Ocwen’s Debt Collection Unit Posts Loss in Q2 as NCI Integration Continues

Mortgage loan servicer and accounts receivable management firm Ocwen Tuesday reported a sharp decline in net income in the second quarter of 2008. The company’s debt collection unit posted a loss of $2.6 million.

West Palm Beach, Fla.-based Ocwen Financial Corporation (NYSE: OCN) said that net income in the second quarter of 2008 fell to $0.1 million from $27.2 million in the same quarter a year ago. Total revenues increased 12.2 percent to $131.2 million.

Ocwen recently realigned its business operations into two distinct lines: Ocwen Solutions and Ocwen Asset Management. The Solutions division includes Financial Services, the company’s debt collection unit. Formerly called Ocwen Recovery Group, the unit was significantly expanded last year with the acquisition of Nationwide Credit, Inc. (“Collection Agency to be Acquired by Ocwen for $55 million,” June 7, 2007).

Financial Services reported revenues of $19 million in the second quarter of 2008, a 200 percent increase from the unit’s revenue in the second quarter of 2007. Nearly all of the gains were attributable to the acquisition of NCI.

But ongoing integration of NCI and capital improvement profits caused the collection unit to post a loss of $2.6 million in the quarter, compared to a $1.2 million loss in Q2 2007.

Ocwen said that expenses in the quarter included the accelerated depreciation of NCI’s dialer as the company “replaced the mainframe computer that supports collection operations.” The company also noted that it is focusing on lowering expenses at NCI as it continues to integrate the collection agency into its Financial Services operations. Ocwen said that it will be “eliminating redundant expenses and migrating U.S.-based collector and administrative jobs to India, primarily through attrition.” The company said that it is currently ramping up a newly-acquired collection center in India.