Ocwen Financial Company (NYSE: OCN), dad or mum company of leading reverse mortgage loan loan company Liberty Reverse House loan, recorded strong quantities in its reverse mortgage organization in Q2 2021 and specific some of what it ideas to do in the reverse mortgage loan business enterprise sector soon after its wholly-owned subsidiary PHH Home loan Corporation obtained the operations, personnel and assets of Reverse Home finance loan Options (RMS) from its earlier owner, Property finance loan Assets Administration, LLC (MAM).
This is in accordance to an earnings presentation of the company’s money success from the 2nd quarter of 2021, and an accompanying conference call by corporation management held on Thursday early morning. In addition to offering much more aspects about the acquisition of the RMS servicing system, the company also detailed that the in general reverse property finance loan quantity from Liberty is up just about 50% year-in excess of-year, and organization leaders proceed to tout Liberty’s general performance as a contributing factor to the company’s economical placement.
Reverse property finance loan volume is up
In the company’s earnings release, Ocwen states that the acquisition of the RMS servicing system will assist in transforming Liberty into an conclusion-to-conclude service provider for reverse home loan debtors and should really bolster the lender’s place in the room.
“This will uniquely placement the organization to be the only whole-services supplier in the beautiful and developing reverse house loan market and is expected to shut in Q4,” the enterprise claimed.
Formerly when the deal was to begin with introduced, the closing of the offer valued at $12.4 million was anticipated to shut in Q3 2021, but no rationale was supplied in launched elements for the new timetable of Q4.
Ocwen CEO Glen Messina comprehensive some of the outlook on the reverse mortgage sector, which include how Liberty has executed around the previous 12 months for the duration of the earnings presentation held on Thursday morning.
“The previously introduced RMS platform acquisition will assistance us expand our presence in reverse home loans, and we consider uniquely positions us as the only comprehensive-provider company in this area, developing a different new growth opportunity for us,” he explained. “Reverse home loan endorsement quantity improved 21% for the very first 50 percent of 2021 as opposed to the exact same period of time in the prior year, and we are unquestionably a beneficiary of this expansion,” he added afterwards.
Messina is also delighted at the speed of reverse mortgage volume expansion for Liberty when comparing current figures to the similar period of time in 2020.
“Reverse quantity is up 47% year in excess of yr,” he reported. “Pre-tax income in reverse originations is on regular about 6 periods out of forward. And in addition to rising general reverse volume, we are focused on driving retail originations, which are the greatest margin in reverse. Retail reverse volume is up 150% year more than year in the to start with fifty percent as in comparison to the exact same time last calendar year.”
‘Long-phrase advancement opportunity’ in conclusion-to-finish reverse mortgage provider
Messina went into added depth about what the RMS deal will suggest for equally Ocwen broadly and Liberty especially, citing the possible chance that exists in the reverse house loan company based mostly on its growth in excess of the past calendar year as properly as companies the company can present that are currently absent from the current industry landscape.
“As aspect of our efforts to diversify servicing revenue sources for the duration of the second quarter, we executed an agreement with Reverse House loan Solutions and their mum or dad business, Home loan Assets Administration (MAM), to acquire the reverse servicing platform and real estate-owned (REO) organizations,” Messina said. “Upon closing we will come to be the sub-servicer for RMS and MAM below a 5 calendar year sub-servicing agreement, which would approximately double our reverse servicing portfolio.”
Also cited as a good addition dependent on the deal was the RMS company’s reverse home finance loan servicing abilities and its expert staff, as nicely as custom made technological know-how RMS has entry to in buy to achieve its duties in the place. In addition to the acquisition, Messina describes the proverbial “door” that has been opened to partner with MAM father or mother corporation Waterfall Asset Administration, which adds supplemental progress possible.
“The transaction supports our method to stand up an in-household reverse servicing capacity and to extend our sub-servicing products supplying to include things like forward servicing, modest harmony business and reverse mortgages,” Messina stated. “We do assume the acquisition to be mildly diluted for 2021 largely thanks to integration and restructuring costs. But, we do believe it will grow to be pre-tax money accretive starting in 2022.”
The acquisition of RMS will also supply Liberty the chance to be a exceptional participant in the reverse home loan room by providing a full bank loan life span of services from beginning to close, one thing also formerly alluded to by Liberty President Mike Kent in an interview with RMD this summer.
“With the closing of this transaction, we will be the only reverse home finance loan corporation that originates, securitizes and instantly products and services our reverse mortgages delivering our prospects and associates with an stop-to-conclude alternative,” Messina said. “We think this enables sizeable progress opportunity and even more solidifies our place as a premier provider in the reverse property finance loan area with a differentiated model. The transaction is anticipated to near in the fourth quarter of this calendar year, clearly matter to regulatory approval and other customary closing conditions.”
Messina finished his portion of the presentation by reiterating common enjoyment about what the acquisition of RMS could mean for Ocwen, PHH and Liberty.
“To wrap up right here, we’re enthusiastic to lover with Property finance loan Belongings Administration and Waterfall investments in the reverse house loan marketplace which we believe that is a prolonged time period growth option for us,” he stated.
Present reverse servicing landscape
In the issue-and-response part of the get in touch with, Messina fielded unique issues related to the RMS acquisition which helps give some added context to the value of the deal from Ocwen’s perspective.
“The attractiveness of the transaction that we’re accomplishing with RMS is it presents us a reverse platform to, once again, produce harmony in our reverse servicing portfolios,” Messina said. “Based on the UPB, the RMS sub-provider that we’re getting on will have about a 50/50 balance concerning owned reverse servicing and sub-support reverse servicing. Our expectation is that we want to continue to improve the two of all those portfolios.”
Messina also described the reverse servicing sector itself as an prospect thanks to the reasonably few number of players there are in the area from his point-of-check out.
“It’s more than an $80 billion sub-servicing industry out there for reverse home loans with restricted levels of competition,” he claimed. “So, we do imagine there is an prospect to proceed to increase that piece of our business enterprise. Our target has generally been balancing diversification, and that is regular with how we’re approaching the reverse servicing area.”