Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Investor Day (December 2013)
134 slides from Onity's investor day presentation, Dec 3, 2013
Slide 1: Investor Day Presentation December 3-4, 2013
Investor Day Presentation December 3-4, 2013
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains certain forward-looking statements that are made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminol
Slide 3: Investment Philosophy
Investment Philosophy Leverage core operating principles to create sustainable competitive advantage Identify secular trends Identify markets that are aligned with secular trends and core operating principles 2
Slide 4: Agenda / Core Operating Principles
Agenda 1. Core Operating Principles 2. Secular Trends 3. Strategic Allies Positioned for New Landscape 3 Core Operating Principles 1 Altisource was established to capture revenue which was difficult to keep within Ocwen Capture Adjacent Revenue RESI capitalized on increased demand for single family
Slide 5: Lower Cost of Capital and Efficient Tax Structure
Lower cost of capital by providing transparency to cash flows Lower Cost of Capital or follow Capital Light Accretion model to create value for shareholders by issuing less shares than visible demand Strategy Avoid lower cost of capital competitors , e.g., banks 4 Efficient Tax Structure Global effe
Slide 6: Lower Cost of Capital/Accretion Model
Lower Cost of Capital/Accretion Model o Accretion is most powerful for companies that have the following characteristics A. Target asset class is very large and offers returns well in excess of the anticipated dividend clearing yield B. Stable cash flows with long duration o Ability to issue accreti
Slide 7: Creation of Strategic Allies
Creation of Strategic Allies Positive Effects of Creating Strategic Allies Outweigh Negative Effects Pros Transparent cash flows that meet the needs of specific investor groups Capture revenue that might not otherwise be retained Focused management incentives Lower taxes Cons Increased costs associa
Slide 8: Strategic Allies - Sound Corporate Governance
Strategic Allies - Sound Corporate Governance Strategic Allies have sound Corporate Governance Sound Corporate Governance with separate Boards and separate management Robust Related Party Transaction Approval Policies Transparency in inter company relationships through public company disclosures 7
Slide 9: Agenda
Agenda 1. Core Operating Principles 2. Secular Trends 3. Strategic Allies Positioned for New Landscape 8
Slide 10: Secular Trends
Secular Trends Secular Trends Reduction in population Government plans to Large banks narrow focus that can qualify as prime reduce exposure to to core customers borrower Mortgage Credit Risk Leverage competitive advantages of Strategic Allies to create opportunities 9
Slide 11: Trend 1: Banks Narrow Focus to Core Customers
Trend 1: Banks Narrow Focus to Core Customers Banks Returning to Core Customers Shift of MSR Portfolios from Repositioning Mortgage Reducing Exposure to Other Banks to Specialty Servicers Origination Nonprime Lending Markets 1 1 Exiting correspondent and More than $500 billion of servicing UPB Auto
Slide 12: Trend 2: Decline of Prime Market - Qualified Mortgage
Trend 2: Decline of Prime Market - Qualified Mortgage Impact of QM on Credit Supply Credit supply to US consumers is restricted due to Tighter underwriting standards and Declining credit worthiness of borrowers Newly enacted Qualified Mortgage (QM) rules expected to severely limit mortgage availabil
Slide 13: Trend 3: Government Reducing Exposure to Mortgage Domain
1. The Market Pulse Core Logic. Vol. 2 Issue 2 Feb 2013. Study applied QM & QRM rules to 2010 originations market (did not include 3% cap on fees and ignored 7-year GSE exemption) 2. US Census Bureau Data 3. Hypothetical illustration that is indicative of expected trends Trend 3: Government Reducing
Slide 14: Agenda
1. Credit Suisse 2. Based on a $200,000 loan 3. FHFA, July 16, 2013 Agenda 1. Core Operating Principles 2. Secular Trends 3. Strategic Allies Positioned for New Landscape 13
Slide 15: Altisource Residential (RESI)
Altisource Residential (RESI) Vision o Capture growing demand for single family rental housing by purchasing Non Performing Loans Strategy o Buy property cheaper than competitors through purchase of Non Performing Loans o Operate property less expensively than competition with contracts from Strateg
Slide 16: Altisource Asset Management (AAMC)
Altisource Asset Management (AAMC) Vision o Multi Strategy Asset Manager, relying on core operating infrastructure of Strategic Allies to develop competitive advantage o Manage asset management vehicles focused on large and scalable asset class Strategy o Provide asset management services to RESI an
Slide 17: Home Loan Servicing Solutions (HLSS)
Home Loan Servicing Solutions (HLSS) Vision o Leading source of financing for mortgage assets with low credit and valuation risk o Growing business with a positive alpha and visibility to reinvestment Strategy o Replenish non-agency assets by purchasing similar assets from Ocwen o Establish Cayman I
Slide 18: Altisource Portfolio Solutions (ASPS)
Altisource Portfolio Solutions (ASPS) Vision o To be the premier real estate and mortgage marketplace offering both content and distribution to marketplace participants Strategy o Expand Hubzu® to other institutions and the non-distressed home sale market o Grow origination related services through
Slide 19: Ocwen Financial Corporation (OCN)
Ocwen Financial Corporation (OCN) Vision o Leading provider of servicing and lending for loan investors and consumers Strategy o Focus on acquiring servicing UPB - $one trillion of servicing UPB estimated to transact in next few years o Develop Mortgage Origination business particularly in non-agenc
Slide 20: Ocwen Financial Corporation Strategy
Ocwen Financial Corporation (OCN) Strategy o Explore opportunities [organic or inorganic] in adjacent markets A. Insurance Domain o Evaluating opportunities within insurance domain which are more operationally intensive and have very low risk exposure o Insurance segments like Title Insurance and Wa
Slide 21: Competitive Advantage
Competitive Advantage Identify Secular Trends and Leverage Core Operating Principles Capture Adjacent Revenue Assume Improve Operational Quality and Risk, Lower OpEx selective through Credit Risk S Technology and little to tr a and Global no Interest t e Resources Rate Risk g i c A lli e s Lower Cos
Slide 22: Investor/Analyst Day Presentation December 2013
Investor/Analyst Day Presentation December 2013 Steve Grundleger, Senior Vice President, RMBS Relations Ocwen Financial Corporation © 2013 Ocwen Financial Corporation. All rights reserved.
Slide 23: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS: Our presentation contains certain forward-looking statements that are made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminol
Slide 24: Performance - Lower Losses For Investors
Performance - Lower Losses For Investors .. Independent third party studies show that Ocwen cures more delinquent loans and keeps more borrowers current than anyone in the industry (July 2009) (May 2010) (June 2010) Ocwen had the highest roll rate from Ocwen was ranked first in a measure Ocwen was r
Slide 25: Leader in Pre-foreclosure Resolutions through Sustainable Modifications
Leader in pre-foreclosure resolutions through sustainable modifications Ocwen maximizes NPV for investors by Modification acceptance rates are very high keeping borrowers in their homes for all modification types 2013 2013 (9 (9 Modification Type 2012 Months) % of Resolutions 2011 2012 Months) HAMP
Slide 26: Effective at Driving Down Delinquencies
Performance - Effective at Driving Down Delinquencies Delinquency Percentage (90+ Days) by Portfolio(1) 46% 41% 36% 31% 26% 21% 16% Legacy Ocwen Saxon HomEq Litton Saxon New Chase Homeward 1) Excludes loans on the ResCap platform 5 Source: Ocwen Loan Servicing; servicing portfolio
Slide 27: Comparison to Other Large Subprime Servicers
Performance - Comparison to Other Large Subprime Servicers Total Modification Rate Re-Default Rate 65% Modifications outstanding as a percent 60% Modification re-defaults (more than 60-of portfolio for subprime securities days past-due) outstanding as a percent of September 2013 portfolio for subpri
Slide 28: Best in Class Payment Velocity
Best in Class Payment Velocity Percentage of loans in subprime PLS that have made 10 or more payments in the past 12 months 70.00% Ocwen Non-Ocwen 60.00% Ocwen consistently outperforms the other subprime servicers as shown by the higher percentage of cash- 50.00% flowing payments for all loans 40.00
Slide 29: Modification Product Type
Modification Product Type 100% 90% 80% 70% FM STANDARD 60% NON-HAMP 50% SAM 40% HAMP T2 30% HAMP T1 20% 10% 0% Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 For the second quarter, the modification percentage for HAMP, SAM and NON-HAMP was 43%, 16% and 41
Slide 30: Ocwen's Shared Appreciation Model
Ocwen's Shared Appreciation Model A Win-Win for All Principal Mods consistently resulted in ..This holds true across FICO segments lower Redefault rates The key issue of Moral Hazard/Strategic Default in principal reductions is best addressed through the shared appreciation model "The second and mor
Slide 31: Effective at Improving Modification Re-Default Rates
Effective at Improving Modification Re-Default Rates 10.0% 30.0% 9.0% 3-month Re-Default 6-month Re-Default 25.0% 8.0% HAMP MODS HAMP MODS 7.0% Non-HAMP MODS Non-HAMP MODS 20.0% 6.0% SAM MODS SAM MODS 5.0% 15.0% 4.0% 10.0% 3.0% 2.0% 5.0% 1.0% 0.0% 0.0% 2008 2009 2010 2011 2012 2013 2008 2009 2010 20
Slide 32: HAMP Vintage Re-Default Rates
HAMP Vintage Re-Default Rates by Delinquency Bucket at Time of Modification 2011 Vintage HAMP Re-Default 2012 Vintage HAMP Re-Default Rates by Delinquency Rates by Delinquency 35.00% 12.00% 30.00% 10.00% 25.00% 8.00% 20.00% 6.00% 15.00% 4.00% 10.00% 2.00% 5.00% 0.00% 0.00% 1 Month 3 Month 6 Month 9
Slide 33: SAM Vintage Re-Default Rates
SAM Vintage Re-Default Rates by Delinquency Bucket at Time of Modification 2011 Vintage SAM Re-Default 2012 Vintage SAM Re-Default Rates by Delinquency Rates by Delinquency 40.00% 30.00% 35.00% 25.00% 30.00% 20.00% 25.00% 20.00% 15.00% 15.00% 10.00% 10.00% 5.00% 5.00% 0.00% 0.00% 1 Month 3 Month 6 M
Slide 34: Non-HAMP Vintage Re-Default Rates
Non-HAMP Vintage Re-Default Rates by Delinquency Bucket at Time of Modification 2011 Vintage Non-HAMP Re- 2012 Vintage Non-HAMP Re-Default Rates by Delinquency Default Rates by Delinquency 50.00% 35.00% 45.00% 30.00% 40.00% 35.00% 25.00% 30.00% 20.00% 25.00% 15.00% 20.00% 15.00% 10.00% 10.00% 5.00%
Slide 35: Outstanding Subprime Modifications Ocwen vs. Non-Ocwen
Outstanding Subprime Modifications Ocwen vs. Non-Ocwen Percentage Amount of Non-Ocwen Mods Percentage Amount of Ocwen Mods 60.00% 60.00% Total Mods 50.00% Balance Reduction Mods 50.00% Capitalization Mods Rate Mods 40.00% 40.00% Total Mods 30.00% Balance Reduction Mods 30.00% Capitalization Mods Ocw
Slide 36: Outstanding Subprime Modifications and Redefault Rates
Outstanding Subprime Modifications Ocwen Versus Non-Ocwen % Mods Outstanding and Redefault Rates 65.00% Ocwen % Mods 60.00% Outstanding, 58.56% 55.00% Non-Ocwen % Mods 50.00% Outstanding, 48.61% 45.00% 40.00% 35.00% Non-Ocwen Mod ReDefault 30.00% %, 33.87% 25.00% Ocwen Mod ReDefault %, Ocwen has mor
Slide 37: Subprime DQ to Foreclosure Timeline
Subprime DQ to Foreclosure Timeline Ocwen vs. Non Ocwen Months 5 10 15 20 25 30 35 Jan-11 Feb-11 Logic Mar-11 Apr-11 May-11 Jun-11 Ocwen Jul-11 Aug-11 Non-Ocwen Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13
Slide 38: Subprime Foreclosure to REO Timeline
Subprime Foreclosure to REO Timeline Ocwen vs. Non Ocwen Aug-13 Sep-13 Subprime DQ to Foreclosure Timeline Ocwen vs. Non Ocwen Oct-13 Months 5 7 9 11 13 15 17 19 21 23 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Ocwen Oct-11 Nov-11 Non-Ocwen Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-
Slide 39: Ocwen-Managed REO Assets Less Aged
Ocwen-Managed REO Assets from FC sales Less Aged than REO Assets Transferred from Other Servicers Sep-13 Oct-13 Subprime Foreclosure to REO Timeline Ocwen vs. Non Ocwen Ocwen-Managed REO Assets from FC sales Less Aged than REO Assets Transferred from Other Servicers Comparison of Ocwen-Managed FC Sa
Slide 40: Subprime DQ to Liquidation Timeline
Subprime DQ to Liquidation Timeline Ocwen vs. Non Ocwen Months 15 20 25 30 35 40 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Ocwen Aug-11 Non-Ocwen Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 substantial amounts of REO with highly age
Slide 41: Investor/Analyst Day Presentation - John V. Britti, CFO
Investor/Analyst Day Presentation December 2013 John V. Britti, Executive Vice President and Chief Financial Officer Ocwen Financial Corporation © 2013 Ocwen Financial Corporation. All rights reserved.
Slide 42: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Our presentation contains certain forward-looking statements that are made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminolo
Slide 43: Investment Highlights: Best in Class Servicer
Investment Highlights: "Best in Class" Servicer with Unique Advantages Leading provider of residential and commercial mortgage loan servicing and residential mortgage lending 20+ years of innovation in loss mitigation #1 in servicing quality in third-party studies Recently ranked as best among servi
Slide 44: Investment Highlights: Strong Cash-flows and Growth
Investment Highlights: Strong Cash-flows and Substantial Prospects for Growth Strong cash-flows and under-levered balance sheet provides ability to fund future growth and increase returns on equity Existing book with modest cash reinvestment rate and improving economy generates over $10 billion of p
Slide 45: The Ocwen Advantage: Highly Scalable Platform with Lowest Operating Cost
The Ocwen Advantage: Highly Scalable Platform with Lowest Operating Cost Cost per non-performing loan1 Lowest operating cost for non- $875 performing mortgage servicing 70% cost Over a decade of experience with advantage world-wide operations Superior performance lowering $269 delinquencies provides
Slide 46: Low-cost, Scalable Servicing Platform and Technology
Low-cost, Scalable Servicing Platform and Technology that Helps Keep Borrowers in their Homes Proprietary servicing system developed over 20+ years at a cost of over $150 million Utilizes advanced optimization algorithms to reduce variability and losses by evaluating loan resolution alternatives Rat
Slide 47: More Modifications with Lower Re-Default Rates
The Ocwen Advantage: More Modifications with Lower Re-Default Rates Comparison of Modification and Re-Default Rates for Subprime Securities 65.0% Ocwen Mods Outstanding, 58.75% 60.0% Modifications outstanding as a percent of portfolio for subprime securities 55.0% Non-Ocwen Mods 50.0% Outstanding, 4
Slide 48: Ocwen Comparison To Other Large Subprime Servicers
Performance - Ocwen Comparison To Other Large Subprime Servicers Total Modification Rate Re-Default Rate 65% Modifications outstanding as a percent of 60% Modification re-defaults (more than 60-portfolio for subprime securities days past-due) outstanding as a percent September 2013 of portfolio for
Slide 49: Unique Track-record of Successful Large Acquisitions
The Ocwen Advantage: Unique Track-record of Successful Large Acquisitions Scalable technology allows for efficient boarding of large portfolios Number of Approx. Days from Contract to Date Portfolio loans Close and Transfer(1) 3Q2009 Freddie Mac - TBW DQ Loan Subservicing 24,000 11 days 4Q2009 Undis
Slide 50: Track-record: Delinquency Percentage by Portfolio
The Ocwen Advantage: Unique Track-record of Successful Large Acquisitions Delinquency Percentage (90+ Days) by Portfolio(1) 46% 41% 36% 31% 26% 21% 16% Legacy Ocwen Saxon HomEq Litton Saxon New Chase Homeward 1) Excludes loans on the ResCap platform 10
Slide 51: Strong Forecasted Cash-flows
Strong Forecasted Cash-flows, Especially With An Improving Economy Present Value(1) of 20-year Adjusted Cash Flow from Operations (2 and 3) $18.0 Billions of Dollars $15.9 $16.0 $14.0 $12.0 $10.3 $10.0 $8.0 $7.0 $6.0 $4.0 $2.0 $- Scenario 1 Scenario 2 Scenario 3 Scenario 1 : Base case - No UPB growt
Slide 52: LOCOM Accounting and Embedded Value in MSRs
Balance Sheet: LOCOM Accounting and Superior Productivity Creates Embedded Value in MSRs Our industry-lowest cost to service creates incremental value embedded in our MSRs $4,000 Millions of Dollars (as of end of Q3 2013) $3,382 $3,500 $3,000 $863 $2,519 $2,500 $1,834 $685 $685 $2,000 $1,500 $1,000
Slide 53: Ocwen Substantially Under-Levered Compared to Peers
Balance Sheet: Ocwen Substantially Under-Levered Compared to Peers 1) Comparison based on last reported data, as on 30th September 2013 2) Adjustment to Ocwen reported numbers consists of fair value adjustment of $685 million on MSRs and 50% of deferred servicing fees (total of $501 million) as of S
Slide 54: Debt-Financed Growth and Stock Repurchases Increasing ROE
Additional Debt-Financed Growth and Stock Repurchases Should Continue Increasing ROE Trend 40.0% Annualized Return on Equity 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Q2 2010Q3 2010Q4 2010Q1 2011Q2 2011Q3 2011Q4 2011Q1 2012Q2 2012Q3 2012Q4 2012Q1 2013Q2 2013Q3 2013 -5.0% -10.0% RoE (Net Income a
Slide 55: Prime MSR Vehicle and Stock Repurchase Update
Prime MSR Vehicle and Stock Repurchase Update Prime MSR Funding Vehicle Substantial progress toward launching debt-offering funded from a portion of prime MSR cash-flows Would assure duration match and reduce prepayment exposure Also supports prime lending growth and future acquisitions Stock Repurc
Slide 56: A Track Record of Growth Since 2000
A Track Record of Growth Since 2000 Historical Growth in UPB End of Period UPB in Billions of Dollars $484 $204 $74 $43 $11 2000 2005 2010 2012 Q3 2013* 16 * Q3 2013 pro-forma estimate; includes estimates for One West and Green Point acquisitions as if completed
Slide 57: Multiple Sources of Growth
Multiple Sources of Growth Beyond 5 years 5 years Long-term opportunities Built-in Earnings tail divestiture 2013 - 2014 and servicer o Prime expansion acquisitions o Non-prime re-emergence o $400 billion potential pipeline1 New Acquisitions o Reverse Mortgages o Over $1 trillion opportunity2 o Othe
Slide 58: Strong Pipeline
Strong Pipeline Strong Pipeline of opportunities Current pipeline of $400 billion of UPB of specifically identified opportunities that we may close over next 12 to 18 months Based on history, Company expects to win its fair share over time Bank Divestiture Still in the "middle-innings" of the melt-d
Slide 59: Embedded Growth: Long Tail to Earnings
Embedded Growth: Long "Tail" to Existing Book's Earnings Normalized Pre-Tax Profit1 Across Multiple Deals Forecasts Year 1 indexed to 100 180 153 160 139 140 120 100 99 100 71 80 60 40 20 0 Year 1 Year 2 Year 3 Year 4 Year 5 19 1) Normalized Pre-tax profit excludes transition-related expenses that t
Slide 60: Embedded Growth: Stronger Economy Supports Profitability
Embedded Growth: A Stronger Economy Would Support Improved Profitability US Unemployment Rate(1) 10.0% Lower delinquency and re-default 9.0% 9.0% rates 7.8% 8.0% 7.2% Lower involuntary prepayments that 7.0% account for most non-prime CPR 6.0% 5.0% Higher interest rates - 10 year swap 4.0% rate is up
Slide 61: Long-term: Multiple Opportunities for Growth
Long-term: Multiple Opportunities for Growth Prime expansion Acquisition of Homeward Residential added origination platform in 2013 Lending segment expected to contribute $18 to 22 million to pre-tax income in the fourth quarter Acquisition of ResCap provided a top prime loan servicing platform Non-
Slide 62: Recent Transactions Update
Recent Transactions Update ResCap Progressing as planned Significant portion of private label securities moved from legacy ResCap platform to Ocwen's platform GSE loans began moving in November All loans expected to be moved to Ocwen platform by first half of 2014 One West Fannie Mae and Freddie Mac
Slide 63: Investment Highlights
Investment Highlights Leading provider of residential and commercial mortgage loan servicing Low cost, scalable servicing platform and technology that outperforms the industry by helping families stay in their homes Under-levered balance sheet and strong cash-flow generation from existing business t
Slide 64: Appendix
Appendix Management Team Mortgage servicing 101 High quality asset nature of advances Portfolio summary Normalized pre-tax income Historical performance - quarterly and annual Historical cash flow data and adjusted cash flow from operations reconciliation Historical performance - normalized return o
Slide 65: Experienced Management Team
Experienced Management Team William C. Erbey, Executive Chairman With Ocwen and predecessors since 1983; Chairman of the Board of Directors since September 1996 1975 to 1983, General Electric Capital Corporation, last position as President & COO of General Electric Mortgage Insurance Corporation Ron
Slide 66: Mortgage Servicing
Mortgage Servicing 101 Residential mortgage loan servicing primarily involves: Collection and transfer of mortgage payments from Borrower Borrower Borrower Borrower borrowers Borrower Borrower Borrower Cash management and escrow account responsibilities Mitigation of losses through loan modification
Slide 67: Advances are High Quality Assets
Advances are High Quality Assets OCN advance collateral coverage 6/30/13 Advances self-liquidate at par $3.4 Billion ~1.1% Advances have the right to be repaid at "top-of- Advance Servicer the-waterfall," i.e. they are paid before any other Advances Rate payments to the trust $319.3 Billion (Propert
Slide 68: Portfolio Summary, 3Q 2013
Portfolio Summary, 3Q 2013 End of Period Servicing Portfolio in Billions of Dollars of UPB(1) Total $ 433.8 Fannie/Freddie $166.1 Non Agency $222.2 Ginnie Mae $45.5 1) Does not include approximately one billion of reverse mortgage UPB 28 2) Non agency include 114,201 prime loans with a UPB of $33.7
Slide 69: Pro-forma Portfolio Summary, 3Q 2013
Pro-forma Portfolio Summary, 3Q 2013 End of Period Servicing Portfolio in Billions of Dollars of UPB (1) (2) Total $ 483.8 Fannie/Freddie $166.3 Non Agency $272.0 Ginnie Mae $45.5 1) Pro-forma portfolio includes estimates for One West PLS portfolio and Green Point acquisitions 2) Does not include ap
Slide 70: Normalized Pre-Tax Income Growth
Normalized Pre-Tax Income Growth - Up 82% from Q3 2012 Normalized Pre-Tax Income Millions of Dollars Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Income before income taxes (GAAP) $80.7 $76.5 $51.3 $87.5 $76.3 Normalization Items: Transition Costs - 2.2 38.2 26.5 48.0 Funding Related - 1.5 17.0 - 17.9 Le
Slide 71: Q3 2013 Normalization: Income Statement Impact
Q3 2013 Normalization: Income Statement Impact Millions of Dollars Q4 2012 Q1 2013 Q2 2013 Q3 2013 Revenue Servicing and subservicing - $5.4 $2.2 $0.4 Process management fees - $9.6 - - Subtotal (A) - $15.0 $2.2 $0.4 Operating Expense Compensation and benefits - $29.0 $18.7 $31.8 Amortization of ser
Slide 72: Historical Performance - Quarterly
Historical Performance - Quarterly Total Revenue Net Income Millions of Dollars $530 $531 Millions of Dollars $77 $65 $67 $405 $51 $45 $233 $236 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Normalized Pre-tax Income Diluted EPS Millions of Dollars $165.9 Dollars pe
Slide 73: Historical Performance - Annual
Historical Performance - Annual Total Revenue $845 Net Income $181 Millions of Dollars Millions of Dollars $496 $360 $78 $38 2010 2011 2012 2010 2011 2012 Normalized Pre-tax Income Diluted EPS $1.31 $289.4 Millions of Dollars Dollars per share $188.8 $0.71 $122.4 $0.36 2010 2011 2012 2010 2011 2012
Slide 74: Strong Cash Flows that Lead Earnings
Strong Cash Flows that Lead Earnings $295 Millions of Dollars $266 $220 $1432 $77 $65 $67 $45 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Adjusted cash flow from operations* Net Income *. Adjusted cash flow from operations starts with net cash provided by operating activities on statement of cash flows and subt
Slide 75: Adjusted Cash Flow from Operations Calculation
Consolidated Statement of Cash Flows - Adjusted Cash Flow from Operations Calculation Q3 2013 Adjusted Cash Flow from Operations of $143 million Three Months Ended Thousands of Dollars Dec 31, 2012 Mar 31,2013 Jun 30, 2013 Sep 30, 2013 Net Cash Provided by Operating Activities (A) 381,703 401,941 47
Slide 76: Ocwen Generates More Cash-Flow to Mortgage Investors
Ocwen Generates More Cash-Flow to Mortgage Investors Ocwen outperforms other subprime servicers in generating cash-flow from borrowers 78% 76.3% Percentage of subprime PLS that have 76% made 10 or more payments in the past 74% 12 months - September 2013 Data 72% 70% 68% 66% 65.4% 64% 62% 60% 58% Ocw
Slide 77: Loan Modification History
Loan Modification History Ocwen continues strong performance in helping homeowners 400,000 35,000 Since 2009, Ocwen has completed over 370,000 32,051 350,000 30,000 300,000 25,000 250,000 20,000 200,000 15,000 150,000 Quarterly Modifications Cumulative Modifications 10,000 100,000 5,000 50,000 0 0 C
Slide 78: Leader in Pre-foreclosure Resolutions through Sustainable Modifications
Performance Leader in Pre-foreclosure Resolutions through Sustainable Modifications Ocwen maximizes NPV for investors by Modification acceptance rates are very high for keeping borrowers in their homes all modification types 2013 2013 % of Resolutions 2011 2012 (9 months) Modification Type 2012 (9 m
Slide 79: Historical Prepayment Rates for Prime Loans
Historical Prepayment Rates for Prime Loans Prime prepayments are more volatile 40% 35% 30% CPR 25% 20% 15% 10% 5% 0% Total Debt Pay Offs Regular Principal Amortization REO/CO/Other Involuntary 39 Note: Historical prepayments data, includes historical ResCap loans for the entire period
Slide 80: Historical Drivers of Non-Prime Prepayments
Historical Drivers of Non-Prime Prepayments Stable voluntary prepayments combined with declining delinquencies expected to drive down future prepayments 25% 20% CPR 15% 10% 5% 0% Total Debt Pay Offs Regular Principal Amortization REO/CO/Other Involuntary 40 Note: Historical Ocwen prepayments data, i
Slide 81: Strong Operations and Conservative Accounting
Strong Operations and Conservative Accounting Operations As advances are collected, it frees-up substantial cash In the first nine months of 2013, Ocwen collected $424 million in advances In the first nine months of 2013, Ocwen sold $3.49 billion in advances to HLSS Timing Differences Things we do n
Slide 82: Strong Balance Sheet with High Quality Assets
Strong Balance Sheet with High Quality Assets $ 1.8 billion of equity2 supported by high quality assets with low amount of recourse debt High quality assets (as reported 09/30/13) ($ in Millions) Assets 9/30/2013 % of Total The balance sheet has high quality / low risk assets. A Investment Grade Qua
Slide 83: Investor/Analyst Day Presentation - David Applegate, Lending
Investor/Analyst Day Presentation December 2013 David Applegate Executive Vice President of Lending © 2013 Ocwen Financial Corporation. All rights reserved.
Slide 84: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Our presentation contains certain forward-looking statements that are made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminolo
Slide 85: Lending Strategy - Overview
Lending Strategy- Overview Large Banks are contracting lending activity. GSE's and HUD are increasing fees and reducing access to credit. Implementation of Qualified Mortgage rules will further impact mortgage access. A significant growth opportunity exists to fill recently created and building shor
Slide 86: Lending Strategy - Overview
Lending Strategy- Overview Ocwen is well positioned for long-term lending growth. Low cost customer access through Lenders One and three million Ocwen clients Global work force to drive low and variable cost operations Ability to re-distribute assets/risks to maintain capital light business model Ab
Slide 87: Lending Strategy - Overview
Lending Strategy- Overview Develop a high servicing margin high volume forward lending operation volume. Correspondent Lending Client Select/Broker to Banker Direct Lending (Portfolio Retention) The reverse mortgage sector offers long term growth potential. Ocwen will make additional investments in
Slide 88: Key Components: Correspondent Lending
Lending Strategy-Key Components Correspondent Lending: Partner with Lenders One and Altisource to grow market share. Lenders One (11% of all originations) low cost customer sourcing opportunity. 60% of Ocwen's fulfillment needs, and growing, are provided by Altisource. Ocwen and Altisource offer a c
Slide 89: Key Components: Broker/Broker to Banker
Lending Strategy-Key Components Broker/Broker to Banker: Channel has been focused on traditional Wholesale; transitioning to non-delegated Correspondent and assisting large Brokers in the transformation to Mortgage Bankers. Work within Lenders One to develop a Co-op model for Brokers. Partner with A
Slide 90: Key Components: Direct Lending
Lending Strategy-Key Components Direct Lending: Expand capacity consistent with three million customer base Develop offering for Hubzu® REO buyers Deploy more sophisticated technology/web-services to improve lead conversion and retention: Take applications on the web Utilize dialogue engine technolo
Slide 91: Key Components: Liberty
Lending Strategy-Key Components Liberty: Strong Retail and Broker operations partnered with low cost and highly effective marketing presence are driving market share growth. Significant sector growth potential with 25 million households age, property and equity qualified: With ~ 600,000 reverse mort
Slide 92: Key Components: Capital Markets and Distribution
Lending Strategy-Key Components Capital Markets and Distribution: Warehouse financing to Bankers and Brokers (HLSS/Ocwen offering). Increased loan quality, pull through and fee opportunities. Full product offering to all channels. Prime products o GSE o FHA/Ginnie Mae o Jumbo Non-agency, QM Exempt p
Slide 93: Lending Strategy Key Components Flow
Lending Strategy-Key Components ASPS Financing Fulfillment Vehicle Ocwen Distribution Lenders One Origination Investor Desk Business Whole loan sold Warehouse Ocwen retains Financing servicing 11
Slide 94: YTD Lending Results
YTD Lending Results Lending Segment (including Lending Lending - Quarterly Results Network) has generated $20.8 million in ($s in millions) pre-tax income on $6.4 billion of funded loan production through the end of the third Q1 Q2 Q3 YTD Sept 2013 quarter 2013 Pre-tax income 5.0 10.1 5.7 20.8 Volum
Slide 95: YTD Lending Results - Forward Lending Volumes
YTD Lending Results Forward Lending Volumes 3,000 2,391 2,500 2,000 1,682 1,593 1,377 1,406 1,465 1,500 Volumes ($s in millions) 1,000 500 0 Q1 Q2 Q3 Funded Volume Lock Volume Funded Volume ($ in millions) Q1 Q2 Q3 YTD Direct 34 60 99 193 Broker 47 261 214 521 Correspondent 2,311 1,272 939 4,522 Net
Slide 96: Capitalizing on Competitive Advantages
Capitalizing on Competitive Advantages Ocwen's Lending transformation is gaining momentum: Ocwen's mix of business is shifting toward higher margin channels-Direct and Broker/Client Select. Capturing additional loan level revenue and improving business efficiency. Ocwen's Lending platform has multip
Slide 97: Investor/Analyst Day Presentation - Andrew Wein, Deputy General Counsel
Investor/Analyst Day Presentation December 2013 Andrew Wein, Deputy General Counsel Ocwen Financial Corporation © 2013 Ocwen Financial Corporation. All rights reserved.
Slide 98: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Our presentation contains certain forward-looking statements that are made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminolo
Slide 99: Regulatory Framework
Regulatory Framework Ocwen's Compliance Management System continually monitors and assesses our compliance with federal, state, and municipal laws and guidance. Such laws include, but are not limited to: Corporate Origination Servicing GSE/MHA o SEC o TILA o RESPA o FNMA o SOX o HOEPA o FDCPA o FHLM
Slide 100: Ocwen's Compliance Management System
Ocwen's Compliance Management System Elements of the Compliance Management System: Establishes its compliance Board Oversight (Reporting) responsibilities; Communicates those responsibilities to employees; Compliance Compliance Ensures that responsibilities for meeting & Audit Program (Monitoring) (
Slide 101: Compliance Management System: 3 Lines of Defense
Ocwen's Compliance Management System "3 Lines of Defense" Business Unit Risk o Contemporaneous in nature Management (identify, o Either internal to the business unit or alongside the business unit assess, manage and o Operates within established policies and identifies errors or weaknesses control o
Slide 102: Ocwen's Compliance Function
Ocwen's Compliance Function Board Oversight (Reporting) Compliance & Audit Committees Board Oversight Direct reporting line from Compliance (Reporting) Department to the Board Compliance Program (Assessing) Training materials and tests for Staff Compliance Compliance Documented policies and procedur
Slide 103: Industry Regulatory Compliance Matters: CFPB Servicing Rules
Industry Regulatory Compliance Matters o On January 10, 2014, the new CFPB rules for mortgage servicing will go into effect, amending RESPA and TILA o Nine Major Topics covered in the rules: (1) periodic billing statements; (2) interest-rate adjustment notices for ARMs; (3) prompt payment crediting
Slide 104: Industry Regulatory Compliance Matters: Consent Orders and Settlement
Industry Regulatory Compliance Matters o In April 2011, Federal Bank Regulators (OCC, OTS, FDIC and FRB) entered into Consent Orders relating to foreclosure practices of 14 mortgage servicers/banks and two third-party service providers o In February 2012, 49 state attorneys general and the federal O
Slide 105: Investor/Analyst Day Presentation - Ronald M. Faris, CEO
Investor/Analyst Day Presentation December 2013 Ronald M. Faris President and Chief Executive Officer Ocwen Financial Corporation © 2013 Ocwen Financial Corporation. All rights reserved.
Slide 106: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Our presentation contains certain forward-looking statements that are made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements may be identified by a reference to a future period or by the use of forward-looking terminolo
Slide 107: Customer Care Overview
Overview Highlights 20+ years of loss mitigation experience. Customer Care handles all inbound calls (all delinquencies) and scheduling. Agents utilize a resolution based consultative approach. Evaluate customer's financial ability. Determine long term resolution, imminent default and/or need to set
Slide 108: Global Locations
Global Locations provides extended hours and low-costs Coppell, TX - 580 FTE Mt Laurel, NJ Waterloo, IA Addison, TX Ft. Washington, PA Mumbai, India West Palm Beach, FL Pune, India Riviera Beach, FL Burbank, CA Houston, TX St. Croix Manila, Philippines U.S. Virgin Islands Bangalore, India Servicing
Slide 109: Communication Methods
Communication Methods Inbound Calls Correspondence Queue environment Alternatives to foreclosure letter Spanish & English capabilities Series of letters (4) for >80 days loans Special queues for Bankruptcy and Short Sale Letters sent at varying intervals per FC timeline Authorized third parties Inte
Slide 110: Working with Community Partners to Help Homeowners
Working with Community Partners to Help Homeowners Ocwen has a history of partnering with nonprofit housing Prominent National and counseling and consumer advocacy organizations in an Regional Nonprofit Partners: effort to help struggling homeowners stay in their homes HomeFree-USA* National Communi
Slide 111: Contact Strategies
Contact Strategies Early Delinquency Indicator Utilizes recent payment behavior to append high, medium or low risk score to each loan based on propensity to roll to the next delinquency bucket. Number of payments missed in the last 12, 6, 3 months. Maximum days due in the last 12, 6, 3, 1 months. Cu
Slide 112: Interactive Voice Response System
Interactive Voice Response System Highlights Increased system capacity to accommodate additional inbound/outbound traffic of expanding portfolio. Enhanced outbound dialing using multiple UIPs & list management systems. Enhanced dialer stability through multiple updates to system reporting, disaster
Slide 113: Customer Care Contact Management System
Customer Care Contact Management System The Contact Management System (CMS) provides a dynamic, Java-based dialogue delivery system. Computer programmers are not needed to program the call flow. o Script editor tool provides a graphical user-interface to allow the Consumer Psychology team to make ch
Slide 114: Home Retention Appointment Call Back Model
Home Retention Appointment Call Back Model A critical component of the strategic design changes for Ocwen's borrower contact efforts. Focus is to move away from reactive contact process into a more proactive model. o Improving right party contact and preparedness of the agent and customer. Specifica
Slide 115: Home Retention Appointment Call Back Model Results
Home Retention Appointment Call Back Model Faster resolution Increased efficiency Higher resolution Increased customer timelines because because customers acceptance rates satisfaction because customers and are being called because customers the process is more Closer to the goal of agents are bette
Slide 116: Inbound Service Levels
Inbound Service Levels 500,000 100.0% 450,000 90.0% 400,000 80.0% 350,000 70.0% 300,000 60.0% 250,000 50.0% 200,000 40.0% 150,000 30.0% 100,000 20.0% 50,000 10.0% Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Inbound Offered % Calls Answered % Calls Answe
Slide 117: SPOC Contact Rates
SPOC Contact Rates Unique Contact rate (unique RPC/unique appts) 80% 78% 76% 74% 72% 70% 68% 66% 64% 62% 60% Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 HRC 67% 70% 70% 69% 69% 69% 71% 70% 72% 72% 72% 71% 72% GSE 66% 73% 72% 73% 74% 74% 75% 74% 76% 75%
Slide 118: First Call Resolution
First Call Resolution 58% 56% 55% 55% 54% 52% 52% 2013 YTD 50% 48% 49% 49% 49% 48% 46% 46% 46% 46% 46% 44% 42% 43% 42% 40% 38% Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 14
Slide 119: Underwriting
Underwriting 1s O
Slide 120: Underwriting Training
Underwriting Training o New hire training for a period of 6 weeks. o Four weeks of classroom training and two Weeks of "On the Job Training". o Monthly Refresher training and knowledge quiz. o New rules to modifications and Quality Assurance findings form basis for additional training. Quality o 100
Slide 121: Underwriting Modification Program
Underwriting Modification Program Ocwen Proprietary Shared Appreciation HAMP Tier 1 HAMP Tier 2 Modification (Non-Modification (SAM) HAMP) Not eligible for Tier 1 Should meet the HAMP Tier 2 Owner occupied first HAMP is not requirements as published by liens that meet the feasible/eligible MHA HAMP
Slide 122: Underwriting Technology Leveraged
Underwriting Technology Leveraged One technology platform for all loss mitigation efforts Automated, instant and simultaneous review Ability to define missing documents Investor rules and constraints Rule-based model for optimum resolution Seamless integration with REALServicing® and REALDoc® 18
Slide 123: Underwriting OWB / Homeward / Fiserv Integration
Underwriting OWB / Homeward / Fiserv Integration At the time of OWB/Homeward/Fiserv integration, activities were performed to ensure that appropriate resolutions would be provided to all borrowers in a timely manner. Preparation of simplified single modification template and questionnaire o A simpli
Slide 124: Underwriting OWB / Homeward / Fiserv Integration
Underwriting OWB / Homeward / Fiserv Integration Review of Preliminary Boarding File o Prior to final boarding, Servicing Transaction Management and Underwriting verify the in-flight data provided by prior servicer on preliminary boarding file. Discrepancies, if any, are immediately raised with prio
Slide 125: Underwriting Modification Product Type
Underwriting Modification Product Type 3,500 10000.00 3,000 8000.00 2,500 2,000 6000.00 1,500 4000.00 1,000 2000.00 500 0 0.00 Oct'12 Nov'12 Dec'12 Jan'13 Feb'13 Mar'13 Apr'13 May'13 Jun'13 Jul'13 Aug'13 Sep'13 Oct'13 HAMP T1 HAMP T2 SAM NON-HAMP Total In October 2013, approximately 8000 loans were
Slide 126: Underwriting Testimonial
Underwriting Testimonial "Ocwen has better turnaround time for modification decisions than any other lender that we have worked with" - Home Free USA 22
Slide 127: Average Mod Turn Times and Overall Quality
Underwriting Average Mod Turn Times and Overall Quality 13-Jan 13-Feb 13-Mar 13-Apr 13-May 13-Jun 13-Jul 13-Aug 13-Sep 13-Oct Approval - Mean 4.0 3.8 5.9 4.8 2.9 5.4 4.2 4.5 4.4 2.0 In October, for loans with a Std dev 5.1 5.2 7.0 4.6 5.9 8.5 5.9 6.7 4.9 2.7 completed package, on 90th percentile 8 7
Slide 128: Collateral Based Solutions (CBS)
Collateral Based Solutions (CBS) 24
Slide 129: Collateral Based Solutions Department Overview
Collateral Based Solutions Department Overview CBS - reviews pre-foreclosure liquidations including short sales and deeds-in-lieu of foreclosure. CBS has a dedicated call team to answer questions and provide updates to authorized third parties. The call team also makes proactive outbound calls to au
Slide 130: Collateral Based Solutions Department Initiatives
Collateral Based Solutions Department Initiatives Loan Boarding Working closely with the legacy ResCap team to ensure a smooth transition through all loan transfers. Engaged with the OneWest Bank team to discuss business practices and prepare for loan transfers. Assisted Short Sale through Altisourc
Slide 131: Collateral Based Solutions Department Initiatives
Collateral Based Solutions Department Initiatives Automated Underwriting Automation of Short Sale and Deed-in-lieu Underwriting activities. Phase I scope finalized; HAFA rule automation will go into production at the end of July. Phase II will automate more of the underwriting activities and Investo
Slide 132: Collateral Based Solutions Assisted Short Sale
Collateral Based Solutions Assisted Short Sale Assisted Short Sale Program RSC RSC Offer Offer or Valuation partners inspects RSC Received, Listing and Title with the title issues Manages reviewed Interest, Report Listing and listing on for refer to Ordered agent to negotiates Hubzu.com approval ASP
Slide 133: Increasing Short Sale Volume
Increasing Short Sale and Deed-in-Lieu of Foreclosure Volume Effective Loss Mitigation Option for Investors Short Sale Performance SS Requests SS Approved SS Concluded 6,723 o Year to date short sale 6,269 closings have averaged 5,494 5,215 5,062 5,073 over 1,400 per month. 2,904 o Approvals and 2,4
Slide 134: Increasing Deed-in-Lieu Volume
Increasing Short Sale and Deed-in-Lieu Volume Effective Loss Mitigation Option for Investors DIL Performance Applications Received Applications Approved Applications Completed 1,451 o Observing an increase in Deed - in-lieu 1,024 of foreclosure 904 815 o Partnering with (Premium Title Services) 763