Good morning, and thank you for joining us for Ocwen's First Quarter 2024 Earnings Call. Please note that our earnings release and slide presentation are available on our website. Speaking on the call will be Ocwen's Chair and Chief Executive Officer, Glen Messina and Chief Financial Officer, Sean O'Neil. 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 statements may be identified by reference to a future period or use of forward-looking terminology and address matters that are uncertain. You should bear this uncertainty in mind and should not place undue reliance on such statements. Forward-looking statements speak only as of the date they are made and involve assumptions, risks, and uncertainties, including those described in our SEC filings. In the past, actual results have differed materially from those suggested by forward-looking statements, and this may happen again. In addition, the presentation or comments contain references to non-GAAP financial measures, such as adjusted pretax income. We believe these Non-GAAP financial measures provide a useful supplement to discussions and analysis of our financial condition, because they are measures that management uses to assess the performance of our operations and allocate resources. Non-GAAP financial measures should be viewed in addition to and not as an alternative for the company's reported GAAP results. A reconciliation of these non-GAAP measures to their most directly comparable GAAP measures and management's view on why these measures may be useful to investors may be found in the press release and the Appendix to the investor presentation. Now I will turn the call over to Glen Messina.

Thanks, Dico. Good morning, everyone, and thanks for joining our call. Today we'll share our results for the first quarter and take you through our progress in executing our strategy and financial objectives to deliver long-term value for our shareholders. Please turn to Slide 3. We're excited about the progress we made in the first quarter and pleased to report improved performance on many of our key financial metrics. We reported adjusted pre-tax income of $14 million, which results in an annualized adjusted return on equity of 13.8%. Both metrics have improved on a sequential quarter and year-over-year basis. We reported GAAP net income of $30 million or diluted earnings per share of $3.74, the highest level in six quarters. Our results were driven by improved performance in servicing and originations, as well as favorable MSR Fair Value Change Net of Hedge. Book value per share also improved to $56. We continued to grow subservicing with $19 billion of subservicing additions for the quarter. Average servicing UPB for the first quarter was below prior year due to the timing of additions and runoff. Quarter end subservicing UPB was up 4% versus prior year. We exceeded our deleveraging objectives for the first quarter with corporate debt repurchases of $47 million. Total liquidity at quarter end was $219 million below year end 2023's level reflecting our capital allocation to debt retirement. We intend to continue to pay down debt in 2024 as excess liquidity permits. As we look ahead, third-party estimates for industry volume have been revised lower, reflecting the expectation that interest rates will remain high for longer. We continue to believe our balanced business positions as well in any interest rate environment. Please turn to Slide 4. Guided by our strategy, we've transformed Ocwen into a balanced mortgage originator and…

Thank you, Glen. Please turn to slide 11 for the first quarter financial highlights. Overall, this was a strong quarter for financial results, both GAAP and adjusted pre-tax income. And I remain excited about our financial outlook for 2024, regardless of the interest rate environment, due to our balanced business model and capital-led approach. The headline is both our servicing and origination businesses continued their profitable trend and demonstrated yet another quarter of improving positive adjusted pre-tax income as well as positive GAAP net income and growth in book value per share. Starting with the blue column to the right, our material improvement in GAAP net income to $30 million versus the prior quarter's loss of negative $47 million was driven by two main items. First, an MSR valuation adjustment net of hedge due to higher rates as well as an active MSR market with elevated demand, as well as strong operational performance. Operational performance is reflected directly in our adjusted pre-tax income, which is up to $14 million for the quarter, driven primarily by servicing with a small contribution from originations. This resulted in an adjusted pre-tax ROE of almost 14% and we are maintaining our guidance for 2024 of 12-plus percent. GAAP net income also continued to benefit from utilization of our NOL deferred tax assets reflected in the previously disclosed tax adjusted DTA for the U.S. subsidiary of over $180 million at the end of the year 2023, currently fully offset by evaluation allowance as shown in our 2023 10-K. Each shareholder metrics would be the $3.23 increase in book value per share to approximately $56 and diluted earnings per share of $3.74, both metrics up from prior and year-over-year quarter. For a more detailed view of our progress on deleveraging, please turn to page 12. During…

Thanks, Sean. Now please turn to slide 15 for a few wrap-up comments before we go to Q&A. I'm excited about how we started 2024 and believe we are well positioned to navigate the market environment ahead and deliver long-term value for our shareholders. Our balanced and diversified business creates opportunities, mitigates risk, and supports our ability to perform across multiple business cycles. We are executing a focused, prudent, capital-like growth strategy, leveraging our superior operating capabilities to grow subservicing across multiple investor and product types. We've expanded our client base, grow our Originations volume mix from higher margin channels and products and continue to improve recapture performance. We believe our originations platform is positioned to operate effectively in any industry environment. We have a strong pipeline of subservicing boarding commitments and we've expanded our MSR capital partner relationships to accelerate subservicing growth. Our servicing platform delivers top-tier operational performance levels and results in measurable improvements for clients, borrowers, and investors. Through our investment in technology, global operating capability, and process improvement, we've built a scalable servicing platform with the best practice cost structure and capacity for growth that delivers improved borrower and client satisfaction. Lastly, we're prudently managing capital liquidity for economic and interest rate volatility and de-leveraging our balance sheet as excess liquidity permits to further improve financial performance and mitigate capital structure related risks. Overall, we are excited about the potential for our business and do not believe our recent share price is reflective of our financial position, growth opportunities, or the strength of our business. With that, Natalie, let's open up the call for questions.

Thank you. [Operator Instructions] Our first question will come from George Bose with KBW. Please go ahead.

Hey everyone, good morning, this is Bose. Actually I wanted to ask first on hedging. On the fourth quarter call, you guys noted that your hedge ratio was up to [100%] (ph), but then obviously you had a pretty nice mark on the MSR here. Can you just walk through where your MSR hedge is? And also, with the move up in rates now in the second quarter, could we see more positive marks on the asset?

Hey, Bose, good morning. We continue to maintain a relatively high ratio for our hedge coverage ratio. So we're operating in the [90 to 110] (ph) range as of the end of April and maintained similar ranges throughout the quarter. What that will do in the long run is it will mitigate both upward and downward impacts of interest rate moves and some of the gains that you're seeing in the MSR fair value net of hedge were driven primarily due to the very strong market that we're seeing with -- I would say, very strong demand as well. And so that results in our external valuation experts taking a slightly higher view of the valuation of both Ginnie Mae and the GSE MSRs.

Excellent. Okay, great. That's very helpful. Thanks. And then in terms of capital allocation, you guys noted that a lot of the growth now is on the subservicing side. In terms of capital use, could we see more of the earnings go towards debt repurchase and then sort of the earnings growth being fueled more efficiently just through subservicing.

Yeah, that is exactly our plan. So we are intending to grow our subservicing portfolio holding our total owned MSR UPB in that $115 billion to $135 billion range with access liquidity from operating activities being used to de-leverage the balance sheet and de-risk our balance sheet. That is the plan.

Okay, great. Thanks.

Our next question will come from the line of Matthew Howlett with B. Riley. Please go ahead.

Hi, thanks for taking my question. First, congratulations on the debt repurchases. It's really nice to see it. I want to go to slide 12 when you look at the target under 3.9 times. Can you kind of break that down? I mean your equity is going to grow with the ROE guys you're giving. How much can we expect in terms of knocking down that PHH note by the end of the year.

Hey, Matt, how are you? So look we want to get down to that 3.9 times to 1 times or lower level. And look, the -- as we continue to work with our financial advisors and get more informed about where we think we could refinance our corporate debt, that'll drive how much we intend to pay down on our total corporate debt stack. So right now, our primary objective is to first break through that the [stated target] (ph) of 3.9 to 1. And then as we get closer and closer to executing refinancing, [zero] (ph) in on the exact amount of capital we need to allocate to that reduction.

In terms of the -- before I asked about the refinancing let me ask you this the $6 billion that you're going to sell a book how much cash is that going to free up for potential debt pay downs after you pay off the credit facility.

Hey, Matt, it's Sean. So I don't think we disclose specific trades, but typically Ginnie’s and GSEs can generate different cash amounts, and then whether you sell an asset servicing released will typically generate more cash than servicing retained, but if you sell servicing retained, you maintain the scale on your servicing platform. So we'll -- probably in the future give more details on transactions as they close. Some of these only have binding and [revise] (ph) at this point. You know but they do provide cash that is available for de-leveraging the debt. And, you know, to Glen's earlier point, part of this will be driven by viewpoints of, you know, current and potential high-yield investors in terms of what the relevant targets to attain are.

So you may be selling this to one of your MAV or one of your managed funds. Is that what I'm hearing you say potentially?

Well, no, you can do a servicing retain transaction to any buyer. It just means you stay on as their sub-servicer. And then a servicing release buyer could be literally anyone. A MAV transaction would be a servicing retain transaction. You're correct there. But we didn't indicate where we were sending the assets yeah.

Sean and Matt I think it's fair to say that you know as we felt these MSR sales will you know at a minimum reduce the amount of MSR debt associated with them, right? So you can -- when our K comes out, which should be -- later on this afternoon or this evening, you can go through the math that shows how much of our MSRs are financed with debt and you know, generally, I'd say between 50% to 75% and that would reduce MSR debt at a minimum.

Right. It should generate -- go ahead. Go ahead.

No, no. You go [ahead] (ph). That was it.

Okay. Great. Well, I mean, it could be somewhere. I calculate $50 million, but I'll get back to you on that. So, Glen, a bigger picture is this. I mean, the PHH bonds stepped down to par at, I think, January 1st of 2025. Then you have the OFC subordinated notes. They stepped down from January 1st to [26] (ph). Can you just give us what the cadence is? I think the PHA notes are yielding about 10%. Do you feel like you're going to do a global refinancing where at some point you're going to just refinance both of those maturities? You want to do one before the other, because given that the sub-notes is going to step down at a later date. Walk me through, you know, what you think you can do. You can do it in just one shot. The PHH note carries a huge yield. That seems like -- that's not going to be an issue to take care of. So just walk me through how you want to get this refinancing done and what your financial advisors are telling you in terms of pricing and how much you can do and so forth.

Yeah, Matt, look, our primary objective, I think as we said in the last quarter, was to address the nearest maturities first, right? So our primary focus is addressing the PHH corporate debt, which matures first in the capital structure. And we'd like to have that addressed before it goes current, right? So within one year of its maturity. That said, in working with our advisors, I'd say, look all options are on the table. If there is an opportunity that's accretive for our shareholders that addresses both courses of our debt stack, we certainly would give it due consideration. So look, I think we're still early in the process. I think it's premature to say exactly this is what we're going to do. I think there's a lot of options open to us and we're exploring those with our advisors.

And debt, Matt, the debt gets current in March of [25] (ph) for the PMC notes and March of [26] (ph) for the OSC notes, not January.

Okay, so you can call them at PAR at both those dates.

From the point where they go current until the debt matures, you can call it part of that is correct, and then prior to that I believe it's at about [102] (ph).

Got you. Well, and that falls into my next question. Obviously that's going to alleviate significant pressure on the equity. Glen, you talked about the board about allocating capital towards share repurchases. I look at your stock trading somewhere between 40% and 50% of forward fully diluted book. Again, there's that DTA that could come on at some point that's worth, that could be extremely valuable. What's the appetite when you get, this refinancing or your capital stack figured out to go buy back shares here at this discount?

Oh, look, Matt once we accomplish our capital structure objectives and refinance the corporate debt, then I think the -- door is open for the board to consider a lot of options for capital allocation and to allocate capital in a way that produces the most value for shareholders. So yeah, right now our priority is the corporate debt stack and after that, we have a lot more flexibility.

Yeah, look, and I should have congratulated with the ROE and the guidance. I mean, you're punching above your [weight class] (ph). You're in line with the peers, which trade way above book, as we're all aware of. So certainly, we would encourage that, and I appreciate the progress with the debt paydowns. Thank you very much.

Thanks, Matt.

[Operator Instructions] We will take our next question from Eric Hagen with BTIG. Please go ahead.

Hey thanks, good morning. Hope you guys are good. I think you noted $6 billion of MSR sales that you've done in the second quarter, taking place above book value. Are those wholly owned or are they owned with MAV? Just any kind of detail that you have in terms of just -- kind of what we should expect as a realized gain from that sale? Thanks guys.

Yeah, so it's up to $6 billion and those were PHA, Joplin owned MSRs not by MAV. So you know the 100% of the economics would come to us. I did separately mention that MAV selling up to $10 billion and again 15% of those economics come to us and look I'm sorry Eric we just don't disclose the trading prices of our MSRs. So they were done above book, we're excited about that. We believe that certainly demonstrates the accuracy and validity of our MSR mark, but we don't disclose specific trades.

What would you say is driving the sales that to take place right now? Is it -- is it just a really good bid -- that you guys are seeing or is it some intention to free up more liquidity to buy back debt or what's the intention?

Yeah, first and foremost, it comes down to economics. Eric, look, the bids that we and MAV received were far in excess of what we could model from long-term economic value on these MSRs. So we've said before that market leaders have an aggressive view of MSR values. That is still the case. And we took the opportunity to take advantage of that, particularly if we don't see our way to realize that economic value long term. And obviously, it does create capital and liquidity to support our debt refinancing, but first and foremost, the math has got to work. And in this case, it more than did.

Yep. Okay. That's helpful. On the marks for the MSR itself, I mean, does the cost efficiencies that you guys are discussing factor into the fair value mark at all, or how should we think about some of the tangible benefits that you might reap in the cost of service and how that's maybe showing up on the balance sheet or the mark itself.

Yeah, so Eric, we use market-based assumptions. I should say our valuation expert uses market-based assumptions to value the MSR. So our specific cost to serve and any, I think we certainly look for reasonableness on individual assumptions, but we don't necessarily price to our specific assumptions. Where that would come through the P&L effectively is day to day operations right so as we did operate and service loans if we can service them for a cost per loan that's lower than you what the other vendors model has baked into it then we get accretive operating earnings to the business about what would have been modeled.

Okay. I had just 1 more on the modeling. I mean, looking at the servicing and subservicing fees of $205 million in the quarter. I mean, looking year-over-year, what may have driven that decrease? Is there a breakout for how much came from subservicing? Thank you guys again. Appreciate it.

Yeah, so there is one big thing that would have driven the decrease. So we did -- at the end of last year, deconsolidate a portion of the Rithm subservicing, which I should say not deconsolidate, but derecognize, right? Sean, that's the appropriate terminology. You know, we used to prior, you know, this quarter last year, we used to recognize the full subservicing fee through revenues as if it was an owned MSR, and then there was a – contra-expense, which was the amount of servicing fees paid out to Rithm. Now that transaction has just reported that's [additional] (ph) subservicing deal. When our queue comes out you'll see the details in it and if we chat later on today or you know in the next couple of days you know Sean and Francois Grunenwald -- could take you through the numbers and how to reconcile them.

Great, is there a number for how much came from subservicing within that [205] (ph)? Thank you guys.

I'm going to have to check on that, Eric. I don't think we split it out on a revenue line item that way.

Okay. All right. Appreciate you guys. Thank you.

Thank you.

And it appears that we have no further questions at this time. I will now turn our program back over to the presenters for any additional or closing remarks.

Thanks, Natalie. I want to thank all of our shareholders and our key business partners for their support of our business. I also want to thank and recognize our board of directors and global business team for the hard work and commitment to our success. I look forward to updating everyone our progress for next quarter earnings call. Thank you so much.

And this does conclude today's program, ladies and gentlemen. Thank you for your participation. You may disconnect at any time.