Ocwen Financial Corporation(NYSE:OCN), a leading provider of residential and commercial loan servicing, special servicing and asset management services, reported Net income of $9.7 million, $0.08 per share, for the fourth quarter of 2011, compared to Net income of $9.9 million, $0.09 per share last year on Thursday.
In the fourth quarter of 2011, Ocwen incurred $31.3 million of transaction-related expenses, largely associated with the Litton Loan Servicing LP ("Litton") acquisition, and $3.6 million of losses on foreign exchange forward contracts. Adjusting for these resulted in normalized pre-tax earnings for the quarter of $53.4 million, a 57% increase over the normalized results in the fourth quarter of 2010. Revenue for the fourth quarter was $156.6 million, 38% higher than the fourth quarter of 2010.
Net income of 2011 was $78.3 million or $0.71 per share versus Net income of $38.0 million or $0.36 per share in 2010.
Revenue in 2011 was $495.9 million up 38% from 2010.
Chairman William Erbey stated, "The imminent execution of an asset sale to HLSS is an important milestone in our strategy to make Ocwen into an 'equity-light' fee-for-services business."
On February 10, 2012, Ocwen entered into an agreement to sell to Home Loan Servicing Solutions (HLSS) the right to receive the servicing fees relating to approximately $16 billion of UPB. In addition, HLSS will take over ownership and responsibility for the associated servicing advances and match funded liabilities. Ocwen will continue to service the loans receiving a subservicing fee and ancillary income. The sale is expected to close when HLSS completes its initial public offering. As valued on December 31, 2011, Ocwen expects to receive approximately $181 million in cash from the transaction; 25% of the proceeds will be used to pay-down the Senior Secured Term Loan as required by the terms of the loan. The remaining cash will be available for future acquisitions, debt repayment or other corporate purposes under the terms of the Senior Secured Term Loan.
"In the near-term, HLSS should provide us additional capital for growth, without dilution to existing shareholders, and make Ocwen more competitive on transactions. Over time, we would hope to move most of Ocwen's MSRs and advances to HLSS. The impact of this should be higher returns on equity than we could achieve by keeping the assets on Ocwen's balance sheet."Mr. Erbey further said.
"The servicing industry as a whole continues to be in the news with the recent federal and state settlement with major banks. We believe that the changes in the industry remain positive for Ocwen's growth and provide useful clarity around servicing standards. Our sales pipeline remains robust and our competitive position very strong." He added.