Slide 1: Business Update Full Year and Fourth Quarter 2023
Business Update Full Year and Fourth Quarter 2023 February 27, 2024 © 2024 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the regulators, the Federal National Mortgage Association (Fannie Mae), and credit ratings as well as other actions from various rating agencies, meaning of Section 27A of the Securities Act of 1933, as amended,
Slide 3: Ocwen is a mortgage originator and servicer focused on creating positive outcomes
Ocwen is a mortgage originator and servicer focused on creating positive outcomes for clients, homeowners, investors and communities Our Strategy Maximize Asset Management 1. Balance and diversification Returns Q2‘23 PTI $15M (c) Executing More 2. Prudent capital-light growth Clean-Up Claims Asset T
Slide 4: Fourth Quarter and Full Year 2023 Highlights
Fourth Quarter and Full Year 2023 Highlights Fourth Quarter 2023 Trend vs Q3’23 Full Year 2023 Trend vs FY’22 Adjusted Pre-Tax Income(a) driven by servicing segment $11M $49M 9.4% Adjusted Pre-tax ROE 10.1% Adjusted Pre-tax ROE GAAP Net Loss reflects unfavorable MSR fair value changes $(47)M $(64)M
Slide 5: Delivering positive adjusted pre-tax income; originations positioned for falling rates
Delivering positive adjusted pre-tax income in current industry environment; Originations platform positioned for falling rates projected in 2H’24 Growing Adjusted Pre-tax Income(a) and performing in line with ROE guidance 23 20 20% Financial Objectives 15 9.4% • Sustain FY’23 Adjusted PTI performan
Slide 6: Balanced and diversified business creates opportunities and mitigates risk
Balanced and diversified business creates opportunities and mitigates risk Servicing driving sustained Diverse capabilities create Diversified servicing portfolio Adjusted Pre-tax Income(a) unique opportunities mitigates risk % of servicing UPB year-end ’23 Origination & Servicing & Subservicing Own
Slide 7: Driving capital-light subservicing with a strong foundation to accelerate growth
Driving capital-light subservicing with a strong foundation to accelerate growth… MSR capital partners(a) increase Building multiple MSR capital partner Driving subservicing growth impact on subservicing growth relationships to support growth objectives $105B subservicing avg servicing UPB with capi
Slide 8: … while dedicated to disciplined MSR investing
… while dedicated to disciplined MSR investing MSR capital partners(a) supporting Originations increasing mix of Managing owned MSRs to targeted originations higher-margin products(b) investment range total originations UPB % of total originations UPB avg servicing UPB $115-135B target range for own
Slide 9: Strong and scalable servicing platform with industry-leading performance
Strong and scalable servicing platform with industry-leading performance Superior special servicing capabilities Cost structure favorable to peers over twice our size Consistently lower delinquency levels Fully Loaded Cost to Service(c) compared to industry(a) Full-Year 2022, Forward Residential Lar
Slide 10: Continued profitability drives adjusted pre-tax ROE to 10% in 2023
Continued profitability (Adjusted Pre-tax Income) drives adjusted pre-tax ROE to 10% in 2023, targeting 12%+ in 2024(a) ($M, except per share metrics) Q4’22 Q3’23 Q4’23 FY’22 FY’23 Q4’23 Adjusted PTI of $11M GAAP Net Income (Loss) (80) 8 (47) 26 (64) • +$1M vs Q3’23 due to improved operating expense
Slide 11: Lower market MSR pricing and hedge cost drove negative Q4 and full-year earnings
Lower market MSR pricing and hedge cost drove negative Q4 and full-year earnings PHH MSR fair value declined year-over-year due MSR interest rate hedge performance and to market calibration and higher note rate hedge coverage ratio (HCR) MSR fair value % of UPB at period end interest rate impact onl
Slide 12: Committing excess liquidity to de-leveraging in the near term
Committing excess liquidity to de-leveraging in the near term Available Liquidity Total liquidity up $23M vs Q4’22 and $48M vs Q3’23 at period end • Increased HCR to 100%, debt service payments in Q1 • Intend to use excess liquidity when available for opportunistic corporate debt retirement as well
Slide 13: Servicing profitability improves with portfolio growth and cost reduction
Servicing profitability improves commensurate with portfolio growth and cost reduction efforts Servicing Update Servicing Profitability Drivers • Forward Servicing PTI improved Adjusted Pre-tax Income(b) Subservicing UPB subservicing 37 Reverse Forward avg UPB - higher service fees, consistent with
Slide 14: Skills in special servicing and reverse improve liquidity and profitability
Skills in special servicing and reverse improve liquidity and profitability Reducing advances on legacy assets Legacy assets(a) focus reduced advances $71M YoY • Frees up cash • Reduces interest expense Legacy assets advances balance • Contributes to higher liquidity that can by used to paydown debt
Slide 15: Originations generates profitability in line with seasonally low volumes
Originations generates profitability in line with seasonally low volumes despite challenges in Consumer Direct and Reverse Originations Update Originations Profitability Drivers • Adjusted PTI down QoQ due to seasonal decline in Adjusted Pre-tax Income(c) Funded Volume & Revenue Margin(f) volume; up
Slide 16: We believe our share price is not reflective of the strength of our business
We believe our share price is not reflective of the strength of our business, especially with a positive and growing adjusted pre-tax income(a) 150 150 (b) Peer Group Russell 2000 Index OCN Share Price 140 140 130 130 120 120 110 110 100 100 90 90 80 80 70 70 60 Indexed to value at 12/31/20 60 50 50
Slide 17: Roadmap to FY'24 profitability
Roadmap to FY’24 profitability FY’24 FY’23 FY’24 FY’23 Originations GUIDANCE ACTUAL Servicing GUIDANCE ACTUAL Funded volume ~$24B $22.3B Avg UPB: owned MSR ~$115-135B $133B % of originations sold to MSR capital partners (a) ~50% 5% Revenue(e): owned MSR ~39bps 38bps Revenue margin(b) ~36bps 38bps Av
Slide 18: Positioned to deliver strong results in 2024 and beyond
Positioned to deliver strong results in 2024 and beyond Broad Origination Capabilities Best-in-Class Servicing Platform Industry top-tier operational Expanded client base(a) performance(e) Industry best practice cost Improved refinance recapture rate(b) Awarded for 3 structure(f) Consecutive Years S
Slide 19: Appendix
Appendix ▪ Ocwen: Who We Are ▪ Condensed Consolidated Balance Sheets (GAAP) ▪ Condensed Balance Sheet Breakdown ▪ Condensed Consolidated Statement of Operations (GAAP Income Statement) ▪ Notes Regarding Non-GAAP Financial Measures ▪ Notables ▪ GAAP ROE Calculation ▪ Adjusted Pre-tax Income ROE Calcu
Slide 20: Ocwen: Who We Are
Ocwen is a mortgage originator and servicer focused on creating positive outcomes for clients, homeowners, investors and communities Business Model Competitive Advantages Originations Servicing Asset Management ✓ Balanced business built to deliver Balances earnings and drives Generates cash flow Ena
Slide 21: Condensed Consolidated Balance Sheets (GAAP)
Condensed Consolidated Balance Sheets (GAAP) Assets December 31, September 30, December 31, (Dollars in millions) 2022 2023 2023 Cash and cash equivalents 208 194 202 Restricted cash 66 72 54 Mortgage servicing rights (MSRs), at fair value 2,665 2,860 2,272 Advances, net 719 565 679 Loans held for s
Slide 22: Condensed Balance Sheet Breakdown
Condensed Balance Sheet Breakdown Balance sheet breakdown Total in $M, at 12/31/23 Rithm, MAV & GAAP GNMA All other pledged HECM GAAP MSR Fair Value(b) EBO others MSR(a) end of period mostly due to Cash 202 202 derecognizing a portion 2,860 of Rithm MSRs Loans 8,653 7,797 856 MSRs(a) 2,272 646 1,626
Slide 23: Condensed Consolidated Statement of Operations (GAAP Income Statement)
Condensed Consolidated Statement of Operations (GAAP Income Statement) Year Ended Year Ended (Dollars in millions) Dec 31, 2022 Dec 31, 2023 Revenue Servicing and subservicing fees 863 947 Gain on reverse loans held for investment and HMBS-related borrowings, net 36 47 Gain on loans held for sale, n
Slide 24: Note Regarding Non-GAAP Financial Measures
Note Regarding Non-GAAP Financial Measures In the following slides, we present supplemental information (including reconciliations) relating to certain illustrative adjustments to GAAP pre-tax income (loss). We believe these non-GAAP financial measures provide a useful supplement to discussions and
Slide 25: Notables by Quarter
Notables by Quarter (Dollars in millions) Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 I Reported Net Income (Loss) 10 37 (80) (40) 15 8 (47) Income Tax Benefit (Expense) 1 4 (1) (2) (1) (1) (2) II Reported Pre-Tax Income (Loss) 9 33 (79) (38) 16 10 (46) Forward MSR Valuation Adjustments due to rates 7
Slide 26: Notables by Full Year
Notables by Full Year (Dollars in millions) FY’21 FY’22 FY’23 I Reported Net Income (Loss) 18 26 (64) Income Tax Benefit (Expense) 22 1 (6) II Reported Pre-Tax Income (Loss) (4) 25 (58) Forward MSR Valuation Adjustments due to rates 11 151 (121) and assumption changes, net(a)(b)(c) Reverse Mortgage
Slide 27: GAAP ROE Calculation by Quarter
GAAP ROE Calculation by Quarter In $M Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 I Reported Net Income (Loss) 10 37 (80) (40) 15 8 (47) II Annualized Net Income (Loss) [ I * 4 ] 41 148 (319) (161) 62 34 (190) Equity A Beginning Period Equity 534 544 546 457 416 434 445 B Ending Period Equity 544 546
Slide 28: GAAP ROE Calculation by Full Year
GAAP ROE Calculation by Full Year In $M FY’21 FY’22 FY’23 I Reported Net Income (Loss) 18 26 (64) Equity A Beginning Period Equity 415 477 457 B Ending Period Equity 477 457 402 II Average Equity [ (A + B) / 2 ] 446 467 429 III GAAP ROE [ I / II ] 4% 6% (15%) Ocwen Financial Corporation 28
Slide 29: Adjusted Pre-Tax Income ROE Calculation by Quarter
Adjusted Pre-Tax Income ROE Calculation by Quarter In $M Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 I Reported Net Income (Loss) 10 37 (80) (40) 15 8 (47) II Notable Items 47 40 (83) (44) (6) (0) (56) III Income Tax Benefit (Expense) 1 4 (1) (2) (1) (1) (2) IV Adjusted Pre-tax Income (Loss) (38) (7)
Slide 30: Adjusted Pre-Tax Income ROE Calculation by Full Year
Adjusted Pre-Tax Income ROE Calculation by Full Year In $M FY’21 FY’22 FY’23 I Reported Net Income (Loss) 18 26 (64) II Notable Items (64) 94 (107) III Income Tax Benefit (Expense) 22 1 (6) IV Adjusted Pre-tax Income (Loss) 59 (70) 49 [ I – II – III ] Equity A Beginning Period Equity 415 477 457 C E
Slide 31: Adjusted Pre-tax Income (Loss) and Weighted Average Shares Outstanding
Adjusted Pre-tax Income (Loss) and Weighted Average Shares Outstanding In $M Q4’22 Q3’23 Q4’23 FY’22 FY’23 I Reported Net Income (Loss) (80) 8 (47) 26 (64) II Notable Items (83) (0) (56) 94 (107) III Income Tax Benefit (Expense) (1) (1) (2) 1 (6) IV Adjusted Pre-tax Income (Loss) [ I – II – III ] 4.
Slide 32: Fully Diluted Share and Equity Data
Fully Diluted Share and Equity Data(a) as of 12/31/23 Equity in $M Shares I. Basic Equity and Outstanding Shares $401.8 7,684,401 II. Awards & Options $0.5 798,484 III. Diluted Equity and Shares [ I + II ] $402.3 8,482,885 IV. Warrants(b) $38.1 1,446,016 V. Fully Diluted Equity and Shares [ III + IV
Slide 33: MSR Valuation Assumptions – Forward Owned MSRs
MSR Valuation Assumptions – Forward Owned MSRs as of 12/31/2022 as of 9/30/2023 as of 12/31/2023 ($ in M) FN/ FH FHA/ VA Non-Agency Total Retained FN/ FH FHA/ VA Non-Agency Total Retained FN/ FH FHA/ VA Non-Agency Total Retained UPB 98,376 12,944 14,869 126,189 88,738 16,829 13,832 119,398 90,263 18
Slide 34: End Notes
End Notes SLIDE 3 SLIDE 7 SLIDE 10 cont’d a) See slide 9 for cost structure comparison to peers over twice our size a) MSR capital partners are third parties to which we sell MSR or ESS, d) MSR Valuation Adjustments that are due to changes in market interest b) Servicer awards include HUD Tier 1 ran
Slide 35: End Notes
End Notes SLIDE 13 cont’d SLIDE 16 cont’d SLIDE 18 cont’d d) Operating expenses include overhead allocation; beginning in Q4’23, c) Closing share price at one business day after quarter’s earnings release e) Servicer awards include HUD Tier 1 ranking for 3 consecutive years Servicing segment include
Slide 36: End Notes
End Notes SLIDE 25 cont’d SLIDE 26 cont’d SLIDE 33 c) Beginning with the three months ended March 31, 2023, for purposes of b) The changes in fair value due to market interest rates were measured a) 3rd party broker assumptions calculating Income Statement Notables and Adjusted Pre-Tax Income, by is
Slide 37: Abbreviations
Abbreviations • Adj: Adjusted (GAAP, net of notables) • GAAP: Generally Accepted Accounting Principles • Orig: Mortgage Originations Business Segment • B2B: Business-to-Business (incl CL and Co-Issue) • Ginnie (Mae): Government National Mortgage Association • Perf: Performing Loan • bps: Basis Point