Wilson-TPC Posted January 5, 2015 Share Posted January 5, 2015 There's 10% left so that's nice. Link to comment Share on other sites More sharing options...
jay21 Posted January 5, 2015 Share Posted January 5, 2015 There's 10% left so that's nice. I am not expecting much in terms of buybacks given the settlement and potential new guidelines regarding the financial position of nonbanks. I think ASPS will be less regulated/scrutinized and has more potential for buybacks (debt or equity). Link to comment Share on other sites More sharing options...
mcmaaaaath Posted January 5, 2015 Share Posted January 5, 2015 Jay21-- what are the guidelines your talking about? And question for anyone else-- has anyone tried to run a valuation of the non-Agency MSR portfolio, most of which is owned* by HLSS but remains on OCN's balance sheet for technical reasons? This is the portfolio that it sounds like they are NOT planning to sell. HLSS values the rights at about $600m but uses discount rates of 15-22% with a weighted average of 19% which is significantly higher than what I am using. It seems to me the residual value of the non-Agency to Ocwen is in the range of $600-700m discounted at 8%. But I don't think the way Ocwen does the accounting the non-agency MSR portfolio actually contributes to OCN book value-- they carry it at something like $700m but have a $620m liability (to HLSS) as well. *not actually owned, technically, since HLSS is not a mortgage servicer and can't own MSRs Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted January 5, 2015 Share Posted January 5, 2015 So the consent order will impose benchmarks upon Ocwen to improve its servicing. My interpretation is that these benchmarks will only apply to New York borrowers? If so, the added compliance burden won't be much because New York borrowers only account for a fraction of Ocwen's portfolio. 34. The purview of the Operations Monitor will extend to all matters directly or indirectly affecting New York borrowers, including matters that affect borrowers in all states or in multiple states that include New York. Ocwen might need to step up its game in other states because the New York settlement might push other regulators into being tougher. At the very least, the disclosure of the letter misdating ("backdating") issue meant that the CFPB had to look into it and to do a more thorough examination of Ocwen. Link to comment Share on other sites More sharing options...
jay21 Posted January 5, 2015 Share Posted January 5, 2015 Jay21-- what are the guidelines your talking about? And question for anyone else-- has anyone tried to run a valuation of the non-Agency MSR portfolio, most of which is owned* by HLSS but remains on OCN's balance sheet for technical reasons? This is the portfolio that it sounds like they are NOT planning to sell. HLSS values the rights at about $600m but uses discount rates of 15-22% with a weighted average of 19% which is significantly higher than what I am using. It seems to me the residual value of the non-Agency to Ocwen is in the range of $600-700m discounted at 8%. But I don't think the way Ocwen does the accounting the non-agency MSR portfolio actually contributes to OCN book value-- they carry it at something like $700m but have a $620m liability (to HLSS) as well. *not actually owned, technically, since HLSS is not a mortgage servicer and can't own MSRs There has been a lot of talk on introducing capital standards for nonbanks: http://www.insidemortgagefinance.com/imfnews/1_385/daily/fhfa-contemplates-capital-standards-for-nonbank-mortgage-firms-1000027955-1.html They will not sell their non-agency portfolios I believe their accounting treatment with HLSS is much like securitization, where they "sell" the MSR to HLSS but remain as subervicer, and then consolidate as the primary beneficiary. Could be wrong, but that was my understanding when I read the FS months ago. Link to comment Share on other sites More sharing options...
usdtor05 Posted January 5, 2015 Share Posted January 5, 2015 Hi there, 100% of the revenue related to HLSS is recorded as revenue top line with HLSS' portion being recorded as interest expense and amortization. the UPB and the revenue/expenses need to be normalized which explains a lot of the variability when you look at it as a % of UPB. Subservicing as a % (which is what HLSS is basically) is roughly 22bps of revenue over last couple of years plus your ancillary. The model has shifted. Previously you had a company that could grow relatively capital free but made lower overall margins due to the increased sub-servicing. Now you are likely going to have a company that keeps more of anything it can buy/originate so the underlying margins will be greater but will require capital. They should be able to free up a lot of capital over next few years by selling the agency MSRs...question is where that goes (debt, MSRs, shares, etc.). Link to comment Share on other sites More sharing options...
valueinvestor82 Posted January 6, 2015 Share Posted January 6, 2015 Is there any logical explanation for OCN being at $13? I have a hard time coming up with an estimate of value below $25. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted January 7, 2015 Share Posted January 7, 2015 I think these guys did a good job of explaining the valuation and a look ahead. http://m.seekingalpha.com/article/2798875 Link to comment Share on other sites More sharing options...
Picasso Posted January 13, 2015 Share Posted January 13, 2015 Whichever analyst got Klarman in OCN in the $20's is probably looking for another job right about now.... Link to comment Share on other sites More sharing options...
Liberty Posted January 13, 2015 Share Posted January 13, 2015 Whichever analyst got Klarman in OCN in the $20's is probably looking for another job right about now.... Maybe he can start a fund with the former Soros analyst who pitched Herbalife? ;) Link to comment Share on other sites More sharing options...
A_Hamilton Posted January 13, 2015 Share Posted January 13, 2015 Whichever analyst got Klarman in OCN in the $20's is probably looking for another job right about now.... What makes you think they are still in the name post-the NY settlement? If anyone could read the writing on the wall that there was massive pot'l for action from other AG's offices it should have been Baupost...they are litigation junkies. Link to comment Share on other sites More sharing options...
jay21 Posted January 13, 2015 Share Posted January 13, 2015 Whichever analyst got Klarman in OCN in the $20's is probably looking for another job right about now.... Pretty ridiculous to say. Im sure their culture is fine if things dont work out if the analysis was sound and they encourage you to learn from mistakes Also, their stomach for distressed/underperforming securities is pretty high. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted January 13, 2015 Share Posted January 13, 2015 California is 23% UPB, the discussions could continue for quite some time, and that 23% has value. I don't see how the stock falls another 37% today. Maybe I'm really stupid but this seems to be a compounding of what was already a terribly gross overreaction based on speculation of the future. Link to comment Share on other sites More sharing options...
yadayada Posted January 13, 2015 Share Posted January 13, 2015 Yeah this was based off a couple 100 complaints they got, and a few mistakes OCN made. So there will be a hearing and some conferences, and if they cannot agree then they will lose their license. But that would be bad for everyone. So it seems the market is grossly overreacting and just pricing in the worst to be sure. Im really kicking myself for not having patience with this one. Link to comment Share on other sites More sharing options...
undervalued Posted January 13, 2015 Share Posted January 13, 2015 who's buying down here? Link to comment Share on other sites More sharing options...
jay21 Posted January 13, 2015 Share Posted January 13, 2015 California is 23% UPB, the discussions could continue for quite some time, and that 23% has value. I don't see how the stock falls another 37% today. Maybe I'm really stupid but this seems to be a compounding of what was already a terribly gross overreaction based on speculation of the future. I kinda agree. Disclaimer: my actions are not backing up these words, yet Link to comment Share on other sites More sharing options...
A_Hamilton Posted January 13, 2015 Share Posted January 13, 2015 California is 23% UPB, the discussions could continue for quite some time, and that 23% has value. I don't see how the stock falls another 37% today. Maybe I'm really stupid but this seems to be a compounding of what was already a terribly gross overreaction based on speculation of the future. I kinda agree. Disclaimer: my actions are not backing up these words, yet But who is the marginal buyer of these MSR's given the regulatory environment? Link to comment Share on other sites More sharing options...
Cunninghamew Posted January 13, 2015 Share Posted January 13, 2015 I have opened up this thread a hundred times and started reading countless other articles about OCN/WAC. Every time I give up on reading after about 10 minutes, because the required analysis seems to complicated and time could be better spent looking for other ideas. I am curious if anyone has ever actually tried taking a stab at the value of OCN in runoff. I have seen a lot of comments that the value is much higher, but not much in the way of methodology. If so do you mind sharing your work? I recognize that I am asking a lot for not contributing anything, so thanks in advance if anyone is willing to share Link to comment Share on other sites More sharing options...
jay21 Posted January 13, 2015 Share Posted January 13, 2015 I have opened up this thread a hundred times and started reading countless other articles about OCN/WAC. Every time I give up on reading after about 10 minutes, because the required analysis seems to complicated and time could be better spent looking for other ideas. I am curious if anyone has ever actually tried taking a stab at the value of OCN in runoff. I have seen a lot of comments that the value is much higher, but not much in the way of methodology. If so do you mind sharing your work? I recognize that I am asking a lot for not contributing anything, so thanks in advance if anyone is willing to share They get broker quotes for a substantial portion of their MSR book so that makes me a little more comfortable with mgmts assertions. It's also a somewhat active market for agencies where there are plenty of MSR transactions and IOs are direct comparables. I would be pretty surprised if anyone actually tried to model out the CFs. Link to comment Share on other sites More sharing options...
Guest roark33 Posted January 13, 2015 Share Posted January 13, 2015 Will any OCN/ASPS bull consider the possibility that Erbey and company are acting in a fraudulent manner? Lots of value investors, myself included, see regulatory action as a time for good buys, because price is driven down on concerns that are typically overblown. However, I think one should seriously consider the possibility that these concerns are actually valid and real in the case of OCN/ASPS. The complaint numbers and ratios are not evidence of lack of fraud. Most people getting foreclosed do not have the wherewithal to make an actual complaint, or at least a well-reasoned and articulated one. In fact, that is the reason most sketchy companies are able to persist in these markets for so long. I just don't think people should always assume the regulators are idiots and/or out to score political points. Sometimes businesses do stupid, greedy things that they should be punished for. For example, marriot recently blocked guests usage of mobile wi-fi spots. Google assisted in the lawsuits and Marriot got smacked down for this practice. This wasn't some political point-scoring case, it was merely one business over-reaching. Link to comment Share on other sites More sharing options...
mcmaaaaath Posted January 13, 2015 Share Posted January 13, 2015 Roark-- I agree. I don't think you can be certain that no fraud is committed just because complaint ratios are similar or lower than other servicers. Why would Ocwen NOT provide California the information they are requesting? Either a) they have some shady practices that they don't want to shed light on or b) they are really dumb. My guess is a). That said, I have been buying a little Ocwen this morning--for the first time. I come into it assuming that there is some level of fraud in Ocwen's practices, and that expenses will go up while revenues from late fees and other fees go down. The upside case is that they know what the fraudulent practices are and can curtail them. On one hand, why clearly management should know what the fraudulent practices are if they are widespread. And if they know what the practices are, they must think that they are fixable, or else why would they have bought back $300m worth of stock in the last two quarters? As a 15% shareholder, Erbey knows its his money that are going into those buybacks. He'd be a fool to squander that money knowing that NY and California are breathing down their neck, if the problems are truly un-fixable. On the other hand though, why the **** hasn't Erbey stopped the fraudulent practices already? Maybe this Cali situation will be a big wake up call. Another way to think about this is-- why shouldn't OCN be able to copy the practices of say Nationstar and Greentree, even if that means lower profitability? Nationstar is targeting 10bps per UPB in annual operating margin. Perhaps the fraudulent practices are just too ingrained in the way Ocwen operates? Meh seems unlikely. Perhaps Nationstar is doing the same stuff but just hasn't been caught yet? Possible. The downside risk, given this morning's news, is obviously that they may have to exit California. There's a lot of unanswered questions: would they be able to sell JUST the cali biz? It seems like it would be difficult to service any pool of RMBS without servicing California. what price per UPB would they get? would the buyer just take over Ocwen's whole business, or try to onboard the mortgages onto a different servicing platform? MSRs are a weird asset because while valuable, you need various regulatory and investor permissions to sell it. Still, I think at $9 or lower per share, the value of Ocwen's servicing rights in the hand of another operator is more than the stock price. I think that the current discount more than compensates for any difficulty they may have in exiting the business, if they are forced to. Link to comment Share on other sites More sharing options...
scorpioncapital Posted January 13, 2015 Share Posted January 13, 2015 Looks like they finally gave them the documents. The wording suggests it is "new management" doing the fixing not the "old management" from October... "Under the oversight of our newly hired chief risk officer, we are cooperating fully with the DBO and recently provided what we believe to be accurate and complete information," Ocwen said." Link to comment Share on other sites More sharing options...
mcmaaaaath Posted January 13, 2015 Share Posted January 13, 2015 Ocwen just sent out a press release, saying among other things "we believe we have provided the requested information in the format requested." and "we expect a satisfactory outcome for all parties". Also contains a VERY important statement of support from the CEO of the National Asian American Coalition. http://shareholders.ocwen.com/releasedetail.cfm?ReleaseID=891150 Link to comment Share on other sites More sharing options...
philly value Posted January 14, 2015 Share Posted January 14, 2015 For what it's worth, now trading at a bit over 50% of book value. Goodwill and DTAs are about 30% of book. Link to comment Share on other sites More sharing options...
Patmo Posted January 14, 2015 Share Posted January 14, 2015 Some analyst says that runoff value is about 12 bucks... Since i dont know jack ill cut that in half and say ill buy a few shares at 6, expecting most of my money back in event of a bad outcome, and explosive returns otherwise. Anyone has a better figure for runoff value? Link to comment Share on other sites More sharing options...
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