Good day ladies and gentlemen and welcome to the Ocwen Financial's Third Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to turn the call over to your host, Mr. Stephen Swett. Sir, you may begin.

Good morning, and thank you for joining us today for Ocwen's third quarter 2017 earnings conference call. Before we begin, please note that a slide presentation is available to accompany today's call. To access the presentation, please go to the Shareholder Relations section on our website at www.ocwen.com and click on the Events & Presentations link. As a reminder, the presentation and our comments today may contain forward-looking statements made pursuant to the safe harbor provisions of the federal securities laws. These forward-looking statements may be identified by reference to a future period or by use of forward-looking terminology, such as certain statements relating to our expectations and strategies for growth, for costs and our cost improvement efforts and the financial and other impacts of our July, 2017 agreements with New Residential Investment Corp or NRG. Forward-looking statements, by their nature, address matters that are, to different degrees, uncertain. Our business has been undergoing substantial change, which has magnified such uncertainties. You should bear these factors in mind when considering such statements and should not place undue reliance on such statements. Forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. In the past, actual results have differed from those suggested by forward-looking statements and this may happen again. Our forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. In addition, the presentations posted online and our comments contain references to non-GAAP financial measures, such as adjusted operating expense, adjusted pretax income, adjusted pretax income before corporate debt expense, normalized adjusted cash flow from operations, illustrative servicing cash flow or servicing cash generation. We believe these non-GAAP financial measures provide useful supplement to discussions and analysis of our financial condition. We also believe these non-GAAP financial measures provide an alternative way to view certain aspects of our business that is instructive. Non-GAAP financial measures should be viewed in addition to, not as an alternative for, company's reported results under accounting principles generally accepted in United States. For an elaboration of the factors I just discussed, please refer to today's earnings release, as well as the company's filings with the Securities and Exchange Commission, including Ocwen's 2016 Form 10-K and Ocwen's third quarter 2017 Form 10-Q. Joining me on the call today is Ron Faris, President and Chief Executive Officer; and Michael Bourque, Chief Financial Officer. Now I will turn the call over to Ron.

Thank you, Steve. Good morning and thank you all for joining the call today. I'm going to start the discussion today where I left off at the end of the call last quarter providing some updates on our go-forward plan. In short, we are closely examining each of our businesses and product lines, especially those that are not generating acceptable returns and those where we may be able - where we may not be able to effectively support longer term growth. As I said last quarter, we will not hesitate to scale back close or sell underperforming businesses or product lines. As previously reported, we closed our Correspondent lending channel for forward originations earlier this year due to unacceptable margins. We have now as of yesterday also effectively exited the forward wholesale lending channel for similar reasons. We continue to explore opportunities to improve servicing scale, reduce corporate overhead, reduce interest rate risk and reduce funding risks. As I mentioned last quarter, opportunities could include strategic transactions, and/or selling certain assets or businesses. As we announced on October 24th, we are seeking to focus the company's operations on mortgage servicing and our retail forward lending channel, primarily through retail lending recapture. While we believe that our reverse mortgage business, Liberty Home Equity Solutions, Inc., has performed well. We are currently evaluating our long-term strategy there, including the potential sale of the reverse lending business or some assets of the business. Barclays Capital is inviting us on the alternative days related to our reverse mortgage assets and business. As noted in our earnings release, our reverse mortgage portfolio ended the quarter with an estimated $98.7 million in undiscounted future gains from forecasted future draws on existing loans. These projected gains have not yet been recognized in our financial statements but could…

Thanks, Ron. And good morning everyone. I wanted to first start with a discussion of the NRZ transaction and summarize some of the key financial impacts. You can follow this discussion on slide six through eight of the presentation. As background, Ocwen entered into various rights to MSR transactions with HLSS, now NRZ from 2012 to 2013 and those transactions, the advances receive sale treatment. For various reasons, the MSR component of the transaction was treated as a financing liability and the underlying MSRs were deconsolidated from our balance sheet. The cash received for the MSR portion was treated as a financing liability. Both the MSR asset and the offsetting financing liability are carried at fair value. The quarterly fair value mark-to-market of the MSR is recorded in servicing and origination expenses and the quarterly fair value mark-to-market of the financing liability is recorded in interest expense. On July 23rd of this year, Ocwen entered into various agreements to effectuate the legal transfer of the MSRs underlying the 2012-2013 rights to MSR transactions subject to the receipt of all required third-party consents. After receiving the consents, the MSR ownership will transfer to NRZ and NRZ will pay us a lump sum payment, which equals the contracted price in basis points times the UPB at the time of the transfer. Over time the contracted lump sum price falls reflecting the reduced future cash flows being purchased. For September 2017 the price was 34.4 basis points. The payment by NRZ is primarily to compensate Ocwen for the reduction in servicing fees down to 13 basis points over the remaining life of the original agreement, the loss of REO related compensation, fees on call rate transactions, and other economic changes to the relationship as part of the July agreement, Ocwen will act as…

[Operator Instructions] Our first question comes from Bose George from KBW. Your line is open.

Hi, good morning. So just wanted to touch on the accounting on the other you went through for the NRZ contract. When we think of the cash impact do you guys is it really the reduction of the 13 basis points servicing fee and the answer is as you mentioned around the interest expense marks will just net out overtime to zero so we should just really think about the 13 of kind of the economic impact of the transaction.

Yeah, so there's - I guess that is partially right. I think if you just think about the go forward economics typically as it relates to cash, what will flow through kind of operating cash flow, it will be the resulting impact of the 13 basis points to the P&L. The upfront cash payments we receive through the mechanism I described effectively compensate us for the foregone economics by switching to these new contracts with NRZ. And so those upfront payments through that value mechanism effectively amortized the income subject to certain assumptions over the remaining life of the original contracts. That, those cash flows will actually show up as a financing cash flow, so it won't be an operating cash, but we will reflect those cash flows as received obviously upfront.

Okay, those cash flows will basically reduce interest expense in the quarters that comes in, is that right?

To the extent, there is an international market-to-market impact between the fair value of the transfers in that period. But, just generally the way to think about it is, assuming everything kind of was equal, and you had a concerned population that perfectly match the fair value. Going forward those would have amortizing cash balance, or that amortizing fancy line ability of setting interest expense, over the next two or three years.

Okay, and so the cash benefit you mentioned is really a cash flow benefit supposed to a, an income statement benefit?

Well, we get the - it's effectively pulling forward, cash we would have otherwise received over the next two or three years, we are getting paid for that upfront as the transfers occur. So, we'll record the cash day, we create the financing liability, because it's effectively a financing transaction that the recognition of that cash or from a flow standpoint, will show up in cash cum financing activities instead of operations. But it's cash into the company, and the recognition of that cash, connect to income overtime as through the interest expense mechanism.

Okay, so that makes sense. And, then in terms of the ancillary that a couple of the other components apart from the 13 basis points, is there a way to think about, how much that adds up? Is that another couple of basis points?

So, the reduction from, kind of the overall economics we received down to the 13 basis point was effectively covered by those upfront payments. So, we mentioned the change in servicing fees, we mentioned the change in some of the REO commissions. We've effectively given up our right to earn fees on future call right transactions, so these upfront cash payments compensate us for that. And so, the go forward economics of 13 bps is kind of what's left.

Obviously, okay, great thanks.

[Operator Instructions] Our next question comes from Fred Small from Compass Point. Your line is open.

Hi, good morning thanks for taking my questions. Are there thinking about cash coming in from NRZ, what are your options for that as it comes in? And at one point you talked about, and I don't know how connected it is to the account you were just discussing. But, is that say, you have to keep that on the balance sheet and then sort of leave it in overtime or can you actually go and do something else out of that cash?

So we can choose to do whatever we want with the cash but, as Michael mentioned from the accounting standpoint it will go on to balance sheet and then generally amortize the income overtime. Since, we are receiving less cash going forward in receiving more cash up front, you can assume that some of them would be utilized for ongoing operations. But, we have your discretion over, how do you guys use the cash once we receive it.

Okay, but then, does that, if you receive the cash and record some liability for the long term value of a transaction over time, I think, Michael you were describing that sort of, you are bringing in the cash now and then there's an offsetting item for it on the balance sheet or on the liabilities. And, then that would reduce operating interest expense overtime?

That's correct.

Okay, and so, if you were to do something else with that cash, those operating interest expense, is that no longer, does that benefit no longer flow through overtime.

No, think about it as two separate, once we have the cash, we have the cash as Ron described. And, that financing liability it's really just a mechanism by which we recognize the benefit of the upfront payment income overtime. It's to recognize in the fair value of that liability as the changes, as we service our obligation goes down, so that liability gives them a boost shrink as we reduce the liability, we have a credit income and that shows up to our interest expense. But, it has nothing to do with the actual cash received on day 1.

Okay, got it I think. And then, in the receipt of cash for the fore transfer and the change in the economics, does that trigger any payment over the next year to decor this? You want any of this cash have to be used to pay it on debts, no?

No.

Okay thanks, and then, second question, do you have any estimate of the time or the one-time cost that you think you incur in transferring the system of record over top like 9?

Yeah, there will be a cost and we are not going to connect this, you know disclose at that time, probably because we just signed the contract and we are still working through , the overall implementation plan. But, primarily, being around having to take, in four years that currently we are staying in the Servicing Operation today and dedicating them over the next couple of years to working on the implementation process and obviously we would need to backfill those positions of in-servicing operation during that time frame. There may be some other causes, well, but we are not disclosing what our estimated at is, at this point in time.

In terms of the, sorry it's just a follow-up. In terms of the time line, you said the next few years and that's for everything, and I guess for implementation. Do you have an estimated timeline for a sort of the woke up transfer, to the Black Knight to occur?

Yeah, it will take potentially a couple of years before anything before anything starts the transfer over.

Okay, got it. That's helpful. And then, I know that you haven't talked about the on-time, I was asking about the one-time expense for this sort of ongoing perspective, any sense of what run rate expenses for NST and for all sort of Black Knight Suite versus Real Servicing.

Yeah, I don't think we are disclosing that, but our contract with Black Knight is going to be similar to what other industry participants have I would assume. And, our contract that we had with our existing vendor was on kind of similar take terms, so, we are not expecting any significant change there.

Thanks a lot.

Ladies and gentlemen that concludes today's call. Thank you for attending the Ocwen Financial Corporation third quarter earnings call. Everyone have a great day.