Ocwen Reports on Success of Customized Loan Modification Program

Ocwen Financial Corporation (NYSE: OCN), a leading servicer of subprime mortgages, has reported solid success with its program to modify substantial numbers of troubled loans in a way that avoids re-default and keeps people in their homes and loans performing for investors.

Ocwen takes a loan-by-loan approach and uses proprietary, scalable technology and analytics in its modification program. At the six-month mark, the 60-day delinquency rate on Ocwen-modified loans is low -- 24.6%.

The Ocwen results contrast with data from the Office of the Comptroller of the Currency (OCC) showing that, overall, 53% of borrowers were more than 60 days late six months after their loans were modified.

"The salient issue is not the efficacy of loan modification as a loss mitigation tool, but whether mods are properly designed," said Ocwen CEO William C. Erbey. "Our loan approach achieves the twin objectives of keeping homeowners in their homes and maximizing the net present value of the mortgages to the investors who own the loans."

Ocwen's President Ronald M. Faris added, "Proper loan modifications require a highly particularized process -- one tailored to the specific facts and circumstances surrounding the homeowners' financial situation, the terms and conditions of their mortgage loan and the current value of the property. The process involves robust technology that is scalable to handle the unprecedented volumes of delinquencies."

"We concur with Federal Reserve Chairman Ben Bernanke that initiatives to reduce preventable foreclosures should be high on government and private sector agendas -- and also agree wholeheartedly with Federal Deposit Insurance Company Chairman Sheila Bair that it would be dangerous to read too much into overall re-default rates for modifications," said Mr. Erbey. "We believe she is correct that the re-default problem lies with how some servicers are doing modifications, not with the concept of modification. It's possible to do modifications right. It's challenging, but we're doing it -- and doing it in a way that's scalable."

Ocwen's Approach to Loss Mitigation Leadership

Ocwen has a longstanding commitment to loss mitigation and foreclosure prevention. Even though its portfolio is more challenging than other servicers', losses on the subprime mortgages it services are half the industry average.

Over the past 10 years, Ocwen has invested more than $100 million in designing and refining its REALServicing® and REALResolution® systems. The technology uses artificial intelligence, rules-based systems, scripting engines and net present value cash flow algorithms to enable Ocwen to apply common elements quickly across a range of modifications, while still allowing for an analytic approach to individual loans. Ocwen has also recently established a Psychology Department, staffed with academics, to help the company's loan analytics experts integrate behavioral sciences into decisioning models. "The goal here is to remove variability from key processes and make interactions with delinquent customers more effective so we can reach successful resolutions faster," Mr. Erbey said.

So far this year, Ocwen has achieved workouts and modifications that have kept 60,000 troubled mortgages performing -- and the borrowers in their homes.

Support for Broad Modification Initiatives

"Ocwen supports all of the government-initiated loan modification efforts -- from the FDIC, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac. They all represent steps in the right direction to address the foreclosure problem," said Ocwen Executive Vice President Paul Koches. "At the same time, we also endorse Chairman Bernanke's entreaty that more is needed. We advocate a quantum leap forward -- a larger and more customized loan-by-loan modification program."

About Ocwen
Ocwen Financial Corporation is a leading asset manager and business process solutions provider specializing in loan servicing, special servicing, mortgage loan due diligence and receivables management services. Ocwen is headquartered in West Palm Beach, Florida with offices in Arizona, California, Florida, Georgia and New York and global operations in Canada, Germany and India. Utilizing our global infrastructure, state of the art technology, world-class training and six sigma processes, we provide solutions that make our clients' loans worth more. Additional information is available at www.ocwen.com.