving and by operating

which can foregone the of on available advanced and that liquidity you plus capacity liquidity We Slide available warehouse million pledged cash unrestricted choosing eligible of to year on could cash. lines available on can into see XX, cash $XXX and that with we borrowing million. corporate as with are ended $XXX quickly facilities. to This we fund As be on included be collaterals based hand view facilities these converted cash

a second During redeemed a balance and corporate $XX to the in seasoned this the of at at quarter debt which of second year. bonds our fourth book lien quarter, million we outstanding our the with par corporate third discount. assumed acquisition, RMBS called PHH We in million matures We X.Xx deal, million $X in debt the equity lien ratio. the bonds million $XX unsecured remaining repurchased debt ended of $XXX of $XXX million, corporate representing about of year

several MSR And needs. exploring our over now, are it replenishing turn Glen. of objective to we funding earlier, back business and meet discussed I’ll Glen our options runoff accommodate As to

Glen Messina

Please quarter Cathy. as PHH the position solid work to XX. company we you, the for benefits of Slide progress Ocwen profitability. turn made in Thank scale and to and future combining We’ve reduction the and realize cost

a thorough in included we assessment completed multiple a the factors profitability impact view that beyond. and past XXXX business could of quarter, which During forward-looking

servicing runoff. help NRZ of that not lower are of greater attracting of addressed payment targets are our subservicing our than target quarter taking a returns XXXX portfolio replenish of MSR result these including acquisition Therefore, addressed key through our highly amount shrink us capital action stronger range. company, a to identified be including likely effort, X% to key through the quality our decisive business key runoff second our initiatives, being required is estimates. have market needs competitive UPB we’re make additions number the in we maintain of Ocwen the this initiatives To execute going As will on now. to to to size and items previous And talent lump-sum is XX% the is we’re forward to end initiatives. address a amortization items as

on NRZ successful capabilities. our billion the with resulting reengineering a this in magnitude complete The of and to track amortization opportunities be effort executing been commenced already structure. timing previously lump-sum $XXX bidder we’re and expected. and and We’re integration MSRs XXXX we’ve $X.X annualized in competitive the The quarter runoff over cost MSR execution. baseline to offsets aligned We’ve for million the robust earlier identified than market are against our cost second reengineering payment continues that we’ve in cost

restart by We forward the the potentially to attractive we XXXX. to end fully acquisition funding funding are integrate place emerging. consideration the objectives support focused on initial we lending and consolidation integration to the shortest our prudent the second in products correspondent on available taking Multiple PHH. to opportunities the undertaking and profitability are non-agency expect structures by of possible end We goal second process remain our quarter lending are potentially MSR have are restore of quarter. introduce to in robust track And timeframe into

in reengineering are we and items profitability questions. the in ready key industry, the assuming market XX regulatory continue And the address a but cost life We to in effort. initiatives there development position difference will our a make for we that, serve. objectives matters. times key the we leadership us of with and customers the we role can through months our dynamic our Our to to XX are actions to growth These and industry condition believe Operator? to believe take business in non-bank and assessment to achieve identified adverse initiatives we’re play mortgage legal and and no return

Operator

Thank you. Instructions]. [Operator

is from first proceed George with with questions. Please KBW. question Bose Our your

Bose George

Good I Hi. over just first the morning. could subservicing running what the MSR You noted about than question, that Actually for you acquisitions? expectations guess go be expected. will faster you the said up

the to you that number do assume does So roughly can think then can for offset year? you as keep buy you the acquisitions, MSR that that gave you So flat this portfolio well? enough

Glen Messina

Good morning, Bose.

on subservicing portfolio runoff. conditions, would and approximately of not achieve of portfolio we’re additions subservicing billion current runoff. UPB it That to And servicing subservicing So of do $XXX looking schedule UPB said, yes, additions $XX based MSR billion. replenish that we to that we believe a the expect market take replenish target will –

than more income MSRs you subservicing per dollars generate As loan of know, does. probably

UPB don’t replace MSR to runoff for from dollar you necessarily subservicing a investments. So dollar have perspective with

Bose George

Okay.

that So XX you’re MSR. billion is contemplating primarily

Glen Messina

sir. That’s Yes, correct.

Bose George

later complete, limit back removed? New and great. the to after going year in MSP contemplate potentially And X% actually of transfer regulators do getting on then MSRs Okay, is you that to York the

Glen Messina

to the data we in do we permission for MSP, mentioned, we Bose, we’ll be have York restriction New growth. X% do and of approval – loans boarding restrictions. integrity the we for you And have part complete audits conditional those as New the lift of York on approaching do is once the would

that So is correct.

Bose George

Okay. Thanks. Ditech? XXX And you pipeline on then gave, you the does Can that? the that billion, include comment that

Glen Messina

quarter so of in was far The $XXX our robust the market we’re say, in equally first seeing an What MSR XXXX market. is, XXXX. billion the view of acquisition

knows would continue to options make grow is transaction. the all about any for are We But consider while that I individual one Ditech shareholders. value specific they various that think can’t options comments to our any portfolio is I in maximize and world considering bankruptcy. there our

Bose George

services actually does relationship any are implications fair to there with yesterday, And decides to to update how difference any Okay, Can comment, And vendors, in just of any for you guys an specifically an Altisource. with enough. Ocwen plays you that out? on put terms NRZ that move make other if then you? out X-K your

Glen Messina

a we on REALServicing third-party will and the amend REALServicing have virtue greater we of mortgages as by gauge help the are provide do better of mechanisms portfolios alternative key clarity, secured Altisource We’ve clarified process. around will Net-net, certain we this control being and that to under Ocwen. negotiating in to ensure look, to and the that getting conditions help Altisource’s here perspective, do essentially got and agreements part versus statement to provisions contract. future support of serviced us increased off well some that certain providers data hire business get as mechanism we’re happy up of transferred Ocwen’s agreements good part transfer services of that. service of the clarify over Altisource level us ultimately can got our direction service of by of a that do performance And the probably and as certain our We’ve benchmark work of Altisource. capability of amendment platform making we performance get and agreement well. reached clarified to where with quality set that discipline vendor sure XX% for the termination believe We for framework anticipate From of as performance we we’ve us the loan also as and the benefit and

Bose George

if of of of I in do? agnostic of last NRZ part just guys kind terms you anything, just what it, changes – And terms guess in what are in that they

Glen Messina

NRZ so providers the portfolio contract to would on if efforts has to Look, with the service under to obviously their we do we Ocwen right support do and it. are. designate choose NRZ’s they

Bose George

one And from great. last Okay, me. one actually

expenses other that guys about $XX of In else PHH to think anything expenses forward, million going million. terms unusual you there regulatory? legal in Is of highlighted or terms should we integration $XX

Glen Messina

associated would integration integration From extent adjustments, with all aspects regulatory is rate the we cover intended either and drive be to entity upon the would Obviously any million boarding, matters and reengineering interest to the MSR the that there PHH to a loan the probably include costs that associated actions. to associated any valuation of significantly, enter merger been $XX perspective, most to of to the legacy or with plus of million the $XX costs costs our in our and with settlements extent nature legal that not there choose would to interest changes the reported that’s a that depending earnings rate adjustment. into legal were minus included the

Bose George

Thanks a great. lot. Okay,

Operator

question. question with Coffey Please Our with proceed Securities. Henry is Wedbush next your from

Henry Coffey

lower for XX I gives of and Subservicing, numbers, XX – sort maybe XX it’s and simplistic morning ever and these there’s for business, you are my some X between I about to that And through all X basis non-agency those servicing what at and comment, you’re it’s sort but then you taking stuff, probably points XX revenue and slightly basis servicing. us look If direct that business. look of and for servicing and call. the cost we it Good and in going today? thank are there’s a you a the nobody does know or basis XX sorry, accounting somewhere business fixed looks direct mean basis MSR points GSE get alone where of allocations points, I’m of you like or and servicing a like do point but valuations think cost. adjustments And amount don’t just if sort numbers, corporate today? And

Glen Messina

from competitive we look, in -- from amount overall I the overhead Henry, to plan excessive business to a today the of just a execute perspective, structure cost obvious reengineering corporate our it’s structure, achieve think in cost is cost cost particularly and that

Henry Coffey

if No, at business. cost servicing Right. look we direct of just the

Glen Messina

servicing loans. expectations direct of for consistent with I and Henry, our both direct cost look, think market for for are servicing performing delinquent Yes. costs

into do win on market we’ve are insight cost direct think basis per the in acquisitions. detailed believe points, bulk we I or but to We’ve with not we a competitive our historically demonstrated provided granular basis. loan cost MSR that ability

Henry Coffey

business, the profitable servicing all – aside is think activity you is the today? So

Glen Messina

direct a that’s On correct. basis, cost Yes.

Henry Coffey

but to so to of a that transition and contract and point a Exactly. related NRZ, the then And contract then and goes you’ve you are as use vendor completed Altisource is that locked-in Is – the the completely where interplay open between services. and zero? Altisource XX% on Ocwen there all

Glen Messina

Ocwen put That was off the until runs services of XXXX and exception of Ocwen portfolios of recall, a Ocwen off at of our with direction can we Henry, provider to Altisource as between the in the is the companies. up you out the service agreement place time Altisource may was to business the where and party. third contract Altisource spun family direct controls of XX% for

designate do the party for, provision areas of do portfolios they – to they services, have third-party we services, whoever For we’re we subservicing not the want to the where to. where control discretion control not

is. the NRZ for obviously designate service they can provider So who portfolio, their

to could we designate can where For provider. service we up XX% an to control, alternative portfolios

Henry Coffey

And that would include newly acquired MSRs?

Glen Messina

correct. That’s

Altisource obviously in all to contract. that that to to traditional the failure, Now have there to But a maintaining they agreement agreed That’s to expect. the secure extent their business in any as standards period. earn is perform that’s performance might subject they service the you

Henry Coffey

preservation the Altisource completed with asset be be there only And then relationship sort and services, when Black remaining Knight, you’ve will or resolution relationships? would around the other of transition to

Glen Messina

operations, – preservation, they that property which are Well, backend type the it’s do majority of stuff. provision services processes, the servicing of that their our the of the for breadth for vast around OREO,

Henry Coffey

the I where regulators other over over finally kind wrangling penalties constructive sit are and terms state hey, everybody then people active to a always you legal – say, And to are a a with Is and and relationship think we us is the with good point hate I’m seems there I we an of and good we murky is is there the how term. the and where resolution with other? have have say, word. And legal each regulators, and close a dialog? happy? back deal not back point it sit to on that sure that that’s everybody but is of use

Glen Messina

may we with regulators address Henry, regular during issues or But our very very dialog those calls process. actually through sure our are integration do have PHH the making dialog are all follow-up the our manage presentations. active, update we of for integration the would go all process. and see proactively relationships and regulators of any maintaining that we we and integration active with I purpose say personally Certain proactive We regulators. have regulators maintaining concerns a engaged express of

productive so far productive and And dialog. been very exchange it’s a a

the have extent we’re they to the good issues progress about addressing We’re and I making. any feel

Henry Coffey

point a or error related to a of the just where there sort rounding Is become --? costs all that

Glen Messina

the regulatory Well, business to relationships is the be our ongoing going part an -- to manage just cost that of

Henry Coffey

I No, legal meant any like. and the fines

Glen Messina

said compliance I As as – we of non-routine we lower system. the and expenses litigation matters, should expect of expenses. to during earnings towards performance made we non-routine and the formal regulatory management legacy, portion And and would we’ve call, decline. as risk expect litigation the resolution – We’ve and investments improved result do that legal our in our operational expect we over infrastructure time, in earnings continue work management call help remaining our that significant compliance

Henry Coffey

Thank amount obviously tremendous moving on it’s and to you’re positioned work here going Great. forward. keep you. A of well

you for comments. thank your So

Glen Messina

Thank sir. Yes, you.

Operator

with Please proceed question next Our with BTIG. your Bologna from questions. is Giuliano

Giuliano Bologna

Good morning questions. for taking and you thank my

Glen Messina

morning. Good

Giuliano Bologna

to are XX additional cost to The XX profitability we getting needed the to get and in around that, cost saves the How over from So the the months timeframe you’ve trying up months. supposed amount million to there’s those achieving is come cost made thinking over XX XX next the will saves mismatch between to saves. of a the But the and XX to months profitability? million. range sorry, to should think to $XXX – of cost XX about a profitability $XXX progress about couple little obviously disclosure just great true savings, go the

Glen Messina

real Yes, of to are at XX entity Giuliano, months – going actually the timeframe, the savings and you after cost loan boarding occur bulk to merger. event the XX look legal if the that the be savings cost

the So that half XXXX. of be would effectively back

in expecting we run of We’re $XXX will the by actions realize to fourth quarter of savings. rate XXXX that annual taken million have

process coming I’m course in be improvements million ratably coming in of costs from all facilities will boarding. after $XX within expect of XXXX, the to course we largely I realized from least XXXX that’s operational process almost $XX operational fairly the another the guess that’s There’s improvements complete XXXX the year $XXX during coming just million of XXXX. during calendar continued loan we and gets that million sorry, at So closure realize the – XXXX that

Giuliano Bologna

of costs timing the for those think That should the makes just kind about the allocation XX to cost the the how million? – then sense. on And million of and XX thinking side, about we

Glen Messina

$XX reduction. Yes, $XX of the upfront costs million cost to in the recognition or cost almost takeouts follow the million the would

people do biggest actions related the severance that and course in are reduction significant the are the people that for of of to there have we is One retention this. categories cost and happening during

going things record will cash are be So, expenditure absent any as it actual business. timed the The accrual of off eliminated as and staffing requirements again to rolls out positions be early. accounting is – staffing as timed to

Giuliano Bologna

just then have the the that disclosed And closed year-to-date, happened fourth sense. company the the bulk the makes on XQ? you in and acquisitions amount that versus That in quarter XXXX

Glen Messina

XXXX agency in That’s Well, and bulk $X.X a yes, closed or acquisitions, billion been the both MSR so on. in we’ve combination Mae far is of have either awarded MSRs. what Ginnie

market, objectives. We’re we continue probably excited at the is of thought. that we’ve us our There there is But pricing to can are help that which gate MSR of lower strong a come a achieve albeit is we market the out range what cautiously to end going strong. optimistic of the growth acquisition be robust

Giuliano Bologna

it, $XX into probably the to another with range to $XX and that’s of at the not the replenish? low ability you that gets for get year, but basis makes is sheet get right annualizing you thinking throughout sort necessarily originations I’m plus to MSRs – that the would that to way about look you were And do That while I’m billion sense. if that to on balance billion assuming your

Glen Messina

to business our that. late of did correspondent The of the is are lending the suggest subject restart-up mention Look, quarter. into coming reentry deals that timing would – annualization marketplace. recur our math we We to second market forward restart going or

will loaded. be that be essentially So that – backend will volume

achieve optimistic subject for objectives, but So, can cautiously look, we we volumes that sure. obviously our we’re to are market

Giuliano Bologna

very That’s Thank much. great. I you time. the appreciate

Glen Messina

you. Thank

Operator

We questions. a from Please question Bose your proceed with George. now follow-up have

Bose George

just to just what exactly happens XXXX? XX. I over Can go Thanks. wanted back Great. you go Slide after to April

Cathy Dondzila

Sure. What remaining have we Bose. Cathy, This is amortization. the is

to you we out, was If rolling sort around balance, to of be into is think sum upfront remaining how think be lump cash the income, the going about going disclosed that which I original we’re amortizing was there 'XX. look in similar $XXX million around fiscal will for that you $XXX amortizing impact million. you – to the if see on was – XXXX, prior That year the XX, year Slide be down

million of that in to taking remaining, So months going here starting that over so the or say, we’ll $XXX January. I’m be XX transaction

Glen Messina

Glen. is And this Bose,

the looking So happens economics, were after, statement reflect more happens after. I what income Effectively, subservicing think traditional you right. will for what right,

there through Slide So is – are see and be would effectively get economics P&L. flowing would traditional entries subservicing there XX you more reflected that our on these downscaled

Bose George

XXX the of a that million, of declining kind that right? straight end line, not of by the it’s a period, And is kind number? So

Cathy Dondzila

mortgage goes amortizes. of It down sort No. like a

XXXX. off amortize over next months April will the by of to XX zero of it the end So

Bose George

that And that Is runoff of right? amortization. your profitability guidance incorporates that

Glen Messina

does. it Yes,

million to that in As expecting to that a amortization. more cost than fact, $XXX savings matter enough is reengineering realize we’re offset of the

Bose George

you. Okay, Thank great.

Glen Messina

welcome. You’re

Operator

like question-and-answer to for We have back the reached management over turn session. the end of I remarks. would conference our to closing

Glen Messina

or execution of for our you progress to of market short Great. speaking to cost of and Ocwen, look We’ve assuming a we’ve can forward reengineering roadmap in and operator. period back a a and regulatory get in where you Thank XX thank growth you, objectives continued XX company and tremendous assuming matters. time the to legal your other we and in no believe made quarter. got months, in amount to we profitability We changes next conditions interest

Operator

Thank you. conference. concludes today’s This

your You and disconnect a day. at great may time, lines have this

Onity (ONIT) 27 Feb 192018 Q4 Earnings call transcript