Ocwen considers selling more pieces of lending business

Mortgage & Real Estate

When 2017 began, Ocwen Financial had six mortgage origination lines of business: correspondent, wholesale, and retail in both forward and reverse mortgage lending.

But the nonbank could soon only have one active lending channel, as the company disclosed this week that it is considering selling off more pieces of its lending business.

Back in August, Ocwen revealed that it planned to exit correspondent lending to focus on its “higher margin” channels – retail and wholesale.

Then, just over two weeks ago, Ocwen disclosed that it planned to exit its wholesale forward lending business, thereby shutting down its largest mortgage origination channel.

And this week, Ocwen divulged in a filing with the Securities and Exchange Commission that it is considering selling its reverse mortgage business.

According to the nonbank, it is merely reviewing its options currently, but wants to to focus on mortgage servicing and retail forward lending in the future, which would reduce its six originations lines of business down to one.

“As part of its cost structure and performance optimizing initiatives, Ocwen is continuing to explore strategic approaches to streamline its business and best leverage its competitive advantages,” the company said in its SEC filing.

Ocwen said that it believes that while it reverse mortgage business, Liberty Home Equity Solutions, has “performed well,” the company is currently evaluating its long-term strategy surrounding reverse mortgage lending.

Included among the options for the reverse mortgage business is the “potential sale of the reverse lending business or some assets of the business.”

Over the last few years, Ocwen has actually grown its reverse mortgage lending business.

In 2014, the nonbank originated $675.47 million in reverse mortgages. That figure rose to $809.67 million in 2015, and to $825.49 million in 2016.

Through the first six months of 2017, Ocwen’s reverse mortgage originations were trending up compared to last year.

According to Ocwen’s second-quarter 10-Q filing, Ocwen originated $398.11 million in reverse mortgages in the first half of 2016, but that figure rose to $548.52 million in the same time period this year – an increase of 38%.

But now, Ocwen is “seeking to focus” its business on mortgage servicing and retail forward lending, primarily through retail lending recapture.

Additionally, Ocwen is also exploring its options surrounding its Automotive Capital Services business, which provides floor plan lending to independent car dealers.

Ocwen previously disclosed that it is reviewing the auto business line, but said this week that while the company “still believes that this business has long-term potential, it is a relatively capital intensive business.”

Ocwen notes that its ability to raise capital at “competitive levels” in the current business and regulatory environment is “limited.”

Thus, the company believes the Automotive Capital Services business “may be worth more to a depository institution, an investment fund or an existing auto industry participant” than it is to Ocwen.

“Consequently, the company is considering the potential benefits of monetizing its investment in this business in the near term,” Ocwen said.

Ocwen did caution that none of these plans are definitive, nor are they guaranteed to work should they actually take place.

“There can be no assurances that Ocwen will enter into agreements to sell its reverse mortgage business or assets or its Automotive Capital Services business, as to the timing and terms of any such agreements, or that these strategic transactions, if implemented, would strengthen the company’s financial performance or operating results,” the company said in its SEC filing.

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