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Th e M Rep o RT | 49 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SERVICING the latest Amid this financial crash diet, Ocwen was also the focus of an investigation by the Office of Mortgage Settlement Oversight, which alleged that Ocwen did not comply with terms of the National Mortgage Settlement of 2012 and is seeking almost $2 billion in damages. Ongoing regulatory scrutiny and nag- ging allegations of servicing violations triggered the removal of Ocwen from Morningstar Credit Ratings' Alert in February. During 2014, Ocwen incurred $728 million in preliminary nor- malized expenses, which include $420 million of "goodwill impair- ment" and $186 million in legal and settlement expenses. Despite the recent turmoil, Ocwen's president and CEO, Ron Faris, says he expects his company to have a profitable 2015. "I am encouraged by the progress Ocwen has made so far," said Faris. "We currently expect to … meet all of our ongoing financial and servicing obligations." Faris says the sales this year have generated substantial cash flow and that extending the company's $1.8 billion advance re- ceivable facility, which begins am- ortizing in October, will help put the company back in the black next year and beyond. Ocwen also announced that it would "continue meeting our regulatory requirements, execute on our plan to reduce our GSE servicing expo- sure, continue to comply with our debt covenants, and maintain our current servicer ratings," according to the statement. "We have already significantly advanced our Agency MSR sale strategy at attractive prices, entered into an amendment with Home Loan Servicing Solutions that provides more stability for the company, and reduced our 2015 refinancing risk," said Faris. "We are optimistic that the investments we have made and are making in these areas reduce significantly the substantial risks associated with non-compliance with laws and regulations and improves our service to home- owners, which will ultimately result in better overall returns to our shareholders." Fed decides against interest rate Hike experts and FoMC say future rate increases are still a possibility. d espite rumblings that the Federal Open Mar- ket Committee (FOMC) would increase interest rates at its monetary policy meet- ing in April, the committee instead reaffirmed its current rates, stating that the 0 to .25 percent rate would remain in place. According to the FOMC's statement, this decision was made to "support continued progress toward maximum employ- ment and price stability" and largely factored in energy prices, household spending and incomes, unemployment rates, inflation and other economic influencers. Despite opting to continue with its current interest rates, the FOMC's statement did recognize that increases in the future are possible. "In determining how long to maintain this target range [0 to .25 percent], the Committee will assess progress—both realized and expected—toward its objec- tives of maximum employment and 2 percent inflation," the statement read. "The Committee anticipates that it will be ap- propriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reason- ably confident that inflation will move back to its 2 percent objec- tive over the medium term." When those increases may come, however, are up in the air. "When the Committee decides to begin to remove policy accom- modation, it will take a balanced approach consistent with its longer- run goals of maximum employ- ment and inflation of 2 percent," the FOMC statement read. "The Committee currently anticipates that, even after employment and in- flation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run." Mark Fleming, chief econo- mist at First American, told the MReport he's not surprised at all about the Fed's decision. "The economic data was indicating that rate hikes would likely be pushed out," he said. "In particular, the lower level of inflation caused by cheap oil and weakened exports caused by a strong dollar contributed to an otherwise unchanging situation in [April's] announcement." Ataman Ozyildirim, director of business cycles and growth research at The Conference Board, says he wasn't surprised either. "It's not surprising that the Fed did not raise interest rates at this time, nor would it be surprising if they waited until September," said Ozyildirim. "We found out this morning that real GDP growth rate was a lower than expected 0.2 percent in the first quarter. The U.S. economy is slowing in 2015 compared to the trend growth of 2014 although it appears resilient enough to generate 2 to 2.5 percent growth in the medium term." Fleming also says he expects mortgage rates to remain low for the foreseeable future. "The labor market, in particu- lar, remains about the same right now with some excess capac- ity and weak wage growth," Fleming said. "This is good for the housing sector as it seems that mortgage rates will remain low, I believe, through the rest of the home buying season." As for future rate hikes, Ozyildirim says it all depends on the economy. "Downward pressure on profits, falling oil-related invest- ment and the strong dollar are holding back the U.S. economy," Ozyildirim said. "Housing construction is unusually weak, partly a result of very weak household formation, even though interest rates are very low. Some of these are tempo- rary factors, some are not. If most of these conditions are reversed in the next couple of quarters and early signs appear that labor market slack is re- moved and that inflation expec- tations start rising significantly, the FED would likely find it easier to start raising rates." Fleming says he predicts increased rates might not occur until years down the line. "It may be as late as 2016, de- pendent mostly on inflation and labor market conditions over the next six months," Fleming said. "The economic data was indicating that rate hikes would likely be pushed out." — Mark Fleming, First American