Hello, and welcome to the Ocwen Financial Corporation Preliminary Second Quarter Earnings and Business Update Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Dico Akseraylian, Senior Vice President, Corporate Communications. Please go ahead, sir.

Good morning. And thank you for joining us for Ocwen's Preliminary Second Quarter 2020 Earnings and Business Update Call. Please note that our preliminary second quarter 2020 earnings release and slide presentation are available on our website. Speaking on the call will be Ocwen's Chief Executive Officer, Glen Messina. 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. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Our business has been undergoing substantial change. And as a result of the COVID-19 pandemic, we are in the midst of a period of significant capital markets volatility and rapidly evolving mortgage lending and servicing environment, 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 several assumptions, risks and uncertainties that could cause actual results to differ materially, including those risks and uncertainties described in our reports and filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2019 and our current and quarterly reports since such date. 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 presentation and our comments contain references to non-GAAP financial measures, such as adjusted pretax income; adjusted pretax income excluding amortization of NRZ lump sum payments;…

Thanks, Dico. Good morning, and thanks for joining our call today. I'm excited to share our preliminary second quarter results with you. We continue to make great progress in the business. Our turnaround and profitability trajectory have really strong momentum, and we're delivering on what we committed to do. We've built a great team who are working together with passion and energy to deliver results for our customers and our investors. I couldn't be prouder of what they accomplished this quarter. Our team has demonstrated incredible resiliency and commitment to serve our borrowers in need during this pandemic. Before we get into the details, let's turn to Slide 3, so I can introduce you to today's Ocwen. We are a leading mortgage special servicer and originator that's focused on creating positive outcomes for homeowners, communities and investors. We have 2 principal business units, our servicing unit and our originations unit. In servicing, we're one of the largest special servicers serving over 1 million borrowers, thousands of investors and well over 100 subservicing clients. We've got a strong subservicing and specialty servicing capability that includes conforming mortgages, small balance commercial loans and servicing loans and private securities. And we've got a proven capability in creating non-foreclosure outcome and industry-leading performance against independent benchmarks in operations, efficiency and improving outcomes for borrowers and investors. To replenish and grow our Servicing portfolio, we've built a diverse, multichannel originations platform in both forward and reverse mortgages. And we've grown volume 14x since this time last year, which helps provide a balanced earnings profile to our servicing business. We expect to originate over $30 billion in volume this year, excluding bulk acquisitions with roughly a 60-40 split in owned servicing and subservicing. And we believe we've just scratched the surface of our potential in originations.…

[Operator Instructions] Our first question today is coming from Lee Cooperman from Omega Family Office.

I had written out 3 questions for -- to ask this morning last night, and I think you've addressed some of them. But with your permission, I'd like to just kind of give you my questions, maybe changing emphasis a little bit given the information you've put out. But my first question was, I compliment you on your efforts to right the ship, but the process has been very slow and the cost to run the company is very high. What is your 3-year vision for the company in terms of return on equity and other measures of profitability? I would answer that question by saying, if I heard you correctly, by mid-2021, you could have a low double-digit return on equity. I assume by that time, that book value would be something in the area of $3.50, maybe more, hopefully. So what we're saying is $0.35 or $0.40 a share in earnings in 2021. So I've asked the question I've answered it based upon the information you provided. And let me give you the other 2 questions and you can come back to that. Second question, the industry is consolidating, and given our cost of capital, aren't the shareholders better served by seeking a partner who pay us a fair price for the business? Our annualized overhead is approximately $550 million to produce very little profit. We are one of the best services for nonperforming loans, a valuable expertise. We have terrific capability in reverse mortgages that are very valuable. In the release last night, you indicated we are exploring all strategic options, is outright sale one of them and if yes, what are the other options you're looking at? The third question I had last night was, what is the status of outstanding litigation? I view them as management's poison pill. If we didn't want to do a deal, what is it that the Florida AG or the CFPB want that makes a deal so elusive? And then I would add to -- an additional question as a result of this morning's call, which I thought was very good, by the way. Is cash generation -- do you expect to generate cash over the next 12 months? And given the cash generation, is there any flexibility you can have in your lending agreements that would allow you to capitalize on the mispricing of your debt and equity? But thank you for your efforts and they're very much appreciated.

Thank you very much for the kind worded comments. I hope you are still safe, healthy and well in this environment. Yes, so let me start with the standing litigation. Again, I can assure you that management and the Board are laser focused on trying to resolve this matter as quickly as possible with an acceptable financial outcome for all our constituents. These are regulatory discussions. They don't follow a usual and customary commercial practice. I'm sure that is frustrating for you, it's frustrating for us as well. We believe we have meritorious arguments for our defenses. And as I mentioned, I think there's been some very favorable developments that happened recently, the consolidation of the 2 cases, the bench trial versus jury trial. And probably most recently and most importantly, the judge has ordered us to go to mediation, which is expected to commence after summary -- motions for summary judgment are filed in September. So mediation brings in a third party, 2 folks get together, they're required to work together to come to an amicable -- or not necessary amicable, but a reasoned solution, and it's a court-ordered mediation. So as you might imagine, I'm sure the court will be monitoring our progress. So look, I -- unfortunately, had -- have had the opportunity to deal with the CFPB in a prior life as well as have dealt with a lot of the state regulators, AAMC, Department of Justice as well in certain matters. And these just don't follow a commercial time line. It's frustrating. But again, I feel good, positive and optimistic about what we have in front of us. In terms of cash flow generation and flexibility, in these market dynamics, the cash flow consumption of the businesses is lower than we had anticipated because of…

Well, you've done a very fine job, and we hope the trends continue.

Thank you, sir. Appreciate it.

On the 1 for 25 reverse split with the book value of $3.33 and the great clarity you provided on the call, are we locked in for 1 for 25? And that's just no big deal. I've always said stock splits, somebody gave me 5 singles for $5 bill, it didn't make me any wealthier. But are we locked in at the 1 for 25?

Lee, I'll have to defer to legal counsel on that. So let me take that offline and…

[Operator Instructions] If there are no further questions at this time, I'd like to turn the floor back over for any further or closing comments.

And Kevin, thank you very much again. I couldn't be more proud of our team. We've demonstrated a solid progress and strong momentum in our turnaround and profitability objectives. And I think we're operating in a very opportunity-rich environment with room for continued growth and expansion. We've built a great team. We've built a great platform, and I look forward to continued positive progress in updating you on our next call. Thank you, everyone.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.