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50 | TH E M R EP O RT 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 LOCAL EDITION Is There Any Silver Lining to be Found in Ocwen's 2015 Earnings Report? WHILE REPORTING A NET LOSS FOR THE YEAR IN 2015, OCWEN ALSO ANNOUNCED THE LAUNCH OF A NEW COMMERCIAL LENDING BUSINESS LINE AND ITS PLANS TO BECOME A "WORLD-CLASS ASSET ORIGINATION AND SERVICING COMPANY." GEORGIA // Atlanta-based Ocwen Financial experienced its second straight year of financial difficulties, reporting a net loss of $224.3 million for the fourth quar- ter of 2015 and a net loss of $246.7 million for the full year of 2015 in the servicer's earnings statement released in late February. Although a net loss of $224 million is bad news for any for-profit company, it is still an improvement from Ocwen's regulatory turbulent year of 2014 in which the company reported a record net loss of $546 million following a net profit of $310 mil- lion in 2013. Ocwen posted a net loss of $66.8 million in Q 3 2015. Revenues were also down for the servicer. Ocwen's fourth- quarter revenue of $362.5 million represented a 26.5 percent decline from the fourth quarter of 2014, primarily due to the impact of mortgage servicing rights (MSR) sales and portfolio run-off in 2015, according to Ocwen. The company's revenue for the full year of 2015 was $1.7 billion, a decline of 17.5 percent year-over- year. Amount of cash generated from operating activities for the full year was $582 million. The positive note from Ocwen's 2015 earnings statement was the $331 million in available liquidity as of the end of 2015, which was an increase of $202 million from the previous year. "We continue to make prog- ress in resolving legacy issues. We also continue to lower our corporate debt, ending the year with a corporate debt to equity ratio of under 0.9 to 1," com- mented Ron Faris, President and CEO of Ocwen. "We are also focused on continuous improve- ment in operational and service excellence, employee engage- ment, diversity, and inclusion. We have made good progress on our cost improvement initiative announced last year, and we are committed to making further progress in this area, while con - tinuing to focus on the borrower experience." The pre-tax loss for Ocwen in Q 4 2014 was $129.3 million, im- pacted by such factors as monitor costs ($22.1 million), net losses from sales of non-performing agency MSRs ($14.0 million), and legal and other settlement costs ($13.9 mil - lion), according to Ocwen. A highlight of the fourth- quarter 2015 was the launch of a new commercial lending business line, Automotive Capital Services (ACS), which makes short-term inventory-secured loans to inde - pendent car dealers to finance their inventory. As of the end of February, the ACS line had en- tered eight sales markets in five states and executed credit lines for $19 million in new commit- ments with 22 dealers, according to Ocwen. "Moving forward, our vision for Ocwen is to be a world-class asset origination and servicing company," Faris said. "We are very excited about the formal launch of our Automotive Capital Services commer - cial lending business, and we continue to invest in our other lending businesses, all of which we believe will drive earnings growth in the future. We believe the successful implementation of our strategy and its initia - tives can, over time, restore the Company to profitability and earnings growth." Other highlights of 2015 included 84,488 loan modifica - tions, with 48.2 percent of those mods completed through the government's Home Affordable Modification Program (HAMP) and 46.2 percent of the mods including some principal reduc - tion; a partnership with New Residential in Q 4 to execute Ocwen's first call rights transac- tion on MSRs for loans with a UPB of $528 million, resulting in a gain of $3.2 million for Ocwen and retention of the transaction's performing loans, which were about 90 percent of the loans; originating forward mortgage loans with a UPB of $813.8 million and reverse mortgage loans with a UPB totaling $173.3 million in Q 4; and an estimated value of $97.7 million for the reverse mortgage portfolio at the end of the year. Nationstar's Q4 Profits Led by Servicing, Originations Growth NATIONSTAR ANNOUNCED $34 MILLION IN EARNINGS FOR THE FOURTH QUARTER. TEXAS // Driven by an uptick in servicing profitability and growth in originations, Nationstar Mortgage Holdings Inc., head- quartered in Dallas, reported its fourth-quarter 2015 earnings reached $34 million, or 32 cents per share, according to the com- pany's earning statement released in late February. The company's GAAP net income totaled $79 million, or 73 cents per share. "Our Servicing segment continued to generate solid cash flows with sequential improve - ment in profitability to exit the year above our target of five basis points. In addition, our Originations segment had a strong fourth quarter, posting its best annual performance since 2012 and continues to provide a cost effective source of new ser - vicing assets," said Jay Bray, CEO at Nationstar. The servicing sector at Nationstar earned $51 million of adjusted pretax income, or 5.1 bps based upon average UPB, for the quarter. "Adjusted pretax income improved for the fourth straight quarter as we reduced delin - quency rates and implemented technology and process initia- tives to drive improved profit- ability," the statement said. Year-end 2015 servicing profits reached $117 million, down significantly from 2014's total of $213 million, which Nationstar says was driven down by higher amortization. The company reported that $91 billion of servicing assets were boarded as a result of acquisi - tions and origination activities, up 56 percent year-over-year. For 2016, Nationstar said, "before consideration of poten- tial MSR acquisitions, we expect the current servicing portfolio to grow modestly, with limited utilization of capital, given the recent subservicing win, expected origination activity and current CPR rates. Our servicing segment is focused on achieving high quality earnings that exceed 5 bps through the delivery of services that exceed the expectations of both customers and regulators." On the originations side, adjusted pretax income totaled $43 million in the fourth quarter, marking the 8th consecutive quarter of pretax income above $40 million. Last quarter, origina - tion profits reached $50 million. Year-end 2015 originations income totaled $210 million, up from $206 million in 2014. "The originations platform continues to replenish the MSR portfolio at attractive rates of return. As expected, adjusted pretax income decreased se - quentially principally due to the industry-wide implementation of TRID and general seasonality in the fourth quarter," the company said. "Key initiatives for 2016 include increasing customer re - capture by focusing on multiple segments within the servicing portfolio, expanding our FHA/ VA streamline capabilities and reducing operating expenses." The Xome segment of the company delivered $6 million in pretax income in the fourth quarter, but earnings were down "due to an increase in technol - ogy and marketing investments, higher title expenses due to TRID delays and increased title orders, and a reduction in property sales attributable to seasonality and pipeline delays that are in the process of being addressed." Third-party revenues rose to 37 percent of total revenues, SERVICING