Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — 2010 Global Financial Services Conference
38 slides from Onity's conference presentation, Sep 14, 2010
Slide 1: 2010 Global Financial Services Conference
Exhibit 99.1 2010 Global Financial Services Conference September 14, 2010
Slide 2: Forward-looking statements
Forward - looking statements Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved or whether such performance or results will ever be
Slide 3: Presenters
Presenters Ronald M. Faris President 19 years at Ocwen 24 years of industry experience § Ocwen: President since 2001, Executive Vice President from 1998 to 2001, Vice President and Chief Accounting Officer from 1995 to 1997 § 1991 to 1994: Controller for a subsidiary of Ocwen § 1986 to 1991: Vice Pr
Slide 4: Presenters (continued)
§ 1989 to 2007: Various executive positions in BellSouth Corporation including Chief Financial Officer of four business units § 1987 to 1989: Auditor, Deloitte & Touche LLP. § BBA in Accounting, Emory University and Master of Business Administration, The University of Texas at Austin
Slide 5: Agenda
Agenda Ocwen Business Overview and HomEq Status HomEq Transaction and Senior Secured Term Loan Revenue Analysis and Ramp for New Portfolios Key Investment Highlights Questions and Answers
Slide 6: Ocwen Business Overview and HomEq Status
Ocwen Business Overview and HomEq Status
Slide 7: Who we are and what we do
Who we are and what we do § Leading provider of residential and commercial mortgage loan servicing and special servicing Ø Publicly traded (NYSE: OCN), pure play mortgage servicer Ø 20+ years of innovation in loss mitigation § #1 servicer in every study of which we are aware and lowest re-default ra
Slide 8: Mortgage servicing overview
Mortgage servicing overview § Residential mortgage loan servicing primarily involves: Ø Collection and transfer of mortgage payments from borrowers Ø Cash management and escrow account responsibilities Ø Mitigation of losses through loan modifications, short sales and other options Ø Administration
Slide 9: Why are servicer advances truly AAA?
Why are servicer advances truly AAA? § When there exists a deficiency in monthly collections due to delinquent borrowers, servicers will “advance” payments to the RMBS trust for third party loan owners. These payments include: Ø Principal and interest Ø Taxes and insurance Ø Property protection and
Slide 10: Superior servicing and loss mitigation capabilities
Superior servicing and loss mitigation capabilities Ocwen cures more loans and generates more cash 12 Month Total Cure & Cash Flowing Rate for Subprime Loans (Net of Bankruptcies) Ocwen 61% Moody’s “Strong” Rated Servicers 59% Assessment “Above Average” Rated Servicers 52% “Average” Rated Servicers
Slide 11: Proven ability to make loans current and enhance cash collectibility
Proven ability to make loans current and enhance cash collectibility Monthly payment velocity of 90+ DQ for 2006 vintage subprime loans Ocwen leads the industry in making 90+ days delinquent loans current _________________________________ Source: Credit Suisse 2008.
Slide 12: Proven ability to make loans current and enhance cash collectibility
Proven ability to make loans current and enhance cash collectibility Roll rate from 90+ days delinquent to current subprime fixed rate Roll rate from 90+ days delinquent to current subprime adjustable rate Ocwen leads the industry in making 90+ days delinquent loans current _________________________
Slide 13: Leading Loss Mitigation Techniques
Leading Loss Mitigation Techniques Recovery Score § A measurement of the present value of recovered cashflow. § Higher Recovery Scores result from increasing the principal recovery or decreasing resolution time for the property disposition. Rank Servicer % SS SS severity SS TL REO severity REO TL Re
Slide 14: Top quality ranking relative to subprime servicer peers
§ Ocwen’s ability to keep loans current, modify troubled loans and effectively manage one of the largest portfolios, contributes to the Company’s top quality ranking relative to its subprime servicer peers. Quality Always Always Cur Balance Rank Cur 60+ to 30 Roll Modded # of Loans ($bn) Ocwen 1 30%
Slide 15: Long-term track record of growth
Long-term track record of growth Ocwen began purchasing non-performing loans in 1992 and has serviced subprime loans since 1996 Track record of growing the business over an extended time period Growth opportunities § Freddie Mac special servicing Ø $6 billion+ boarded in the past 18 months Ø Expect
Slide 16: Business withstands multiple economic cycles
§ Government Agency Ocwen’s business has demonstrated an ability to withstand multiple economic cycles due to Recently awarded REO and subservicing stable assets, recurring revenues, self hedging operating model and low leverage _________________________________ 1. Reflects $6.9 billion in Saxon UPB
Slide 17: HomEq transition status
HomEq transition status Loan Transfer § Simultaneous closing and transfer of 134,000 loans took place on 9/1/10 Ø Immediate boarding onto Ocwen’s system eliminated the need for systems integration between HomEq and Ocwen and provided immediate control over the operation Ø Images of active loan files
Slide 18: Slide 18
Slide 19: HomEq transition status: Technology
HomEq transition status Technology § Technology plan was designed to support the full immediate transition of the HomEq portfolio Ø Scaled hardware, storage and licenses as needed Ø Added data / telecom links to Sacramento and Raleigh and configured dialer and call recording equipment Ø Software is
Slide 20: HomEq Transaction and Senior Secured Term Loan
HomEq Transaction and Senior Secured Term Loan
Slide 21: HomEq transaction overview
HomEq transaction overview Transaction Overview & Rationale § Ocwen acquired the servicing portfolio and assets of HomEq Servicing from Barclays on 9/1/2010 for $1.3 billion Ø Deal priced to provide pre-tax ROE of greater than 25% Ø Transaction is highly accretive § The acquired portfolio has $22.4
Slide 22: Senior Secured Term Loan - Transaction terms
Senior Secured Term Loan - Transaction terms Summary Terms and Conditions Issuer: Ocwen Financial Corporation (“Ocwen” or the “Company”) Issue: $350 million Senior Secured Term Loan (the “Term Loan”) $300 million accordion subject to covenants and other conditions Guarantor: Ocwen Financial Corporat
Slide 23: Use of Proceeds and Financial Covenants
50% Excess Cash Flow Use of Proceeds: General corporate purposes including acquisition financing Maximum Corporate Debt (includes recourse and MSR debt) to EBITDA Ratio Maximum Total Debt to Tangible Net Worth Ratio Financial Covenants: Minimum Interest Coverage Ratio Maximum LTV Ratio
Slide 24: HomEq Transaction Overview and Status
HomEq Transaction Overview and Status
Slide 25: Estimated purchase price allocation for HomEq
Estimated purchase price allocation for HomEq Balance sheet accounts Mortgage servicing rights $83.5 Match funded advances $1,095.5 Premises and equipment, net $14.3 Other assets $0.6 Intangibles, including goodwill $11.7 Other liabilities ($8.9) Total purchase price $1,196.7 Match funded liabilitie
Slide 26: Purchase price allocation notes
§ Book value for other assets and liabilities § Intangibles, goodwill make up the difference _________________________________ 1. Excludes miscellaneous fees paid at close.
Slide 27: Revenue Analysis and Ramp for New Portfolios
Revenue Analysis and Ramp for New Portfolios
Slide 28: Splitting revenue between Servicing and Subservicing reveals different trends
Splitting revenue between Servicing and Subservicing reveals different trends Servicing revenue yield dipped in Q2 after two elevated quarters Subservicing revenue yield has adjusted based on contract mix (bps of average UPB) 2009 2010 Q2 Q3 Q4 Q1 Q2 UPB Data ($ mm’s) Average UPB $39,627 $39,419 $43
Slide 29: Servicing fee bps expected to increase in Q3
§ Servicing fee bps are expected to increase in Q3 due to the Saxon ramp and crediting of Saxon HAMP fees for performing modifications § For Subservicing, Q2 revenues declined due to changing contract mix § Deals with reimbursement of advances have lower fees
Slide 30: Update on the Saxon portfolio revenue ramp
Update on the Saxon portfolio revenue ramp Servicing fees and other revenue have increased since Q2 Contractual annual servicing fee All Other Revenue includes late fees, HAMP revenue, and REO revenue § Saxon servicing fees were low in April and May as each was a partial month and servicing fees are
Slide 31: Advance ratios on acquired servicing portfolios
Advance ratios on acquired servicing portfolios Generally similar characteristics with differing levels of advances as a % of UPB _________________________________ (1) Excludes UPB of servicing agreements where Ocwen is not responsible for making advances. (2) Historical data prior to acquisition is
Slide 32: Key Investment Highlights
Key Investment Highlights 2010 Global Financial Services Conference Proprietary & Confidential 24 O
Slide 33: Key investment highlights
Key investment highlights Stable business model with recurring revenue streams § Contractually established servicing fees § Consistent profitability throughout the credit crisis § Attractive returns on acquisitions Substantial cash flow generation § Expect to generate substantial free cash flow to d
Slide 34: Key investment highlights (continued)
§ Duration matched liabilities and hedged against LIBOR increases § Maintain over $750 million of excess advance funding capacity Strong collateral protection § Investment grade quality collateral of $1.1 billion exceeds the secured term loan by 3.1:1 Over two decades of servicing led by an experien
Slide 35: Principal reduction modifications target portfolio segments with the highest advances
Principal reduction modifications target portfolio segments with the highest advances Distribution of 1st Liens by FICO and LTV LTV < 70 LTV 70 to 100 LTV > = 100 FICO Portfolio: 6.3% Portfolio: 13.0% Portfolio: 5.0% >= Avg. Days Delq: 2 Avg. Days Delq: 15 Avg. Days Delq: 110 650 Contractual 90+: 2%
Slide 36: Distribution of Advances
MODs Re-default: MODs Re-default: MODs Re-default: 22% 22% 37% REO: 1% REO: 3% REO: 8% Advances: $79mn Advances: $364mn Advances: $522mn (4%) (19%) (27%) Distribution of Advances § 54% of Advances are for loans with an LTV > 100%. § These loans will benefit from new HAMP incentives for principal red
Slide 37: Growing demand for high-touch servicers in $11 trillion industry
Growing demand for high-touch servicers in $11 trillion industry § $10.7 trillion in residential mortgages outstanding as of March 31, 2010 Ø $1.6 trillion of delinquent loans § Every loan needs a servicer Ø Top five banks service 60% of total loans, but focused on prime and subprime loans Ø Growing
Slide 38: Questions and Answers
Questions and Answers 2010 Global Financial Services Conference Proprietary & Corfdectiat 28 oO
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