OCN - Earnings call transcript Q2 2019

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Ocwen Financial Corporation Second Quarter Earnings Call.

As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Instructions]. [Operator

like Investor conference go Relations now Arias, to ahead, turn Director, Managing and to would over the Hugo sir. I Treasury. Please

Hugo Arias

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

Chief be the Chief Executive and call Messina; Campbell. will Ocwen's Financial on June Speaking Glen Officer, Officer,

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

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

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

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

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

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

amortization and these contain We supplement useful analysis NRZ, In adjustments others. expenses, and measures financial excluding loss, lump discussions addition, net pre-tax among references MSR sum financial financial payments, believe and our the of of presentation condition. measures provide and notables to comments excluding valuation non-GAAP cash to such as non-GAAP notables; our a and

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

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

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

Glen Messina

Thank joining profitability. our to our the progress our you for will and you, and to are actions to deliver achieve Today, also Ocwen conditions an to Hugo. executing Good morning we for key discuss address evolving I'll and business update plans provide I thank value creation initiatives regarding in shareholders. us. market reposition taking

questions. Campbell, brief with will Our follow I call with our review quarter the opening then CFO, will a remarks of some second XXXX financial close up for before June it results.

progress earnings to Slide we Since for last Please the our company position continued turn to make have to call, key our initiatives profitability. X. substantial with business respect to

and executing committed ahead. the the to-date team objective energized well, by key accomplishments our we’re Our delivering of opportunities is on to and initiatives our

Black million legacy MSP Servicing PHH well approximately X boarding pipeline the completed loans Mortgage. to Ocwen We Loan the as as of Knight and the Ocwen merger of

XXXX as We items, are adjustments the tracking rate second XXXX million for quarter Ocwen excluding of of the compared expectations run cost PHH. quarter annualized valuation to and $XXX in realized of have our MSR net re-engineering of savings, and initiative, ahead and expense the notable second combined for

and after on our correspondent UPB quarter mortgage proprietary through our lending reverse origination acquisitions launched of in product. second and closed commenced our billion a with We are acquisition the $XX EquityIQ, activity. We through MSR MSR rebuilding market pipeline forward approximately channel lull

initial us $XXX with on The MSR the facility borrowed We financing borrowing $XXX provides closed support July initial million committed our near-term and to acquisition capacity of amount MSR a an objectives. million. facility

we in savings. we acquisition quarter a second the pre-tax are PHH our the $X.X expense and and conditional continue we in working requirements the expect result relationships. X, meeting $XX.X Since our for approximately to repurchased lien all third improve million to approximately believe gain have regulatory approval annualized July which we million of $X.X of million notes And in lastly,

of Slide by excluding PHH $XX combined As sum XX, amortization loss, on cash quarter of lump the level the to our detailed the NRZ approximately million actions annualized million date from have payment in second Ocwen and of notable XXXX. reduced and $XXX pre-tax

interest please MSR Now basis valuation conditions, assumptions, yield significant and X. turn Slide an the along approximately portfolio XX dropped in XX-year value with Since net in of million. the have points treasury approximately of $XX faster start we run-off changes change has market the by to seen rate our sensitive year, unfavorable fair other driving including

terminations by low relationship in acquisitions subservicing end merger. clients seeing we due our smaller at bulk for of MSR Unlevered have drifted of of larger our midsized returns. UPB portfolios to We minimum our billion approximately returns legacy and resulting X%, are the from change PHH target below in to for returns $XX experienced the target investment

awarded been interest not reduction requirements. returns no close chose in met sizable We investment MSR in resulted as acquisition longer our bulk minimum to rates we that the had a

We rights. lending and are lower increased increased increased lending cost forward seeing opportunity, reverse to opportunity, opportunities margins, higher lending forward funding refinancing exercise call

market to limit investment building decisive our sourcing to are the market; performance; continuously making large conditions, on returns to a the evolving balanced servicing a provide offset available aligning taking portfolio. people, to market recapture rates our including us help interest to improve operate at bulk effective structure to the our address processes macro profitably on We the MSR changes in to to enable and our cost and action technology dependency MSR approach hedge the

for for future accessing enhance returns and evaluating investment financing limit structured alternatives Maintaining capital deploying strict to events; opportunistically debt through service our early and call MSR effective a vehicle; rights collateral and retirement quality MSR capital MSR to capital standards on loss cost early through transactions. potential more potential new investments the

lending our subservicing excluding client for portfolio UPB believe current on exist our portfolio, MSR enough and corresponding impact the we to smaller MSR source that of arrangements, meets through replenish terminations. Based return to opportunities the of volume conditions, market retention requirement combination acquisitions servicing

portfolio acquisition of low the to activity given acquisitions more we with However, of ramp attractive bulk achieve profile, MSR return objectives. volume replenishment MSR up now our expect gradual large

necessary To to allow upper of on for the the decided months. of payment profitability pre-tax amortization sum extend environment, excluding adjustments time notable the for market return current end to of basis, offset to and of impact a range impact the our we by three lump the NRZ the items have

return months to profitability and we a matters. there industry regulatory XX the believe next to conditions changes As X can current result, to legal no assuming are adverse and or we in market

each initiatives to objectives business. and the turn transform company address our the update strengthen to our provide and I will now for on X. Please a Slide detailed of

During the with UPB of the XXXX, approximately of half first we billion. MSR $XX acquired total

quarter, rebuilding we our lower market MSR a the pipeline. activity acquisition Following second are in

quarter, the originations. In also completed second forward lending the out build of we our and commenced platform correspondent

on our cost, scalable a We’ve management risk for our an service concentrated building initial timeline, that We and platform would deliver clients. goals. compliance achieved have efficient, consistent quality experience

excited and potential new consistent channel in expect up are the customer with objective. our this volume ramp and to return service a We of about disciplined manner

XXXX. amount a will replenishment platform of in beginning provide portfolio this our significant expect We

value values product. We to also existing eliminating this We believe FHA meaningful which their loan proprietary more our lower limits. insurance opportunity launched allows use equity amounts and higher offer proprietary to will million mortgage home drive to with cost to compared reverse above for overall $X offerings, mortgage so borrowers to borrowers an borrowers can LPDs EquityIQ, up realize proceeds through higher FHA product access

improve future, to are customer experience expectation the rate over taking several recapture for consistently actions portfolio foreseeable the Considering we low in our interest platform. rates and retention

the legacy and of team, targeting systems, portfolio an telephony and completed strategies. entirely We operating Ocwen operations, and our implemented platform hired and pricing integration segmentation have implemented new new the leadership new PHH sales changed

underwriting We’re talent. management performance evaluating the and and operating sales for frontline our framework and processes management

We are competency. portfolio making to core a recapture committed

size and who these than for We RFPs on longer. that have subservicing, tend servicing servicing expensive been is and and portfolios be for have bid Lead more from mainly seen complicated opportunities concluded anticipated. banks others time modest to and self aging several

X% MSR level rates Based participants we going than substantially accept unlevered experience we are average acquisitions to lower assume to in decisions ensure on bulk risk and We continue disciplined an higher returns. assume MSR market at of allocation market, our intend recapture remain and operating in least collateral recent to and achieve we on target appropriate capital our adjusted to of believe market certain returns, risks. the legacy returns

the for also risk class. GNMA believe market potential MSRs We associated the that this to with credit misprice asset continues

bidding and billion ramp more our greater likely achieve with potential up MSR success the range, We to to $X $X into gradual to acquisitions. a means billion which have portfolios target MSR UPB of expect returns

requirements. investment midsized that at servicing of returns persist the our end expect to We the portfolios smaller lower will for

market are rate relating sensitive. ordinary to portfolio reduction and credit of We to the sensitive interest The anticipating particularly is rate portfolio our higher run-off interest our to XX% a nature interest of sensitive changes in more the portfolio rates remainder that rates. of less in due is in

from to in significant the view subservicing resulting client We merger PHH clients relationship. historical a terminations the our taking continue in resulted legacy that experience change subservicing

only future Although these modest subservicing impact substantial servicing have impact have servicing a UPB, on a on they client margins. terminations

of of and for While we subservicing, environment X%. least at the subservicing owned is at material owned owned that margin MSR there are a delinquency economics the servicing capital for that requirements returns contribution Xx differences and in versus estimate servicing assuming stable least

we portfolios expense our investing reductions be MSRs, client line loss believe servicing of subservicing margin to can of quarter more and/or investment from relatively in actions. largely other NRZ the Therefore, and terminations run-off the one UPB loss driven profitable offset our the owned roughly of

opportunities there UPB by also subservicing our replenish the client MSR to MSR of We acquisitions. flow complemented portfolio through channels the terminations us believe for both sufficient impact excluding are

the revenue benefits on MSR in vehicle. is the are total excluding providing on impact expected a have impact in shift servicing of diversification. to composition the targeting XX% our This portfolio our servicing additional of In any future mix servicing, owned implementation approximately from positive we of term, potential while long profitability capital

recapture taking MSR more acquisitions. necessary a to portfolio. these actions changes earnings the requirements run-off We and correspondent on sourcing, to are lending, return our including rate impact and interest flow believe servicing We meet and sustainable complement source of replenishment of and have our offset natural a bulk enable approach are agreements a to balanced purchase MSR portfolio to MSRs to to

channel In opportunities origination initiatives enhance to our addition, for growth and become way potential intend as evaluate available channel. the if they in a lending organic we to complement growth M&A

interest investment rates, to in loan to pursue. due exercising loans private our as call intend servicing on seeing and decline we attractive alternative portfolio Lastly, which we the are such rights opportunities

underlying the approximately call interest that of of callable $XX callable. billion rates is $X approximately As population yields, which of to Based than rates sufficient believe billion we of factors, we controlled XX, and currently value XX% the rights delinquency collateral June in execute. especially currently various to mortgage economic has on less

turn borrowing collateralized amount At Mae July under an existing funding closed MSR XX% committed the to that of million and against advance we facility agency initial On a Freddie MSRs million Mac Please capacity we Slide X, facility rate. at $XXX MSRs. provides a borrowed $XXX X. Fannie closing, by

We at expect MSRs Mae additional under XX% to $XX to subject million Ginnie rate have the the to borrow the an up acknowledgment advance an the receipt of agreement. same ability to facility against

due senior result believe positive our we’ve liquidity enhanced near-term be factor been flexibility. should secured position XXXX. eventual closing position term and a liquidity in of As this our We financial our strengthened a to loan facility stronger has efforts refinance December our our

a As of owned expected diversified variable until primary to owned MSR we ABS to funding facility funding funding in closing complemented a by transition vehicle initial term we strategy the portfolio The more previously provide MSRs. step sufficiently a indicated, for is an bank note. to the funded achieve the facility MSR issuance large can as view

this advance dependent our including phase this in MSR believe strategy our source. on diversification provide rates, lower and next portfolio. costs growth will higher The certain should benefits funding us We owned timing the be of of approach of tenor, funding with owned financing longer MSR

certainty our leverage of of our July. of allocation, this capital the returns due debt early service on use million part as capital was repurchased part well available costs. We as the to approach notes As impact and second due of the we in lien and X.XXX% believe XXXX a during prudent level to positive our of disciplined $XX.X

of are our structure. We cost capital our capital lower evaluating and opportunities continuously optimize to

with acquisitions. us are grow vehicle evaluating We for significantly the capital provide alternatives capital currently could MSR our lower UPB with to compared ability that to requirements servicing MSR

MSR objectives. focus growth our We’re will strategy the The financing area next next financial our capital of to to excited vehicle be X having new over support phase about of XX of the months. an a agency source fund MSR and prospect our and the

from servicing million transferred completed multi-phased to X. June. system Slide early as MSP the conversion We to in loans of X total, our the turn MSP were Please part approximately process. In old to

to now cost XXXX of are a half and second significant XXXX. We in operational the realize strong position and during benefits into

of legal facilitate of the now entities should regulatory entity We merger June related also entity legal cost. simplified X. legal our other licensed and two elimination completed We and more the activities have duplicative a that on licensing structure primary support

and as the focused and Throughout the needs liquidity the as integration key value. remained on compliance the assets components of strategy we minimizing well franchise excellence our long-run have as of foundation operating and preserving for business

our ensure expected. and integration and have our multiple operations monitor performance performing as activities general to of continue We to are dimensions operating

Slide turn Please X. to

achieve highly market levels are MSR us composition operate profitably that structure competitive portfolio allows on a to and We return profile. cost actions at executing to our focused

Our integration-related volume relative based we’ve merger previously with consist of lending MSR re-engineering annual our of at cost assuming least outlined baseline second $XXX and synergies XXXX UPB to of $XXX least reduction three quarter certain of cost categories initiatives million at saving actions; that billion. targets including on expense

digitization based reductions enhancements. size on portfolio; continuous on cost and based lending Ongoing of and expense MSR expectations innovation, volume for re-engineering productivity technology-enabled other the our

of Our stage now reductions running is cost execution team expectations strong and our this we’re for efforts. demonstrating ahead of at our

total at by least of cost fourth rate annualized additional quarter million measured second quarter Ocwen $XX the at million we notable are expenses adjustments continue and the as run valuation XXXX. savings adjusted and exclude At this re-engineering combined our an time, cost by baseline These savings the least annualized target to for PHH. MSR and $XXX quarter net items and against XXXX second

upward to carefully our target. cost any We our progress adjustments are the process in evaluating reduction of to make

portfolio Our if actual lending we volume differ targeted efforts of by and expectations. savings size. re-engineering certain would from cost cost re-engineering assumptions adjustments expect our our MSR are spent complemented be cost based on to Therefore, volumes original volume-driven materially

quarter, in of of estimate cost million the million We $XX expense. execute incurring million re-engineering incurred our $XX second we Through end amount of this resulting to XXXX. the upfront approximately have from actions employee-related with $XX

re-engineering meaningful and process Based for actions, on we believe what we our from have are additional we execute learning benefits we cost re-engineering opportunities as innovation.

cost, phase of on We’re continuous improvement and commencing re-engineering compliance our speed, customer experience. second focused in business

global is excellence automation. are function resources its initiative engaged Every process in committed with strategic lien in who supported optimization and by sourcing, of design, operations centers

team Our global energized long-term committed and experienced, success. is engaged, our to

We and the cost, our in further automation new system optimizing recognition, workforce. the digital believe through objectives. distinct competitive core and achieving machine character advantage operating a are robotics, global by operating of capabilities exist We operations technology application optical and our of learning believe our opportunities

[ph] and to strategically refine have lien processing we vendor loan environment, we apply that business the Now simplify usage. operating are our and in MSP completed can boarding fully processes

XX. turn to Slide Please

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

continue to regulatory a reg our on consistent engage frequent basis track relates progress proactively leaders as and We and to commitments. it our

of of of positive New their the the the regulatory completion our to in was a another servicing on The respective regulatory Massachusetts under matters growth from step settlements loans removal This most requirements states our was XXXX the in servicing of the conversion restrictions requirement MSP one and of system and of states. for April for portfolio commitments. the meeting York remaining

York successfully a management all infrastructure on Services migrated REALServicing the we to that sizable MSRs. of York is serviced loan system and respect onboard with final have of next risk that demonstrate The MSP the step compliance, to satisfaction to of to to been have system satisfactory New the control step developed Financial the Department and and New portfolios internal

by party. will respect an growth MSR be be complete to the the which phase integrity conducted three-phased restrictions when third second a audit With data we of independent Massachusetts, lifted will

are New MSRs the investment respective with a regulators not working our minimum target, date the satisfy their ability have been at acquire Massachusetts to Although constrained requirements. on to restrictions in our return we state and to York

in We and matters meritorious we defenses continue ourselves. and vigorously believe CFFB defending the to have are Florida we

updates to with no matters. have We currently these respect

June results I discuss to will over will the turn the now quarter. who it for

June Campbell

quarter Glen. comments compared on you, second as the Thank focus My our quarter. prior results today will to

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

turn Slide Please XX. to

net loss to net in $XX reported XXXX unfavorably quarter million the million of compares the XXXX. second quarter Our $XX first of loss of

in million Our valuation retention $XX changes net second and $XX other unfavorable quarter rates by pre-tax changes impacted and pre-tax fair assumptions by interest value million severance, cost. of re-engineering driven was of and

our amounts provider. a pre-tax results quarter first previously of $XX expensed As million reminder, service recovery included a from the

positive of payments million earnings amortization quarter the payments the quarters in sum of lump XXXX. The million over income quarter. $XX NRZ these will and $XX from positive pre-tax of from impact received The in lump XXXX our cash have cash the through impact pre-tax April and $XX XXXX amortization to in prior million sum future the second an was

due Revenue $XXX from quarter the by this, run-off. decreased down interest servicing NRZ million Offsetting compared recorded prior were decreased of and were to servicing $XX to fees of million quarter, continued revenue the in million prior remitted $XX $XXX to expense. portfolio million $XX primarily million

through loan higher volume processing of due are $X we replenish market our to revenue unfavorable in the fees MSP intend conditions, trends modification boarding we negative the of associated to with cost To to unable timing remitted partially to to net June. down NRZ offset due the was million Revenues final reductions. loan extent

$XX first our in quarter mortgage assumption financing million revenue from portfolio the million declined update quarter. cost the reverse of million due favorable $XX the prior $XX to Lending to

$X the favorable to due compared portfolio quarter decrease million rates million favorable in in valuation first the to a included The valuation of reverse quarter. second $X interest on mortgage of

$XX $XXX previously This than of was higher due our was provider from offset quarter to million and million first the other in a service lower initiatives retention primarily of re-engineering expenses progress quarter. and Non-MSR expensed amounts the expenses. severance, $XX million prior recovery in savings the by

the MSR forward XX our the swap to quarter, valuation decline in point million in XX-year the basis value million $XXX reduction rate $XX and second unfavorable the drove respect a updates in a of assumption With adjustments MSRs. valuation

You may changes are primarily rates. in remaining to from agency comprised sensitive portfolio recall the million interest run-off. portfolio The PHH of which more MSRs, is $XX resulted

of $XX from million portion million the and financing valuation $X rate assumption A value of mortgage favorable by previously liability offset fair MSR expense million was interest the recorded favorable adjustment portfolio. resulting NRZ unfavorable change valuation which change valuation interest and reverse noted $XX in on updates changes was of

have additional We on valuation provided to the Slide information related MSR impacts XX.

our on and results. now would lending segment servicing to comments like I provide

As loss modification XX, and continued unfavorable our timing $XX business the $XX was outlined processing changes of portfolio impacted a pre-tax associated fair compared prior loan in loan by the MSR pre-tax on MSP segment Slide The quarter. a run-off, million final value boarding. servicing to loss recorded million with

of some in remains of loan modification sustainable providing in servicing We focused forgiveness type X,XXX approximately XX% resulted which modifications qualifying need. to borrowers million. The the in completed $XX debt on totaling quarter, business solutions

approximately down of termination $XXX billion at all March UPB XX. terminations, $XXX legacy which of billion smaller billion approximately portfolio $X certain This by of is our a $XX a annual the subservicing in servicing of revenue. which and at client PHH relationship As driven reduction from stood June totaled million of was XX, UPB representing total

subservicing representing termination result resulted quarter billion terminations anticipated in of the view legacy impact These additional the significant currently our clients change results. We to $X subservicing are on an no financial expect but client our material taking the of PHH adverse historical UPB third their subservicing that a had in merger relationship.

by would of our while flat prior Excluding quarter. been impact quarter increased over quarter-over-year, UPB client our billion almost total terminations, have the close subservicing portfolio second to owned the the UPB MSR $X portfolio

ability cost replenish our portfolio the Sustained and be execute pursue the impact profitability re-engineer to terminations. successfully of by integration, the will largely opportunities run-off our operating driven to subservicing in business excluding

turn Please Slide XX. to

forward the in business to channel lower to to lending forward million volumes. We Our $X slightly recorded unfavorable ramp prior second cost $X prior favorable which quarter due the pre-tax correspondent expect was a in to million was reductions. disciplined Revenue reentered quarter a the up manner. by quarter and of driven loss the

are on We pull-through retention and improving focused portfolio rates.

or $XX favorable on of commitments Our reverse interest $X included lending future value to related rate fair Unrecognized business net million related or changes. estimated to recorded changes million value draw and originated basis is to pre-tax income X, prior future over will which of purchased sold. value recognized to be a loans million as draws time on XXXX January $XX or be present securitized

mix. proprietary lending our initiative product our launched lending our part a and balanced as also quarter to achieve volume more in grow We reverse of revenue the

In of XX% March after to more business, initial mortgages. our new loans conformed disbursement our over underwriting which the originated XXXX, criteria HECM reverse for portfolio stringent consists limits of in

$XXX our of of HECM our than the as of lower approximately rate is XXXX. outstanding million XX% projected addition, loans had buyouts current of drawn with In for initial fixed We buyouts fully and peak only HECM. August traditional in HECM our June on million $XX LIBOR-based disbursement sheet XX balance is ARM portfolio

judicial We fund non-judicial of advanced maintain to XX% days or to typically versus XX% on can levels the and state. up and property adequate resides HECM the of XXX in with funding depending status a inactive for active whether rates buyouts

of see included $XXX can with $XX million ended liquidity Slide of $XXX our of servicing facilities. available the on you As million cash This available we unrestricted XX, liquidity on quarter advanced million. and

warehouse and lines fully can drawn our eligible facilities our advanced as on plus view quarter end, were on servicing we the based be liquidity cash committed as warehouse from collateral. At that available on hand We came available borrowing facilities capacity liquidity funded advanced available lines. on

the $XX use XX working $XX which cash by that cash Our acquisitions quarter reverse we least includes in of liquidity was million and at million of uses prior for expect capital $XXX million million to MSR other driven third than of quarter. used lower

We ended quarter the of million. outstanding corporate $XXX with debt

notes in our September, equity million ratio have $XX unsecured X.Xx. maturing would to been the in book Excluding PHH corporate debt

I'll it over to Glen. turn now back

Glen Messina

Thank you, to last company the earnings our business Slide with June. Since turn substantial key continued profitability. to for XX. progress call, initiatives we position to make have Please respect our to

to executing objectives Our energized the and the team key on well, and of our by delivering to committed is initiatives date we’re ahead. accomplishments opportunities our

taking by taking We’re actions and our capability, our MSR incremental to portfolio reducing conditions decisive and market address evolving strengthening reduction actions, capital. diversifying cost sources, capital allocation exercising recapture of discipline our prudent cost of

continued industry structure operating a dynamic conditions competitive a in rules-based predetermined business environment. with expect We largely and revenue while highly

execution, As of profitability capabilities. advantages driven generation a will regulators, be and and recapture result, cost we operational believe by performance and competitiveness structure, ancillary in customers sustainability, reputation income

scale practices. positioned subpar poor service per quality advantage poor returns gain and and/or economies of collateral in operating critical with success. believe tides to tough long-term loans for lead competitive thought well were platform, the to legacy underperforming Chasing challenges is of to and what the We [ph] we still capabilities lead will is Ocwen and each

future establish robotics, digital in optical operating replatformed and areas innovation, balance recognition, technology workforce. the machine are foundation systems have our for We our so being implemented character and technical a technology of to learning automation

pool energized creating experience investors We consumers, who highly and that provide to talent skilled, for positive are have to outcomes global access and committed operations us communities.

our optimum Mae to X execution improvement compliance rating Tier speed, we expect earned experience. customer consumers in our cost, phase mortgage achieve and servicing of a servicing, re-engineering had rating focused and strength for Tier servicer commenced We’ve for second operational business Ginnie X on a The XXXX. PHH in of

advances allowance enabled X% advances just unrecoverable was and of has our under XX. execution June total of servicing unrecoverable lower, operational advances Our for as

highly diligence practices We collateral preserving MSRs on service complete and files. focused the through rigorous of acquired loan newly validate are compliant value to and

mortgage a risk to participants. other credit with reverse business a profitable, have We compared high-quality profile industry lower

activity buyout manageable to date to limited buyouts peak is of at and levels. outstanding incurred be have our We projected balance expected

mortgage a loss creates be servicer and to with that vision is homeowners, outcomes leading core for Ultimately, for in investors. Ocwen competency our a positive communities mitigation

XX-XX to servicing an and the a anchored capability portfolio grow replenish roughly diversified and retention by of vehicle, potential portfolio product channels excluding origination include objectives owned Our of capital performance. balance MSR impact and strong subservicing our

scalable an A efficient lean synthetic enabled through solutions cost high capital utilizing promoter scores strong structured low offshore revenue demonstrated top satisfaction industry by execution, cost quartile platform, sources. customer net cost processes complaint and for ancillary capital consumer subservicing, and operating MSR our to lower sources levels and financing diversified structure create income vehicle and structure automation, compliant of

I want our for partners work through thank vendor Ocwen our Directors, enduring and Board key associates transformation. of hard and all to the commitment their our

And with that, Operator? questions. we’re ready to take

Operator

Certainly.

We will [Operator begin Instructions]. question-and-answer now session. the

Please comes question first from sir. KBW. Our Bose George ahead, with go

Bose George

billion in of just third portfolio any morning. You the the being think subservicing noted the that Good are risk Hi. was that that need about? but quarter, first X Actually moved, on at we there anything other to portfolios you else moved? are think

Glen Messina

Bose. we $X Good only morning, that The the is are aware thing of. billion portfolio

Bose George

based it of sort this a happened? a was while, the Like in works terms guess was really client incremental was you in – something acting And of in for of there or caused I that has kind transfer on so Okay. characterize – line was what the obviously so with been expectations? this how that would

Glen Messina

that Yes. On a was Bose, it had said to would earnings run we subservicing previous replenishment. subservicing call line expect exceed in with I I’d off say expectations.

million, billion acquisition had this more of end revenue $X here we $XX relatively nearly which a So quarter we the to offset have than revenues. the the the did about notice UPB subservicing large again, servicing and advance the of impact is But award, were first At termination. termination client small. the of offset

Bose George

actually is an there or goes you happens operating the of is Okay, when what we the should NRZ great. impact optics cash impact anything one there can largely – me of away, think – Thanks. just the And that is after then amortization about? remind

Glen Messina

of operating an balance that no an original cash subservicing we’re There’s look payment the been contract. stops, already of purely impact, event. arrangement. term received economics lump The will Bose. the like sum the accounting over P&L our cash and The additional amortizing in amortization Once amortization has is the

Bose George

Okay, the that related expense Can expenses, great. from Thanks. accounting happened just impact actually the the the change you previously an to then And numbers. there mentioned, XX million non-MSR standpoint? go just over what you

Glen Messina

referring you’re provider in related the reported $XX recur service the which in quarter think a did to positive first to a not were item a that we with I settlement second million, a quarter. notable

Bose George

Thanks – clarifying that. the I just me let so was Actually first at in okay, make So that sure. quarter, for Thank looking you. right. was you’re

all That’s for me. thanks. okay, So,

Operator

Instructions]. question-and-answer would any like conference session. [Operator the This for the over to I Messina to Glen concludes remarks. closing turn back

Glen Messina

all To of forward being talking for quarter. Ocwen much us to those very and the joined for to operator. you, look call, and with support you who next thank Thank you your

Operator

concludes call. conference today’s This

You for may Thank have and participating a lines. pleasant your you disconnect day.

Onity (ONIT) 6 Aug 192019 Q2 Earnings call transcript