phil_Buffett Posted October 30, 2014 Share Posted October 30, 2014 what i dont get, with this low Ratio of complaints, why they have probably to pay over 100mio to settle? could somebody explain this to me? Extortion and Politics ;D ok it is the same whats happen bac. so it is not important. Long term ocwen will make Money and Business and this Thing is very short term drag. Link to comment Share on other sites More sharing options...
yadayada Posted October 30, 2014 Share Posted October 30, 2014 Yea it seems easy from now on to make lawsky look bad for ocwen. Almost 0% complaints, more people kept in their homes etc. so prob will be resolved soon. Erbey said that they are "unlikely to reach settlement for less than $100M." Even a big settlement seems like a fine outcome. What worries me are the potential "non financial" elements of a settlement that Erbey mentioned. A hit to earnings power or ability to buy MSR's would be a big deal. Forced divestiture would be huge, but seems like overkill. I doubt they can not buy new MSR's. They could literally make tv commercials why their business is better then banks and how the overzealous regulator is stopping it for his own political career. Obviously that is unlikely, but if they push Ocwen far enough into a corner something like that becomes a real possibility. Plus pressure from investors of those mortgages to not do something like that, because with Ocwen they get more UPB back? Just seems like there is so much pressure now to slap a fine on it and let it go bussiness as usual. Especially considering Lawsky got some heat for being a bit too proactive already. Only bad possibility is if they find some new dirt. But they had monitors for like 8-10 months now, so something would have been found already if that was the case. You would also see a lot higher complaint ratio then. Link to comment Share on other sites More sharing options...
krazeenyc Posted October 30, 2014 Share Posted October 30, 2014 Yea it seems easy from now on to make lawsky look bad for ocwen. Almost 0% complaints, more people kept in their homes etc. so prob will be resolved soon. Erbey said that they are "unlikely to reach settlement for less than $100M." Even a big settlement seems like a fine outcome. What worries me are the potential "non financial" elements of a settlement that Erbey mentioned. A hit to earnings power or ability to buy MSR's would be a big deal. Forced divestiture would be huge, but seems like overkill. I doubt they can not buy new MSR's. They could literally make tv commercials why their business is better then banks and how the overzealous regulator is stopping it for his own political career. Obviously that is unlikely, but if they push Ocwen far enough into a corner something like that becomes a real possibility. Plus pressure from investors of those mortgages to not do something like that, because with Ocwen they get more UPB back? Just seems like there is so much pressure now to slap a fine on it and let it go bussiness as usual. Especially considering Lawsky got some heat for being a bit too proactive already. Only bad possibility is if they find some new dirt. But they had monitors for like 8-10 months now, so something would have been found already if that was the case. You would also see a lot higher complaint ratio then. Yada, I think you have to ignore the ethics of what Lawsky is doing (even if you don't like it) and focus on the potential outcomes. We could easily find ourselves in a political environment that would make it very easy for Lawsky to press even harder. My guess is the market likes the fact that Erbey is mentioning settlement -- it would be an excellent result for both OCN and ASPS if there is simply a fine paid -- even if it is say $200MM. When I first looked at OCN and ASPS -- I thought it was a sneaky end around regulations allowing ASPS to be a really profitable company outside of the regulation and scrutiny that OCN would be subject to. I've always worried that regulators would eventually frown on the OCN/ASPS relationship and break it up. Otherwise I'd probably be buying ASPS right now. Are my fears totally misguided? While I don't know any personally, it seems as if there are plenty of real estate brokers and home owners doing short sales that are likely to complain to their congressman about the relationship between OCN and ASPS/Hubzu. Link to comment Share on other sites More sharing options...
yadayada Posted October 30, 2014 Share Posted October 30, 2014 I think your misguided there. You need a certain infrastructure to use ASPS's services, the other servicers don't have that. Also ASPS actaully gives OCN a low er cost advantage vs other servicers. So it is not overcharging OCN. And ASPS actually sells services and software to other companies. I doubt it really is a big risk. I thinkt hey are the better investment though. ASPS is trading at like 6.5x earnings now. Just imagine the upside if new MSR"s will be boarded or income will not fall of a cliff in the coming years.. And the reason Im not scared of Lawsky is because he does not have a case here. Erbey could make him look bad in the future. And there is not that much to gain here vs some 200bn$ bank. When your going after a bank, you know they did something bad, so they don't want to drag it out. But pushing OCN in a corner could be dangerous for him. The risk reward is not there for Lawsky to push it much further if he has no ground to do so. Erbey could go to the press and show them the statistics here, and Lawsky would could potentially look bad and look like he is overstepping, in it for himself. I doubt he would risk that if he can just save face now and still look good. Erbey can basicly make Lawsky look like the guy that actually gets more people kicked out of their home. I doubt he would risk that for at most several 100 million$ more? Link to comment Share on other sites More sharing options...
krazeenyc Posted October 30, 2014 Share Posted October 30, 2014 I think your misguided there. You need a certain infrastructure to use ASPS's services, the other servicers don't have that. Also ASPS actaully gives OCN a low er cost advantage vs other servicers. So it is not overcharging OCN. And ASPS actually sells services and software to other companies. I doubt it really is a big risk. I think they are the better investment though. ASPS is trading at like 6.5x earnings now. Just imagine the upside if new MSR"s will be boarded or income will not fall of a cliff in the coming years.. And the reason Im not scared of Lawsky is because he does not have a case here. Erbey could make him look bad in the future. And there is not that much to gain here vs some 200bn$ bank. When your going after a bank, you know they did something bad, so they don't want to drag it out. But pushing OCN in a corner could be dangerous for him. The risk reward is not there for Lawsky to push it much further if he has no ground to do so. Erbey could go to the press and show them the statistics here, and Lawsky would could potentially look bad and look like he is overstepping, in it for himself. I doubt he would risk that if he can just save face now and still look good. Erbey can basicly make Lawsky look like the guy that actually gets more people kicked out of their home. I doubt he would risk that for at most several 100 million$ more? Oh I get the upside both at ASPS and OCN. I like the upside. Just not sure what skeletons are around. If ASPS was an unrelated 3rd party, there is no chance they would have the same economics they have today. At the end of the day OCN is part of a regulated industry -- I'm not sure I know of any business that wants to make enemies with the entity that regulates them. That's why I think the market LOVES the settlement talk -- they don't care about the merits of Lawsky's complaints -- they just want him to go away and be able to conduct business as usual even if they have to pay $100M+ to do it. If I knew it would cost OCN $200-$300M but that OCN and ASPS would be allowed to conduct business as usual I'd of course be buying both right here. Link to comment Share on other sites More sharing options...
yadayada Posted October 30, 2014 Share Posted October 30, 2014 I have read up on Erbey, and that guy is obsessed with this, and he thinks long term. If something bad is still out there, it happened despite him trying to avoid it. This is his life. And these regulators have been turning around rocks for like a year now. They would have found something serious by now? Anyway, I think both will be fine long term, just don't buy OCN 2016 options like I did. Also the scenario where Lawsky prevents OCN from buying new MSR"s or even forces them to sell those MSR"s they have now, would push them in a corner where they don't have much to lose. I doubt Lawsky would do that. Banks would get pissed, OCN could make Lawsky look bad, etc. I think the most likely scenario here is a few 100 million$ hit, and then a multibagger for both OCN and ASPS. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted October 30, 2014 Share Posted October 30, 2014 When I first looked at OCN and ASPS -- I thought it was a sneaky end around regulations allowing ASPS to be a really profitable company outside of the regulation and scrutiny that OCN would be subject to. I've always worried that regulators would eventually frown on the OCN/ASPS relationship and break it up. Otherwise I'd probably be buying ASPS right now. Are my fears totally misguided? While I don't know any personally, it seems as if there are plenty of real estate brokers and home owners doing short sales that are likely to complain to their congressman about the relationship between OCN and ASPS/Hubzu. It doesn't get around regulations. However, there are potential conflicts of interest between the mortgage servicer (Ocwen) and the mortgage investors. Ocwen purchases services on behalf of the mortgage investors. The investors pay for those services. Ocwen has an incentive to keep the costs of those services down because Ocwen has to put up advances and eat the cost of financing those advances. In theory, Ocwen can take kickbacks on services it makes the mortgage investors pay for (e.g. on force placed insurance). This would hurt mortgage investors. A variation on that would be Erbey using his control of Ocwen to make Ocwen drive profits towards Altisource, e.g. selling REO via Hubzu. Ocwen's practice of selling REO via Hubzu could theoretically hurt mortgage investors but doesn't hurt any ordinary citizens. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted October 30, 2014 Share Posted October 30, 2014 Erbey said that they are "unlikely to reach settlement for less than $100M." Even a big settlement seems like a fine outcome. What worries me are the potential "non financial" elements of a settlement that Erbey mentioned. A hit to earnings power or ability to buy MSR's would be a big deal. Forced divestiture would be huge, but seems like overkill. It could consist of: - Restrictions and safeguards to prevent Ocwen from engaging in abusive practices that it has been accused of: kickbacks on force-placed insurance, harming mortgage investors, wrong dates on letters, etc. - Promises to modify a certain $ amount of homes. This would cost Ocwen nothing. And it shouldn't cost mortgage investors anything. It really inflates the settlement amount though that gullible journalists will reprint. A forced divestiture would make no sense because it would harm homeowners. A lot of errors will occur when the loans are boarded onto a new platform. Stopping Ocwen's ability to buy MSRs also makes no sense. Lawsky doesn't gain anything from that. Homeowners will be hurt. And Ocwen would be hurt badly. A lose-lose-lose all around. Link to comment Share on other sites More sharing options...
portfolio14 Posted October 30, 2014 Share Posted October 30, 2014 The delineation between OCN and ASPS has always been a mystery to me. In the conference call, Erbey says they want to lay down the infrastructure/platform for future growth. I thought ASPS was the one that provided the infrastructure/platform? Shouldn't it be more appropriate to discuss such capex in the context of ASPS instead of OCN? ??? Btw, can someone enlighten me what "QM-exempt" is? Link to comment Share on other sites More sharing options...
yadayada Posted October 30, 2014 Share Posted October 30, 2014 My read on it is, Ocwen does the servicing, and ASPS provides the platform to sell REO and to turn it into REO and provides the dialogue platform Ocwen uses. ASPS also values the real estate. And they also do some insurance. And Ocwen hires the call centre workers basicly. And they manage to put together cheap call centre workers with the ASPS dialogue system. And the actual MSR's are on HLSS. Ocwen just services and turns non performing into performing with the tools ASPS provides. But Valuetrap probably knows it exactly. So pls correct me if Im wrong on this. Also OCN does originations, and that should become a bigger part. But ASPS will provide all the technology for that. There were some interesting remarks about that in the conference call. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted October 31, 2014 Share Posted October 31, 2014 The delineation between OCN and ASPS has always been a mystery to me. In the conference call, Erbey says they want to lay down the infrastructure/platform for future growth. I thought ASPS was the one that provided the infrastructure/platform? Shouldn't it be more appropriate to discuss such capex in the context of ASPS instead of OCN? ??? Btw, can someone enlighten me what "QM-exempt" is? Ocwen needs the infrastructure/platform, even if it ends up Altisource building it for them. Altisource might then go on to sell the technology to other originators. Qualified mortages: A Qualified Mortgage is a category of loans that have certain, more stable features that help make it more likely that you’ll be able to afford your loan. A lender must make a good-faith effort to determine that you have the ability to repay your mortgage before you take it out. This is known as the “ability-to-repay” rule. If a lender loans you a Qualified Mortgage it means the lender met certain requirements and it’s assumed that the lender followed the ability-to-repay rule. http://www.consumerfinance.gov/askcfpb/1789/what-qualified-mortgage.html Link to comment Share on other sites More sharing options...
portfolio14 Posted October 31, 2014 Share Posted October 31, 2014 Thanks Glenn. Link to comment Share on other sites More sharing options...
Guest roark33 Posted November 7, 2014 Share Posted November 7, 2014 Has anyone considered the potential value of the clean-up or call rights embedded in the UPBs? I am curious if anyone has tried to really break apart the balance sheet and come up with a potential value on the current assets in run-off or liquidation value. I feel like some people have claimed to do this since it was around $5B in market cap (i.e. that was the run-off value), but haven't found any good descriptions. Link to comment Share on other sites More sharing options...
jay21 Posted November 7, 2014 Share Posted November 7, 2014 Has anyone considered the potential value of the clean-up or call rights embedded in the UPBs? I am curious if anyone has tried to really break apart the balance sheet and come up with a potential value on the current assets in run-off or liquidation value. I feel like some people have claimed to do this since it was around $5B in market cap (i.e. that was the run-off value), but haven't found any good descriptions. I dont think run off is a reasonable scenario so I havent really run the calc myself. The call rights are valuable. NRZ said they should make 2-3 pts for every $1 of UPB they call. You run the math, but I expect over the next year they can probably get more than $5b of UPB done then its a question of rates thereafter imo. Link to comment Share on other sites More sharing options...
krazeenyc Posted November 13, 2014 Share Posted November 13, 2014 When I first looked at OCN and ASPS -- I thought it was a sneaky end around regulations allowing ASPS to be a really profitable company outside of the regulation and scrutiny that OCN would be subject to. I've always worried that regulators would eventually frown on the OCN/ASPS relationship and break it up. Otherwise I'd probably be buying ASPS right now. Are my fears totally misguided? While I don't know any personally, it seems as if there are plenty of real estate brokers and home owners doing short sales that are likely to complain to their congressman about the relationship between OCN and ASPS/Hubzu. It doesn't get around regulations. However, there are potential conflicts of interest between the mortgage servicer (Ocwen) and the mortgage investors. Ocwen purchases services on behalf of the mortgage investors. The investors pay for those services. Ocwen has an incentive to keep the costs of those services down because Ocwen has to put up advances and eat the cost of financing those advances. In theory, Ocwen can take kickbacks on services it makes the mortgage investors pay for (e.g. on force placed insurance). This would hurt mortgage investors. A variation on that would be Erbey using his control of Ocwen to make Ocwen drive profits towards Altisource, e.g. selling REO via Hubzu. Ocwen's practice of selling REO via Hubzu could theoretically hurt mortgage investors but doesn't hurt any ordinary citizens. I think it's clear they were skirting regulations -- it was unclear exactly how the regulators would handle it. Ultimately they ended up hitting ASPS pretty hard by actually stopping business. So ... now what? What's ASPS worth now? How does OCN ultimately get impacted by this? I suspect OCN will be the one to pay the fines -- and ASPS simply loses the business. I don't think OCN is actually impacted much by yesterday's news -- but I wonder if it impacts people's confidence in Erbey. Do the longs view Erbey differently now? Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted November 13, 2014 Share Posted November 13, 2014 Ultimately they ended up hitting ASPS pretty hard by actually stopping business. ASPS voluntarily decided to stop the business. They have potential exposure to problems with: - CFPB - State AGs. There's a lot of states in the US. - Other regulators. - The SEC, due to related party transactions. - Lawsuits from homeowners who are hurt by force-placed insurance. - Lawsuits from mortgage investors. Ocwen has faced very few lawsuits. Link to comment Share on other sites More sharing options...
krazeenyc Posted November 13, 2014 Share Posted November 13, 2014 Ultimately they ended up hitting ASPS pretty hard by actually stopping business. ASPS voluntarily decided to stop the business. They have potential exposure to problems with: - CFPB - State AGs. There's a lot of states in the US. - Other regulators. - The SEC, due to related party transactions. - Lawsuits from homeowners who are hurt by force-placed insurance. - Lawsuits from mortgage investors. Ocwen has faced very few lawsuits. Yes i understand they voluntarily stopped the business -- but you can assume they did so recognizing that if they didn't the regulators would come after them in a bigger way. If you did not already have a large position in OCN and ASPS would you be a buyer at today's prices? Particularly ASPS. Is yesterday's announcement simply a loss of $2.40 in annual income or does it change your thesis regarding superior management? Does it make you question Erbey's integrity? Link to comment Share on other sites More sharing options...
valueinvestor82 Posted November 13, 2014 Share Posted November 13, 2014 Krazeen I see you're asking the sam question every few posts, so I'll give you my answer: it doesn't matter. I do have questions for you- if OCN doesn't end up servicing the loans considered toxic by banks, who will service them? Who has a better record in terms of complaints? This of course is rhetorical, no one does. OCN has the lowest complaint ratio. I'm pretty sure that hell will freeze before the banks start doing what they need OCN to do, and I'm not sure where the obsession arises to demonize Erbey as though it ruins the investment. I'm not saying you're obsessed, but more than one post seems to take an idealistic moral view toward a problem with no other solution. I think OCN is here to stay and represents a compelling investment opportunity, whether new MSRs are acquired or not. Link to comment Share on other sites More sharing options...
mvalue Posted November 13, 2014 Share Posted November 13, 2014 From my perspective the fact that the business was stopped suddenly right now, but not prior, probably means a settlement to all of these issues is being hammered out with NYDFS (ie OCN/ASPS thought the arrangement was legally defensible before and thus didn't halt it the day it was "discovered," but are also willing to kill it as part of a settlement) Ultimately they ended up hitting ASPS pretty hard by actually stopping business. ASPS voluntarily decided to stop the business. They have potential exposure to problems with: - CFPB - State AGs. There's a lot of states in the US. - Other regulators. - The SEC, due to related party transactions. - Lawsuits from homeowners who are hurt by force-placed insurance. - Lawsuits from mortgage investors. Ocwen has faced very few lawsuits. Yes i understand they voluntarily stopped the business -- but you can assume they did so recognizing that if they didn't the regulators would come after them in a bigger way. If you did not already have a large position in OCN and ASPS would you be a buyer at today's prices? Particularly ASPS. Is yesterday's announcement simply a loss of $2.40 in annual income or does it change your thesis regarding superior management? Does it make you question Erbey's integrity? Link to comment Share on other sites More sharing options...
krazeenyc Posted November 13, 2014 Share Posted November 13, 2014 Krazeen I see you're asking the sam question every few posts, so I'll give you my answer: it doesn't matter. I do have questions for you- if OCN doesn't end up servicing the loans considered toxic by banks, who will service them? Who has a better record in terms of complaints? This of course is rhetorical, no one does. OCN has the lowest complaint ratio. I'm pretty sure that hell will freeze before the banks start doing what they need OCN to do, and I'm not sure where the obsession arises to demonize Erbey as though it ruins the investment. I'm not saying you're obsessed, but more than one post seems to take an idealistic moral view toward a problem with no other solution. I think OCN is here to stay and represents a compelling investment opportunity, whether new MSRs are acquired or not. FWIW I've been looking very hard at OCN and ASPS as a long investment -- based on many of things mentioned in this thread as well as my own research. I would agree I'm a bit obsessed because I don't enjoy losing money -- so I want to think about the various scenarios that could play out. I tend to think OCN is the safer bet -- but probably less upside than ASPS. I pretty much have no opinion on Erbey's integrity but do think he created this structured to bypass regulations (smart? But a bit sketchy? and definitely something that could bring on penalties). I know some people think of him as the next John Malone -- I don't. While I'm not an Erbey fanboy, I'm also not an Erbey hater. My questions/posts are from someone looking to establish a long position. (Mvalue -- I agree with you that it's likely they are hammering out a settlement and the loss of FPI for ASPS is part of the settlement -- I even posted as much in the ASPS thread) Legally defensible can still be an attempt at skirting regulations -- I'm not even saying it's wrong to try -- just that there might be a punishment for doing so. If we get a settlement that's reasonable for OCN, what would that mean for the stock? We need Eric to do some of his detective work like he did with MBIA. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted November 13, 2014 Share Posted November 13, 2014 Well said, krazeenyc. One reason the settlement would be so positive would be the simple headline value of not having the same legal risks on the table, and first and foremost, the resumption of MSR acquisition like the Wells Fargo deal that was halted several months ago. Then we see earnings and the growth trajectory pick up again. I honestly haven't done the math, but I've seen other people's work that seems to point to a runoff value of $35-$40 minimum without new MSRs. Insider ownership of 15% or more is what gives me comfort, they will do what is best for their own fortune. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted November 13, 2014 Share Posted November 13, 2014 but you can assume they did so recognizing that if they didn't the regulators would come after them in a bigger way. That's unclear to me. If you did not already have a large position in OCN and ASPS would you be a buyer at today's prices? Particularly ASPS. Is yesterday's announcement simply a loss of $2.40 in annual income or does it change your thesis regarding superior management? Does it make you question Erbey's integrity? Yes I would be a buyer... mainly of ASPS. --- I'm not sure if ASPS loses $2.40 in income annually. Suppose they were structuring kickbacks as a lump sum. Assurant or some other insurance company (Southwest something or other is ASPS's current insurance provider) sends kickbacks to one of Altisource's subsidiaries, e.g. Beltline Road Insurance. These kickbacks went to Ocwen when Altisource purchased a number of businesses from Ocwen... one of which was Beltline. So, the kickbacks went from the insurance provider to Ocwen via Altisource. The deals are structured in a way to throw up smoke and mirrors. Ocwen is paying Altisource to act as a "broker" for insurance. However, the contracts are structured in a way that Altisource will receive an uncertain amount of kickbacks. However, Ocwen receives a lump sum that doesn't depend on how much insurance is force placed. What's happening now is that Altisource is giving up all of its kickbacks. The lump sum it gave Ocwen is gone. It has to eat the cost. Somehow the contracts were structured so that Altisource is now the bagholder. I could be completely wrong. Link to comment Share on other sites More sharing options...
rayfinkle Posted November 13, 2014 Share Posted November 13, 2014 8-k out. http://shareholders.ocwen.com/secfiling.cfm?filingid=1019056-14-1393&CIK=873860 Cancelled Wells Fargo purchase Link to comment Share on other sites More sharing options...
rayfinkle Posted November 13, 2014 Share Posted November 13, 2014 Between this, reserve, and asps news feels like settlement is mounting Link to comment Share on other sites More sharing options...
yadayada Posted November 14, 2014 Share Posted November 14, 2014 why you think that was a good thing? Link to comment Share on other sites More sharing options...
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