Onity Group Inc. · NYSE:ONIT

Onity — Ocwen Financial — Investor Presentation (November 2013)

43 slides from Onity's investor presentation, Nov 12, 2013

1. Slide 1: Investor Presentation November 2013

   Investor Presentation November 2013 © 2013 Ocwen Financial Corporation. All rights reserved.

2. Slide 2: Forward-Looking Statements and Non-GAAP Measures

   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

3. Slide 3: Investment Highlights: "Best in Class" Servicer with Unique Advantages

   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 ??Ocwen's overall performance

4. Slide 4: Investment Highlights: Strong Cash-flows and Substantial Prospects for Growth

   Investment Highlights: Strong Cash-flows and Substantial Prospects for Growth ??Sustained history of growth in servicing portfolio ??Compound annual growth rate of 35% in unpaid principal balance (UPB) since 2000* ??Over $480 billion servicing portfolio at the end of Q3 2013 on a pro forma basis* ??

5. Slide 5: 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 pr

6. Slide 6: Low-cost, Scalable Servicing Platform and Technology that Helps Keep Borrowers in their Homes

   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

7. Slide 7: What this Means: LOCOM Accounting and Superior Productivity Creates Embedded Value in MSRs

   What this Means: 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 $1,00

8. Slide 8: The Ocwen Advantage: 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

9. Slide 9: 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* * Q3 2013 pro-forma estimate; includes estimates for OneWest and Green Point acquisitions as if completed 9

10. Slide 10: The Ocwen Advantage: 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 UPB Close and Transfer(1) 3Q2009 Freddie Mac - TBW DQ Loan Subservicing 24,000 $4.2 billion 11

11. Slide 11: The Ocwen Advantage: Unique Track-record of Successful Large Acquisitions

    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 11

12. Slide 12: 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

13. Slide 13: 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 12-18 months ??Bank divestiture ??Still in the "middle-innings" of the melt-down, with serious delinquencies, loans in foreclosure and REO

14. Slide 14: Embedded Growth: Long "Tail" to Existing Book's 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 1) Normalized Pre-tax profit excludes transition-related expenses that typi

15. Slide 15: Embedded Growth: A Stronger Economy Would Support Improved 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

16. Slide 16: 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 platf

17. Slide 17: Strong Forecasted Cash-flows, especially with an Improving Economy

    Strong Forecasted Cash-flows, especially with an Improving Economy Forecasted 10-year Cumulative Adjusted Cash Flow from Operations $16.0 Billions of Dollars $14.0 $13.4 $12.0 $10.7 $10.0 $8.4 $8.0 $6.0 $4.0 $2.0 $- Scenario 1 Scenario 2 Scenario 3 Scenario 1 : Base case - No UPB growth, with cash r

18. Slide 18: Balance Sheet: Ocwen Substantially Under-Levered Compared to Peers

    Balance Sheet: Ocwen Substantially Under-Levered Compared to Peers 1) Comparison based on data as on June 30, 2013 2) Adjustment to Ocwen reported numbers consists of fair value adjustment of $637 million on MSRs and 50% of deferred servicing fees (total of $512 million) as of June 30, 2013 3) Corpo

19. Slide 19: 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 & CEO of General Electric Mortgage Insurance Corporati

20. Slide 20: Recent Transactions Update

    Recent Transactions Update ??Homeward ??All loans were moved from Homeward platform by mid-April ??Integration and performance as planned ??ResCap ??Also progressing as planned ??Significant portion of private label securities moved from legacy ResCap platform to Ocwen's platform ??All loans expecte

21. Slide 21: Investment Summary

    Investment Summary ?Leading provider of residential and commercial mortgage loan servicing ?Low cost, scalable servicing platform and technology that helps keep borrowers in their homes ?Sustained history of growth in servicing portfolio with strong near-term and long-term growth prospects ?Strong c

22. Slide 22: Appendix

    Appendix ??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 on

23. Slide 23: 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 modi

24. Slide 24: 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 (Pro

25. Slide 25: 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 2) Non agency include 114,201 prime loans with a UPB of $33.7 bil

26. Slide 26: 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 OneWest PLS portfolio and Green Point acquisitions 2) Does not include app

27. Slide 27: Normalized Pre-Tax Income Growth - Up 82% from Q3 2012

    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

28. Slide 28: 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

29. Slide 29: 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

30. Slide 30: 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

31. Slide 31: Strong Cash Flows that Lead Earnings

    Strong Cash Flows that Lead Earnings $295 Millions of Dollars $266 $220 $143 $77 $65 $67 $45 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Adjusted cash flow from operations* Net Income oAdjusted cash flow from operations starts with net cash provided by operating activities on statement of cash flows and subtrac

32. Slide 32: Consolidated Statement of Cash Flows - 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

33. Slide 33: Our ROE has been Increasing Over Time

    Our ROE has been Increasing Over Time 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 after Normalization adjustments) RoE (Reported Net In

34. Slide 34: 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

35. Slide 35: 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

36. Slide 36: Performance 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 (

37. Slide 37: 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 Note: Historical prepayments data, includes historical ResCap loans for the entire period 37

38. Slide 38: 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 Note: Historical Ocwen prepayments data, incl

39. Slide 39: Strong Operations and Conservative Accounting

    Strong Operations and Conservative Accounting Operations ??As advances are collected, it frees 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 d

40. Slide 40: Strong Balance Sheet with High Quality Assets

    Strong Balance Sheet with High Quality Assets $ 1,801 million 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 Investment Grade Qu

41. Slide 41: Loans Serviced

    Loans Serviced UPB (in millions) Loan Count Total loan servicing portfolio September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012 Mortgage loans held-for-sale $ 324 $ - 2,358 -Off balance sheet mortgage loans GSE 152,877 10,844 890,496 54,957 GNMA 31,917 106 206,037 714 Non agen

42. Slide 42: Owned MSR Portfolio by Vintage

    Owned MSR Portfolio by Vintage Total Owned Servicing Portfolio Origination Vintage (in thousands) 2009+ 2008 & prior Total Unpaid principal balance $ 122,512,432 $ 238,940,767 $ 361,453,198 MSR carry value 956,565 874,853 1,831,418 MSR value/UPB 0.78% 0.37% 0.51% Origination Vintage Unpaid principal

43. Slide 43: State Concentration of Serviced Assets

    State Concentration of Serviced Assets UPB State (in millions) Loan Count CA $ 77,785 317,342 FL 29,076 191,391 NY 24,250 103,326 TX 17,520 170,978 NJ 16,665 78,900 IL 14,152 93,211 MA 13,323 61,675 MD 12,417 60,913 VA 10,953 58,424 Other 145,635 1,118,788 Total primary servicing $ 361,778 2,254,948

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