How one mortgage servicing company is prioritizing home retention during economic uncertainty

Nearly two years ago, Ocwen acquired PHH Corporation, and Glen Messina became the president and CEO of the newly combined companies. Today, Ocwen Financial Corporation is a leading non-bank mortgage servicer and originator providing solutions through its primary brands, PHH Mortgage and Liberty Reverse Mortgage. HousingWire spoke with Messina on the progress that’s been made in reshaping the mortgage servicer and originator, its evolving business model and its progress in turning around the company.

HousingWire: How does the Ocwen of today compare to the companies that merged two years ago?


Glen Messina: The Ocwen of today is a different organization, and I believe we are stronger, more efficient and more diversified. We’ve transformed the business to be both a lender and servicer, and our originations business is growing at a very fast clip to keep up with demand.

In servicing, we are one of the largest and most experienced special servicers, managing more than 1.3 million borrowers, thousands of investors and more than 100 subservicing clients. At the end of Q2, we serviced more than $206 billion in UPB.

On the originations side, we’ve built a scalable, multi-channel lending platform that has grown volume by 16X in just the past year. In August, we originated more than $2.5 billion in loans and flow MSRs, which puts us at an annual run-rate of $30 billion.

One thing that hasn’t changed is our commitment to our customers – helping homeowners is one of our guiding principles and our mission is focused on creating positive outcomes for homeowners, communities and investors.

Financially, we are in the final stages of arguably the most significant turnaround in the mortgage industry – our profitability is improving, our originations business is rapidly growing and our strong subservicing and special servicing capabilities position us very well to continue the momentum we have. We’re really proud of the team and what we have achieved so far. 

HW: Historically, Ocwen was a special servicer of non-performing loans, while PHH subserviced performing loans. What’s your strategy now, and how do you intend to grow your servicing business? 

GM: We’re executing our strategy of leveraging our historic strengths managing both performing and delinquent loans to offer the market the best of both worlds at a single servicer. We think of our servicing capabilities in four quadrants: performing owned servicing, performing subservicing, special owned servicing and special subservicing. In these four quadrants we service conforming and government mortgages, small balance commercial loans and private securities. We’ve built a multi-channel origination platform to replenish and grow our servicing portfolio across each of the four quadrants, giving us the flexibility to pivot to market opportunities and optimize capital deployment. For example, in the near term, we are building our portfolio of owned performing servicing and subservicing.

Longer term, we believe we are well positioned to assist borrowers needing loss mitigation as they reach the end of their COVID-19 forbearance plans, and in the process provide valuable services to investors. We expect this will lead to growth opportunities in both special owned servicing and special subservicing.

Our core competency for the past decade has been to help homeowners avoid foreclosure, while setting the bar in terms of operational efficiency and improving outcomes for borrowers and investors. Since the mortgage crisis, we’ve completed more than 1.5 million non-foreclosure workouts for consumers – far more than any other servicer. We really hold ourselves up as the best in the business at managing delinquent or high-risk assets and keeping families in their homes.

These competencies are critical in today’s uncertain economic environment. With the COVID-19 pandemic, there are now more than 3.6 million borrowers in forbearance, a significant number of whom may unfortunately end up going into a default scenario.

Given compliance and reputational concerns, in my opinion you’re going to see banks moving away from in-house default servicing, to the extent that they can. As they do, special and default servicing will shift back to subservicers and the non-bank sector.

There are only a handful of servicers that have maintained core competency in loss mitigation and default. This will obviously be attractive as investors and MSR holders cope with the aftermath of the pandemic.

We believe we have a very compelling story to tell when it comes to overall servicing performance. Moody’s ranks us as a leading servicer in terms of total delinquency cycle time performance, and our servicing cost per loan for performing and non-performing loans compares favorably to MBA benchmarks, as does our call center performance in terms of average hold time and call abandonment rate.

HW: You mentioned that you’re ramping up your originations operation. How is that going, and what kind of volume do you expect to generate?

GM: We’re very excited about the multi-channel originations platform that we’ve built. Over the past 18 months, we’ve built the capability to originate through bulk purchases, direct flow arrangements, the Fannie Mae SMP and Freddie Mac CRX programs, and our correspondent and portfolio recapture platforms. In our Liberty Reverse Mortgage operations, we originate through retail, wholesale and correspondents, and we’re a top 3 HECM originator nationwide.

We have built an Enterprise Sales team that markets all these capabilities plus performing and special subservicing and portfolio retention services. There are few companies today offering the breadth of products our team offers under one roof.

We are seeing strong growth across our forward and reverse lending channels and have increased quarter-to-date volume in August by 16X in the past year. We continue to grow our correspondent seller base, expand our delivery partners for the GSE co-issue program and expand our portfolio recapture capacity and capabilities.

To support our growth, we have increased originations headcount by approximately 40% since the beginning of this year, and we plan to increase headcount by an additional 35% through the balance of 2020. This will roughly double our total originations staffing by year-end 2020 versus year-end 2019. We continue to expand our operating capabilities through hiring, technology development and continued process improvement.

HW: On your most recent earnings call, you referenced the Ocwen/PHH Enterprise Sales strategy. Why is this so important for the company’s transformation, and how is it being received in the market?

GM: Our value proposition is simple: if you’re a lender, we can help whether you want to retain, release or recapture mortgage assets. The market has really taken to the idea of having one counterparty to offer all these services. We’re providing liquidity through whole loan and MSR purchases — both directly and through the GSE co-issue platforms.

We’re subservicing both performing and delinquent loans — all private-labeled and customized to each client. And because we’re a lender and not just a subservicer, we’re helping MSR owners recapture customers and defend against runoff. Finally, we’re servicing commercial assets and helping clients originate reverse mortgages.

We can offer all these services and execution strategies as a single enterprise partner. What we’re finding is when our account executives sit down with a client or a prospect, it’s a much broader, more strategic conversation about how we can help grow their business.

Currently, when considering just our top sales prospects, we’re looking at more than $100 billion of new business opportunities across our various channels — thanks to our enterprise sales team.

HW: Most observers expect defaults to rise due to the economic repercussions of the pandemic. What’s your view?

GM: In terms of the fallout from the COVID-19 pandemic, I think we’re still in the early innings. As we disclosed on our Q2 earnings call, we had about 112,000 borrowers in forbearance as of mid-July. The good news is we’ve not seen a lot of new requests, and roughly 35% of our borrowers who are on forbearance plans were still making their payments.

As far as borrowers approaching their initial forbearance period expiration, roughly 22% were fully reinstating and most of those remaining were extending. Only about 1% have gone into to loss mitigation, which is a great sign.

There are millions of credit-stressed borrowers who are going to need modifications of some kind, and this is going to be a significant challenge for our industry. Unfortunately, we expect up to 25% of our borrowers on forbearance who have Ginnie Mae or non-agency mortgages are likely going to need loss mitigation assistance.

What our team brings to the table is extensive experience in curing defaulted assets and helping homeowners stay in their homes. We have home retention experts working directly with borrowers, educating them on their various options and doing everything possible to avoid foreclosure and keep families in their homes. Many of our resident default experts have been with us for a long time and had to manage through the 2008 financial crisis. This in-house knowledge is helping us help homeowners get through the pandemic.

Our goal is always to try to work with the consumers to produce the best outcomes for their families while balancing the needs of the investor. We take our mission to serve consumers very seriously, and we’ve partnered with a number of community advocacy firms — including the NAACP, HomeFree-USA and others — to conduct virtual borrower outreach events in local communities.

HW: When Ocwen and PHH merged, you were facing a turnaround situation as well as the challenge of combining two publicly traded companies. What steps have you taken to return the company to profitability?

GM: Over the past two years, we have executed an enterprise-wide transformation program focused on the integration of two large mortgage companies, improving profitability and building a balanced business model across servicing and originations, while maintaining a strong focus on compliance and quality. I believe what we have accomplished, in a relatively short timeframe, is nothing short of a remarkable turnaround.

Since Q2 2018, we’ve reduced our annualized pre-tax loss by $228 million and increased our annualized adjusted pre-tax earnings run rate before the amortization of NRZ lump-sum payments by more than $350 million. We’ve been executing on continuous cost improvement actions that have reduced our adjusted operating expenses by more than 40%, resulting in a very competitive cost structure. Assuming no adverse changes to market conditions and legal or regulatory matters, we expect adjusted pretax income will be positive for 2020, and we expect positive GAAP earnings in 2021.

HW: Like most of the industry, Ocwen has been operating remotely for the past six months. How difficult was that transition?

GM: When the pandemic was in its earliest stage, we made the call to move our employees to remote work right away. Our human resources, operations and technology teams — and many others who worked around the clock for days — did a spectacular job making this happen. In a very short period of time, we were able to procure the necessary technology and transition our entire global workforce — more than 5,000 associates — to a remote work environment, with the exception of certain jobs that needed to be performed in the office, with minimal disruption to our employees and customers.

We conducted a company-wide survey a couple of months after the transition to see how employees were doing, and 82% of our employees said they were as or more productive working remotely. They like the flexibility of working from home and feel they can better balance their work and personal lives.

Everyone is going through a lot right now with the pandemic, especially those who are trying to balance virtual or hybrid learning for their children with work. It’s hard, and we are trying to do everything we can to help them through this time.

Overall, our employees are operating at a very high level and I couldn’t be prouder of the team. So, I think the transition was executed very well and our employees adapted quite well.

We are looking at business resumption plans and different scenarios, keeping the health and safety of our employees as our top priority. At the end of the day, our current work-from-home model is unlikely to change any time soon. Longer term, we expect remote working will be a permanent part of our business model, and our office environment is likely to look and be utilized very differently from what it was in the past.

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Source: HousingWire Magazine

Altisource expands servicing to handle forbearance overflow

Altisource Portfolio Solutions, a provider of real estate, mortgage and foreclosure services, said it has expanded its Texas operations center to handle the overflow from home-loan servicers trying to cope with customers requesting forbearances.

The Luxembourg-based company said it is adding customer service workers to its operations center in El Paso, Texas, who will handle forbearance requests as a “brand representative,” meaning they will act as if they work for the mortgage servicer who contracts with Altisource.

“Current moratoriums and forbearance plans are benefitting borrowers facing economic uncertainty and unemployment but creating customer service challenges for banks and servicers,” the company said in a statement.

Altisource in April opened a 30,000-square-foot building in the Northwest Corporate Center in West El Paso that is bigger than its U.S. headquarters in Atlanta, an Altisource senior vice president told the El Paso Times earlier this year.

The company wants to act as a “surge protector” for mortgage servicers inundated with calls from customers seeking forbearance, said Robert W. McKinley, an Altisource vice president.

“The long-term objective is to continue working with them and other clients after the pandemic,” he said.

The share of mortgages in forbearance dropped to 6.87% in mid-September, representing 3.4 million home loans, the Mortgage Bankers Association said in a Monday report.

That’s down from a pandemic high of 8.55% in the first week of June, according to MBA data.

Weekly forbearance requests as a percent of servicing portfolio volume increased to 0.11% from 0.10% the previous week, the report said. The abandonment rate, meaning the people who hung up after waiting for a period, dropped to 6.9% from 7% the previous week.

The time it took to handle a call remained flat with the previous week’s 7.8 minutes, the MBA report said.

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Source: HousingWire Magazine

Urban Institute’s Laurie Goodman to speak at HousingWire Annual Oct. 8

This year has been a numbers game. How low are the rates this week? How long will borrowers be in forbearance? Will the next stimulus bill be enough? The pandemic has created a long list record-breaking figures, but behind all the headlines and statistics are real people trying to keep their homes in a time of uncertainty.

That why we’ve invited Laurie Goodman, vice president at the Urban Institute, to decipher what the data means along with other experts at our HousingWire Annual event on Oct. 8. Goodman will speak on a panel with Cindy Waldron, vice president of research and analytics at Freddie Mac, and Donnell Williams, president of the National Association of Real Estate Brokers, to discuss Increasing Homeownership in Underserved Communities.

At the Urban Institute, Goodman is also the co-director of its Housing Finance Policy Center, which provides policymakers with data-driven analyses of housing finance policy issues that they can depend on for relevance, accuracy, and independence.

Goodman began her career as a senior economist at the Federal Reserve Bank of New York and spent 30 years as an analyst and research department manager on Wall Street, holding research and portfolio management positions at several Wall Street firms. From 1993 to 2008, Goodman was head of global fixed income research and manager of U.S. securitized products research at UBS and predecessor firms.

Thereafter, from 2008 to 2013, she was a senior managing director at Amherst Securities Group LP, a boutique broker-dealer specializing in securitized products, where her strategy effort became known for its analysis of housing policy issues. Goodman was inducted into the Fixed Income Analysts Hall of Fame in 2009.

Goodman serves on the board of directors of MFA Financial, Arch Capital Group Ltd., and DBRS Inc. and is an adviser to Amherst Capital Management. She has published more than 200 journal articles and has coauthored and coedited five books. 

HousingWire Annual will feature other experts, including Doug Duncan, senior vice president and chief economist at Fannie Mae, Ed DeMarco, president of the Housing Policy Council, Trina Scott, chief diversity officer at Rock Ventures, Robert Dietz, chief economist at the National Association of Home Builders and many more.

We’re focusing this virtual event on The Great Acceleration — the disruption speeding through the business landscape, upending traditional strategies and agendas for those in housing. We’ve got sessions on the future of regulation, business strategy during times of social upheaval, green housing, capital market appetite by channel and much more.

HW+ members can attend for free by registering here. Not an HW+ member yet? You can sign up for free attendance plus get the amazing premium content we publish digitally and in the print magazine. Regular registration can be accessed here.

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Source: HousingWire Magazine

Fed aims to give less complex banks relief in capital planning rule

The central bank issued a proposal aligning recent stress testing changes with supervisory standards that are tailored to an institution’s size and complexity.
Source: American Banker

Fed will extend freeze on stock buybacks, cap on dividends

The Federal Reserve will continue its ban on share repurchases for banks with more than $100 billion of assets into the fourth quarter and will cap dividend payments using a formula based on recent income.
Source: American Banker

UWM to knock 50 bps off VA IRRRL loans

United Wholesale Mortgage (UWM) announced on Wednesday that it would offer a 50 bps discount on all VA interest rate reduction refinance loans (IRRRL) through Veterans Day on Nov. 11.

The company, which is the nation’s largest wholesale lender and plans to go public at a $16.1 billion valuation later this year, said the new rate is effective on all locks between Wednesday, Sept. 30 and Veterans Day. The program is intended as a “thank you to those who have made great sacrifices for our country,” the company said in a statement.

With interest rates at historic lows, UWM has been offering a variety of loans under 3% to borrowers. In late June, UWM rolled out a new loan program that offered conventional 30-year fixed rates for veterans between 2.25% and 2.375%.

Last week, at the AIME virtual conference, UWM rolled out a new tech offering for brokers. Called UWM InTouch, the mobile app provides brokers access to their entire pipeline of UWM loans. The app allows brokers to handle everything from underwriting through to the close.

On Monday, HousingWire published a deep dive into UWM’s strategy as a public company, and what brokers and rival lenders think of the move.

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Source: HousingWire Magazine

Goldman to resume job cuts as banks abandon COVID moratorium

Goldman Sachs is resuming job cuts as the coronavirus pandemic outlasts the financial industry’s resolve to offer jittery employees stability through the economic downturn.
Source: American Banker

Barclays, Citi and other big banks invest in behavior biometrics firm

Four global banks have joined American Express Ventures in contributing to BioCatch’s Series C fundraising round and earning themselves seats on its newly formed Client Innovation Board.
Source: American Banker

No housing market slowdown as real estate agents report a busy fall

Realtors can usually count on their biggest season being spring, followed by summer. But nothing about 2020 has been normal, including home-buying patterns. With shut-down orders in the spring, summer became the new home-buying season. However, homebuyers were still incredibly active in August.

Now, believe it or not, fall home-buying season is in full swing.

Traditionally, home-buying season slows down during the fall because families have settled in their new homes just in time for school to start. Now that school is mostly virtual, that calculation may be changing a bit.

“There’s a lot of homeschooling going on in this hybrid world, and it’s difficult,” Realtor Vesna Kanacki with Century 21 Full Service Realty in New City, New York, told HousingWire. Kanacki said that when it came to seasonal buying, “we’re still riding the wave with 2020.”

Kanacki’s market, like many others, remains competitive as buyers continue to experience bidding wars amid historically low housing inventory and an uptick in home prices.

“I think there is a lot of fear with the election coming up, that’s going to play a big factor of our spring market as well [and] depending on how everybody is comfortable with leadership going forward,” Kanacki said.

“But if the pandemic surges up again, I think we’re just going to get busier and busier here, because we are definitely located in the correct position, outside of New York City, where parents can still commute to work and children can have space needed for homeschooling and things like that,” Kanacki said.

Over the last four weeks ending on Sept. 20, the National Association of Realtors said that contract signings were up 23% year over year. There were nine new pending contracts for every 10 new listings, a slower rate than the 9.9 ratio in the past four weeks through July 5, but still impressive for a fall time period.

“The strong interest in home-buying observed this summer has carried over to the fall,” Joel Kan, MBA’s economist said to CNBC.

Jackie Merchant, Realtor at Coldwell Banker Realty in Sacramento-Sierra Oaks, said she doesn’t think her market will be slowing down anytime soon.

“The market here in Sacramento is crazy, the residential market is super, super hot, and [there’s lots of] multiple offers and properties going way over asking,” Merchant said. “I think it’s being driven by interest rates being low and then there’s also people are on the move, related to COVID.”

Merchant said that more people are pouring into Sacramento from the Bay Area and Southern California, and that “everybody seems to be on the move.”

“…maybe they want to get a bigger house so they have a home office, or they want a bigger yard because they have people working from home and kids doing school from home,” Merchant said.

Usually, Merchant said the Sacramento housing market slows down after Labor Day, but doesn’t see that slowdown this year. Merchant said that she thinks the housing market will remain strong as she is cautiously optimistic about the rest of the year.

“I think people used to say that [they] wanted to get settled before school started back in the day,” Merchant said. “I don’t think that’s such a driver anymore.”

Joshua Stern, a Realtor with Keller Williams Salt Lake City’s The Stern Team, said that for 2020 his market is on track to have the highest sales record in Utah year over year.

“I think the next few months you’re gonna see a plateau and the reason why I think you’re gonna see it is just because of the lack of inventory,” Stern said.

Stern said that his team remains busy not only due to pent-up demand but also because of Utah’s low unemployment rate and low mortgage rates driving migration to Salt Lake City.

Susan Hamblen, broker and owner of Long Island-based EXIT Realty Achieve, also said that buyers aren’t concerned about moving while school is in session, either. 

“Our market hasn’t let off because school has started,” Hamblen said. “We’re continuing to have really high demand and a lot of activity in the marketplace regardless of the fact that school has started.”

Hamblen said that there’s about a month-and-a-half worth of inventory in the Long Island market and she is expecting a strong end to 2020. 

While the holidays in November and December are generally when Hamblen said she sees the market slowing down, she said she’s not so sure that will happen this year. 

“I think we’re going to continue with strong buyer demand,” Hamblen said. “There’s a little bit of a frenzy for people to get a house right now.”

Lisa Rees, a Realtor with Coldwell Banker Reilly and Sons based in Leavenworth, Kansas, said that she had a little bit of a slow down right as school started, but now she said she’s swamped.

“I think people are wanting to get back to normal again and getting back into continuing their home search or getting their current house ready to sell,” Rees said. “Believe it or not, the housing market has not been hit near as hard as you would think with all that has happened this year.

“I think it is super crazy right now due to low inventory and lots of buyers, so if it does slow it won’t be by much and/or just plateau for quite a while,” Rees said.

Down in Southlake, Texas, Denise McClelland Johnson, broker and owner of Torelli Properties with Keller Williams DFW, said she had a healthy summer buyer-wise, and her team thinks they will continue to see strong buyer activity continue for the next few months.

Pending the upcoming presidential election, Johnson said they expect a strong market all the way until the spring.

“I don’t think we’re looking at a slowdown for 2021, I think that’s predicted to be strong, and then maybe even after that,” Johnson said. “I do think if interest rates are where they are, buyers are able to buy larger homes, more affordably and because more people are home, because of school and or work, they are looking for more space.”

In Palm Beach County, Florida, Terry Story, a Realtor with Keller Williams Realty Services in East Boca Raton, Florida, said that they thought they would run out of buyers because of the pent-up demand from COVID-19 in March, April and May.

Story said that properties are coming off faster than they’re coming on.

“[We thought] ‘they’re all rushing in to buy right now, When is it going to stop?’ Well, they’re still coming,” Story said.

“The difference that we’re seeing this year that we haven’t ever seen in the past, is what we thought was just strictly pent-up demand is turning to be something greater than that,” Story said. “And where are these extra buyers coming from? Well, we get calls all the time, from different parts of the country more so than I have ever seen wanting to move down here.”

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Source: HousingWire Magazine

Pending home sales at an all-time high! Now what?

Riddle me this: How can home sales grow when we have no homes to buy?

When a monthly home sales print fails to meet expectations the excuse often used is that inventory is too low to meet the demand. But not so long ago, for more than a year we had negative year-over-year monthly data with inventory rising on a year-over-year basis. Now we have the opposite scenario. Today, I give you an all-time high in pending home sales, according to NAR, along with cycle lows in inventory. Apparently we have no homes to buy along with this index hitting an all time high! Riddle me that!

Keep in mind, however, that the spike in the pending home sales index doesn’t mean we are going to have an existing home sales boom like they did during the housing bubble years. We are far from those levels even with purchase applications up 22% year over year according to the most recent report from the Mortgage Bankers Association.

Today’s pending home sales data adds another week to the 19 consecutive weeks of year-over-year growth in purchase applications. We are steadily working our way toward a positive year for existing home sales. Even though purchase application data are averaging over 20% year-over-year growth in the last 19 weeks, we still need to make up for the nine negative year-over-year prints we had at the beginning of the COVID-19 crisis.

The purchase application data provide a 30-90 day preview of what to expect in existing home sales. Remember, our best existing home sales prints in the previous expansion occurred in the fall and winter, not the heat months of spring and summer. Sales still have legs to walk higher as we have seen for the past four months.

Context is key. We are working from the mother of all low bars this year due to COVID-19. At some point in the future, the data will smooth out and we can work from more normal conditions. I go back to my main theme for housing for the years 2020-2024 and that story is about demographics and mortgage rates. The February housing data before COVID-19 hit our shores showed a break-out performance for that month compared the past 12 years.

If there was no COVID-19 we could have expected to end the year with existing home sales in 2020, 400,000 -500,000 higher than in 2019. Pre-COVID February data had nearly 40% year-over-year growth in housing starts as well. So keep in mind that this housing market growth story was in the works before COVID-19 hit. Now we just need to catch up for lost time.

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Source: HousingWire Magazine