Legal woes continue to drag down Ocwen’s bottom line, with the servicing giant posting a second-quarter net loss of $44.4 million.
The loss, which the company announced Wednesday, wasn’t unexpected. Ocwen had already warned investors that it expected to post losses in 2017, due largely to what it called “regulatory challenges.” At the same time, Ocwen did shrink its losses compared to a year ago. In the second quarter of 2016, the company posted a net loss of $87.2 million.
But Ocwen has had a rough year so far. In April, more than 20 state regulators leveled cease-and-desist orders against the company for alleged mishandling of consumer escrow accounts and other alleged servicing failures. On the same day, the Consumer Financial Protection Bureau sued the servicer. In the weeks that followed, other states jumped on the bandwagon.
Most of the company’s pre-tax loss, $41.6 million, came in the form of $33.6 million in legal settlement expenses and $5.6 million in defense costs over regulatory issues.
However, Ocwen President and CEO Ron Faris said the company’s outlook was improving despite the grim start to the year.
“Despite the recent regulatory setbacks, we made progress during the second quarter on a number of fronts,” Faris said. “We signed our agreements relating to mortgage servicing rights transfer and subservicing with New Residential Investment Corp. We settled additional legacy litigation matters further reducing future uncertainty; and we specifically identified approximately $12 million in annual corporate overhead cost savings that we expect to realize in the second half of this year. We also saw our servicing business achieve its fourth consecutive quarterly pre-tax profit, and for this quarter, after adjusting for various items such as legal settlements, Ocwen recorded an overall adjusted pre-tax profit of $2.8 million. Just as important, we continued our successful community outreach efforts, assisting over 11,000 struggling families.”
Ocwen generated revenue of $311.3 million in Q2, down 16.6% from the second quarter of 2016. Cash flows for operating activities were $195.1 million for the second quarter and $280.7 million for the first six months of the year.