Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Investor Presentation (November 2012)
24 slides from Onity's investor presentation, Nov 7, 2012
Slide 1: Investor Presentation November 2012
Investor Presentation November 2012 © 2012 Ocwen Financial Corporation. All rights reserved.
Slide 2: Who we are and what we do
2 Who we are and what we do Leading provider of residential and commercial mortgage loan servicing and special servicing » Publicly - traded (NYSE: OCN) pure play mortgage servicer with more than $5.0 billion in market capitalization » 20+ years of innovation in loss mitigation » #1 in servicing qua
Slide 3: Ocwen Has Produced Substantial Shareholder Value
3 Ocwen Has Produced Substantial Shareholder Value While the S&P 500 index increased by only 12% between 12/31/2010 and 10/26/2012, Ocwen’s share price increased by 307% during the same period .
Slide 4: Acquisition Updates
Acquisition Updates Litton Acquisition meeting or exceeding pro forma expectations Boarded about 240,000 loans that were 1/3 over 60 - days delinquent while quickly improving performance – proving the scalability of Ocwen’s servicing platform Saxon MSR Portfolio of approximately $22.2 billion in UPB
Slide 5: Acquisition Updates
Acquisition Updates ResCap Acquisition will add almost $127 billion in MSR and $31 billion in subservicing based on the UPB at the end of August 2012 Boarding is expected to be in the first quarter of 2013 Adds substantial capabilities in prime loan servicing, including GNMA Homeward Acquisition wil
Slide 6: Summary of investment highlights
Low risk balance sheet Summary of investment highlights 6 Ocwen has built - in growth and is well - positioned for more Substantial competitive advantages with lowest costs and scalable platform Operating model that drives strong returns to shareholders Superior servicing and loss mitigation practic
Slide 7: Built-in growth with strong position in $1 trillion UPB growth opportunities
7 Built - in growth with strong position in $1 trillion UPB growth opportunities Built - in growth with track record success Growth opportunities ResCap and Homeward acquisitions add substantial built - in growth and strong platform for further growth Tracking a pipeline of $350 billion in new servi
Slide 8: Ocwen's key differentiators are directly proportional to delinquency of target portfolios
8 Ocwen’s key differentiators are directly proportional to delinquency of target portfolios Ocwen has » A 70% cost advantage in servicing non - performing loans » A proven ability to reduce delinquencies and advances » Best in class 90+ day to current roll rates of 14% for subprime adjustable rate l
Slide 9: Highly scalable platform with lowest operating cost in the industry
Highly scalable platform with lowest operating cost in the industry 9 9 Can quickly scale its servicing platform to efficiently board acquired portfolios with only modest additions to infrastructure Lowest operating cost in the subprime mortgage servicing industry Achieves its competitive position t
Slide 10: Proven ability to close transactions and effectively board loans
Litton Saxon HomEq Proven ability to close transactions and effectively board loans 3 Portfolio acquired in September 2011 with $38.6 billion in UPB Over 240,000 loans with 1/3 delinquent Since then, 90 day + delinquency has dropped from 35% to 29% of UPB Portfolio acquired in September of 2010 with
Slide 11: Superior servicing and loss mitigation practices
11 Superior servicing and loss mitigation practices… 1. Source: Bank of America/Merrill Lynch report dated July 2009, based on 2006 vintage loans on data from December 2008 to M ay 2009. 2. Source: Corelogic LoanPerformance, Barclays Capital, March 2011 Roll rate from 90+ days delinquent to current
Slide 12: Ocwen modifies more loans and has lower re-default rate
Modifications Outstanding as % of Portfolio and % of Modifications 60+ days late for Subprime Private Securities Source: BlackBox Logic Ocwen Mods Outstanding 52.8% Ocwen Mods 60+ 27.3% N on - Ocwen Mods Outstanding 46.6% Non - Ocwen Mods 60+ 38.3% 20% 25% 30% 35% 40% 45% 50% 55% Jan - 10 Feb - 10 M
Slide 13: Ocwen outperforms other sub-prime servicers in generating cash-flow from borrowers
Ocwen outperforms other sub - prime servicers in generating cash - flow from borrowers Source: BlackBox Logic as of September 2012 Percentage of loans in subprime PLS that have made 10 or more payments in the past 12 months Making all 12 payments 60.0% 54.1% 4
Slide 14: Effective at driving down delinquencies and advances
14 … with differing levels of advances as a % of UPB (1) Delinquency Percentage (90+ Days) by Portfolio …Effective at driving down delinquencies and advances 4 1) Includes advances not on Ocwen’s books due to transfer to HLSS
Slide 15: Revenue in bps – Ramp up on acquired business
15 Revenue in bps – Ramp up on acquired business 4 15 Revenue exceeds contractual rate soon after boarding due to recapture of deferred servicing fees and due to ancillary income Notes: - Saxon servicing portfolio was boarded in May - 2010, HomEq portfolio in Sep - 2010, & Litton portfolio in Sep -
Slide 16: As performance improves, capital requirements fall and return on capital increases
0% 20% 40% 60% 80% 100% 120% 0 Year 1 Year 2 Year 3 Year 4 Deal 1 Deal 2 Deal 3 Deal 4 Deal 5 Deal 6 1. Illustrative numbers representing different deal types Indexed Capital / UPB (1) As performance improves, capital requirements fall and return on capital increases Pre - tax return on capital (1)
Slide 17: Substantial cash flow generation
Substantial cash flow generation 17 17 Without any new UPB, the existing portfolio is expected to generate substantial free cash flow Cash flow from operations was over $1.4 billion for first 9 months 2012 Even if delinquencies increase 25%, free cash flow would only decrease 15% in 2013 versus base
Slide 18: Operating Cash Flow Substantially Exceeds Net Income
Operating Cash Flow Substantially Exceeds Net Income * Adjusted cash flow from operations starts with Net cash provided by operating activities on Statement of Cash Flows and subtracts advance reductions used to pay down match - funded liabilities Substantial cash flow generation 6 18
Slide 19: Conservative balance sheet… Highly rated assets
Conservative balance sheet… 19 Highly rated assets (as reported 9/30/12) $ 1,523 million of equity supported by high quality assets with limited recourse debt 7 The balance sheet consists of high quality / low risk assets consisting primarily of advance receivables » Advances are over - collateraliz
Slide 20: Improving economy would offer substantial potential upside to Ocwen's results
20 Improving economy would offer substantial potential upside to Ocwen’s results Reduced delinquencies and Re - defaults Lower involuntary CPR with little incentive to prepay Lower Costs and Higher Revenue 8
Slide 21: Summary of investment highlights
Proven ability to close transactions and effectively board loans Summary of investment highlights 21 Ocwen has built - in growth and is well - positioned for more Substantial cash flow generation that leads earnings Superior servicing and loss mitigation practices effective at driving down delinquen
Slide 22: HLSS completed a successful follow-on equity offering
22 On September 12, 2012, HLSS completed a successful follow - on equity offering raising $236 million at a share price of $15.25, up from the $14 price of the initial offering – the offering was substantially over - subscribed. We expect that HLSS should be able to continue raising funds to purchas
Slide 23: Mortgage servicing overview
23 Mortgage servicing overview Residential mortgage loan servicing primarily involves: » Collection and transfer of mortgage payments from borrowers » Cash management and escrow account responsibilities » Mitigation of losses through loan modifications, short sales and other options » Administration
Slide 24: Mortgage servicing overview – Advance Quality
24 Mortgage servicing overview – Advance Quality Advances are very high - quality assets Advances self - liquidate at par Advances have the right to be repaid at “top - of - the - waterfall,” i.e. they are paid before any other payments to the trust Advances are substantially over - collateralized,
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