Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Investor Presentation (March 2012)
21 slides from Onity's investor presentation, Mar 23, 2012
Slide 1: Investor Presentation March 2012
Investor Presentation March 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 about $2.0 billion in market capitalization » 20+ years of innovation in loss mitigation » #1 in servicing quality
Slide 3: Mortgage servicing overview
3 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 4: Ocwen Has Produced Substantial Shareholder Value in 2011
4 Ocwen Has Produced Substantial Shareholder Value in 2011 While the S&P 500 index increased by only 12% from 12/31/2010, Ocwen’s share price increased by 68% during the same period.
Slide 5: Acquisition Updates
Acquisition Updates LITTON Approximately $38.6 billion UPB boarding completed as planned on November 1, 2011 All elements either as planned or exceeding plan, including strong early results on delinquencies Most transition - related costs are complete in 4Q2011 Saxon Approximately $26.8 billion UPB
Slide 6: Summary of investment highlights
Summary of investment highlights 6 Ocwen is well positioned to take advantage of attractive growth opportunities Highly scalable platform with lowest operating cost in the industry Deploying capital to take advantage of attractive opportunities Substantial cash flow generation Superior servicing and
Slide 7: Residential mortgage market and distressed assets
7 $10.5 trillion in residential mortgages outstanding as of December 31, 2010 » $1.4 trillion of delinquent loans Top four banks service 54% of total loans, but focused on prime “low touch” loans » “High touch” servicers are best equipped to improve loan performance Ocwen currently looking at over $
Slide 8: We have a strong pipeline of attractive growth opportunities
8 We have a strong pipeline of attractive growth opportunities 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 $21.9 $42.8 $73.9 $123.7 2001 2005 2010 Q2 2012E ($ in billions, UPB at pe
Slide 9: Ocwen's key differentiators
9 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 10: Highly scalable platform with lowest operating cost in the industry
Highly scalable platform with lowest operating cost in the industry 10 10 1. Source: Analysis of Nov 2009 MIAC cost per non - performing loan applied to Ocwen's portfolio relative to Ocwen's marginal cost study for November 2009. Can quickly scale its servicing platform to efficiently board acquired
Slide 11: Proven ability to close transactions and effectively board loans
Litton Saxon HomEq Proven ability to close transactions and effectively board loans 3 Acquired portfolio has $38.6 billion in UPB and approximately $2.5 billion in servicer advances for a purchase price of $247.2 million (closed September 1, 2011) Acquisition makes Ocwen the #1 subprime servicer in
Slide 12: Superior servicing and loss mitigation practices
0% 4% 8% 12% 16% Ocwen New Century Centex HFN RFC Option One Aurora IndyMac WaMu Saxon Long Beach Fremont HomEq Wells ASC Chase HLS MLN EMC SPS Ameriquest Fieldstone Fairbanks Litton Countrywide Nat City Equity One Wilshire Ameriquest 12 Superior servicing and loss mitigation practices… 0% 4% 8% 12%
Slide 13: Differing levels of advances as a % of UPB
13 … with differing levels of advances as a % of UPB 1. Based on UPB where Ocwen is required to make servicer advances as of 12/31/2011 Delinquency Percentage (90+ Days) by Portfolio ( 1) …Effective at driving down delinquencies and advances 4 1.84% 3.98% 2.77% 6.7% 0% 1% 2% 3% 4% 5% 6% 7% 8% Legacy
Slide 14: Revenue in bps – Legacy Saxon, HomEq & Litton Portfolios
14 Revenue in bps – Legacy Saxon Servicing, HomEq & Litton Portfolios Annualized Revenue (bps) 4 14 Revenue exceeds contractual rate soon after boarding due to recapture of deferred servicing fees and to ancillary income Note: Saxon servicing portfolio was boarded in May 2010, HomEq portfolio in Sep
Slide 15: Capital / UPB and pre-tax return on capital by deal
1. Illustrative numbers representing different deal types 0% 20% 40% 60% 80% 100% 120% Year 1 Year 2 Year 3 Year 4 Year 5 Deal 1 Deal 2 Deal 3 Deal 4 Capital / UPB (1) As performance improves, capital requirements fall and return on capital increases Pre - tax return on capital (1) - 10% 0% 10% 20%
Slide 16: Substantial cash flow generation
Substantial cash flow generation 16 16 Without any new UPB, the existing portfolio, including Litton, is expected to generate substantial free cash flow Cash provided by operating activities was $982mm for 2011 Even if delinquencies increase 25%, free cash flow would only decrease 15% in 2013 versus
Slide 17: Conservative balance sheet
Conservative balance sheet… 17 Highly rated assets (as reported 12/31/11) Source: Company filings. 1. Excludes $58.5 million of Loans, Net - Restricted for Securitization Investors arising from FAS 167 accounting rule change. 2. Includes $78.4 million of goodwill. The balance sheet consists of high
Slide 18: Strong collateral protection
18 $454 $295 $314 $277 $1,271 $589 $546 $0 $400 $800 $1,200 $1,600 $2,000 $2,400 Collateral >=BBB Collateral Term Loan ($ in millions) MSRs DSF Advances Cash Term Loan Strong collateral protection 1. Collateral is shown as of December 31,2011 plus the pro - forma for Saxon and JPM acquisitions as if
Slide 19: …with upside potential
19 …with upside potential 7 160 168 549 135 131 413 295 299 962 Book value MIAC / 3rd party Internal valuation Litton Ocwen 16.58 2.66 12.85 12.89 19.24 Book value MIAC / 3rd party Internal valuation MSR values according to various methodologies Implied book value / share Our industry - lowest cost
Slide 20: Summary of investment highlights
Proven ability to close transactions and effectively board loans Summary of investment highlights 20 Why now – Ocwen is well positioned to take advantage of attractive growth opportunities Highly scalable platform with lowest operating cost in the industry Deploying capital to take advantage of attr
Slide 21: HLSS Transaction Update
21 21 HLSS Transaction Update In February 2012, HLSS completed an initial public offering that could eventually enable Ocwen to significantly reduce capital needs » HLSS will be structured in a tax efficient manner as a Passive Foreign Investment Company (“PFIC”), offering investors yield in the for