Good day, ladies and gentlemen and thank you for standing by. Welcome to the Ocwen Financial Third Quarter 2016 Earnings Conference. At this time, all participants are in a listen-only mode to prevent background noise. [Operator Instructions] We will have a question-and-answer session later and the instructions will be given at that time. Now I would like to welcome and turn the call to Mr. Steven Swett. Please go ahead.

Good afternoon. Thank you for joining us today for Ocwen’s third quarter 2016 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 and 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. Forward-looking statements, by their nature, address matters that are to a different degree 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 presentation and our comments contain references to non-GAAP financial measures, such as adjusted operating expense, normalized adjusted cash flow from operations, Illustrative servicing cash flow and adjusted pre-tax income and the economic value to Ocwen of our MSRs. We believe these non-GAAP financial measures provide a useful supplement to discussions and analysis of our financial condition. We also believe these non-GAAP financial measures provide an alternate way to view certain aspects of our business that is instructive. Non-GAAP financial measures should be viewed in addition to and not as an alternative for the company’s reported results under accounting principles generally accepted in the United States. For an elaboration of the factors that I just discussed, please refer to our presentation and today’s earnings release as well as the company’s filings with the SEC, including Ocwen’s 2015 Form 10-K, Ocwen's second quarter 2016 Form 10-Q and once filed Ocwen's third quarter 2016 Form 10-Q. Joining me on the call today is Ron Faris, President and Chief Executive Officer; Tom Gilman, President of Automotive Capital Services and Michael Bourque, Chief Financial Officer. Now, I will turn the call over to Ron.

Good evening. And thank you for joining us today. Last quarter I highlighted our superior servicing results for both homeowners and RMBS investors, our progress in resulting our legacy issues, our path to return to profitability and our strategy for future growth. I intend to highlight much of the same today. However, I would like to start with our path to return to profitability. Following last quarter’s earnings call, I began to believe that we had a chance at achieving a quarterly profit, not next year but in the third quarter. So I challenged the entire Ocwen team to respond. From our press release released earlier today, you already know the result. The team did respond and we achieved GAAP net income of $9.5 million, our first profit since the second quarter of 2015 and a $97 million improvement over the second quarter of this year. Frankly when I made the challenge to the team, I had hoped that we would get some help from a rise in interest rate that would have helped us recover some of the MSR impairment taken earlier this year. We didn’t get much help from rates, and we continued to incur some large legacy expenses yet we still met the challenge. Included in the third quarter results was an additional $10 million reserve for the potential regulatory settlement in California, which I will discuss further in a few minutes. If you adjust for the additional $10 million California reserve, third party monitor spend at $15 million, new remediation, and legal settlement reserved the $6 million and ample of other normalizing items all of which are summarized on pages 40 and 42 of our investor presentation. Our illustrative adjusted pre-tax profit would have been $28 million, up $25 million or over eight times higher than…

Good afternoon everyone. It’s a pleasure to join the call today to describe for you the automotive lending platform that the team at ACS has been building for Ocwen. While filling our initial build out, ACS is seeing positive and significant progress towards its ultimate objectives. The concept of ACS came about through the identification of a niche within the auto lending environment. I had been independently studying the auto finance industry after having this Chairman and CEO of Chrysler Financial as well as the President, CEO of Toronto-Dominion Bank's Auto Finance Group. As a result of the sale of Chrysler Financial to TD Bank, I can recognize the impact of the economy and other factors had on community banks, causing many to go out of business almost 1600 of them in fact. These banks were primary source of financing for many independent used vehicle dealers. These used vehicle dealers relied on community banks to provide consumer retail instalment financing for used vehicle customers and they also relied on them for inventory financing. Inventory financing which is most commonly known as floor plan financing was not because of the problems of the community banks, efficiently run floor plan financing businesses have been able to demonstrate strong performance in very economic cycles with historically low actual losses. In 2009 on the day the Chrysler Corporation filed bankruptcy. Chrysler Financial had a multibillion dollar portfolio of floor plan assets. Within nine months we had liquidate the entire portfolio and experience the loss ratio of under 50 basis points. The lesson we learned from that performance was it if you know what you're doing in the floor plan business you can be very successful. Most of us have heard of the auto industry numbers that hit the headlines every month. You know there…

Thank you, Ron and thank you, Tom. In my comments today I will briefly summarize our third quarter results and discuss the progress we have made on operational cost controls. I will also discuss and update you on our liquidity position. Please note that our earnings presentation includes all the regular slides that we typically include and I won't cover them all in my remarks today. And my comments will be focus on other areas; I will let you review these on your own. As Ron said we are extremely pleased to report a profitable quarter on a GAAP basis. This was a significant achievement for the company reflecting the focus efforts we've made over the last 18 months to invest in technology reduce costs and improve operational efficiency across our platform. Ron cover the reported results and I'd like to direct you to slide 48 in the appendix, I'm sorry slide 42 in the appendix and see our adjusted pre-tax income, a non-GAAP measure which attempts to show the underlying performance of the business excluding legacy and other onetime matters. Adjusted pre-tax income for the third quarter was $28 million, an improvement of $25 million versus the prior quarter and the sequential quarter-to-quarter improvement for the third quarter in a row. Turning to our cost performance, I'll refer you to slide 17 of the investor presentation to follow along. Total operating expenses were $272 million in the quarter compared to $385 million in the second quarter, $113 million or 29% decline and we saw decreases in every single one of our cost categories. We reported a $76 million decrease in servicing and corporate costs, a $10 million reduction in lending and new initiative spending and $27 million decrease in "uncontrollable costs" Beginning with servicing and corporate costs, as we…

Thank you. [Operator Instructions] And our first question is from the line of Bose George with KBW. Please go ahead.

Good afternoon guys and congratulations on the improved profitability. I had a couple of things. First, just can you go through the different things that went through the amortization line item you know the HUD note sales or anything else?

Sure. So, previous, if you look at page in the appendix I think its slide 25, there's really two things happening here that impact most of the lines kind of in that central column. The first is kind of the MSR fair value change. In the quarter the MSR fair value didn't decline significantly as one would expect given run off of the MSRs. We have more detail on the queue, but we had some basically MSR value increases as a result of periodic process we go through sometimes the FICO scores for our portfolio, to update the underlying collateral values and the underlying traits of the loans that making up the MSRs. So that largely offset what would be typically seen as run-off or negative fair value change and that positive benefit there however was offset by a increase in the interest expense payable to NRZ. You'll recall that dynamic where the cash payment is determine separately and then related with what the payment between a liability, amortization and interest expenses. And so, since the liability which is link to the fair value of the MSRs really didn't change this quarter, it all shows up as interest expense. So that’s kind of the biggest driver on why the MSR fair value change went from $28 million to $5 million there.

Okay.

The second…

Sorry….

Just to finish the comments on kind of the second driver going on in some of these categories is around the Ginnie Mae losses and the HUD note sale program. In the quarter we had $24 million of Ginnie Mae losses as a result of the note sale program which is kind of in the fourth. makes up the majority of the increase in that fourth graph in the central column, that was offset by a positive 18 million benefit in lower amortization that shows up in the first graph and the way to think about this is you accelerate basically claim losses by – accelerate by assigning basically these highly delinquent loans Ginnie Mae, but then we do that you remove what's essentially a negative value in your MSR, so you show a positive amortization benefit. So there's an offsetting impact there. You can see the total results on page 38 that help you pieces together after the fact, but at the end of the day the net impact in the P&L between those two lines was about $6 million loss.

Okay. And the operating expense, the $23.6 million just went through operating expenses?

Yes.

Okay. That's great, helpful. Thanks. And then, actually going back to a couple of comments from the call, I mean, you noted that, I guess you'll apply to New York to have for permission to grow again. But we still might not see a lot of growth. But I'm curious, is it, I mean, could we see a situation where you're at least acquiring enough for growing enough to stabilize your portfolio?

I just want to make sure I clarify. So, we have not yet made that request as I indicated in the – in my remark, so we hope to do that in the coming weeks. We are definitely trying to first and foremost grow our origination volume such that ultimately originations will eventually cover the run off. It will depend on when we get that approval and they are not restricted from regulatory standpoint. It all depend on like I said, what kind of MSRs are available, what kind of returns we think we can do the math relative to our cost to capital. But there is really no way at this point we can or would predict what kind of volumes we would do on the acquisition side next year.

Okay, thanks. And then, just one more on, when you look at the HAMP income going forward after the program ends, this year I mean, will be essentially kind of the run rate HAMP revenues kind of run-off over that three-year period, as their payments start faced [ph] out, and is there any offset to that, are there other pieces that could go up?

I mean, I guess, so without kind of giving guidance and that's not something we do, I mean, it’s important factor to understand and while we know industry is looking at different kind of modification programs, it’s uncertain how and if and when anything else may happen. We've always been a big believer in modifications and that something that's not going to change when the programs expires. Getting to the financial impact I think year to-date we've recognised about $88 of HAMP fees and rough order magnitude about $5.50 million of those have been associated with the kind of the modification concluded in the year or kind of the upfront fee we earned. So if you want to model out kind of a change in HAMP fees in the future using that proposition you can do that, you recall HAMP fees are driven by first an upfront fee ad then you have success fees on each of the three or anniversary, so there won't be a step down next year, but that tail will run off over two or three years assuming nothing else changes around the program.

Okay, great. Thanks a lot.

And our next question is from the line of Fred Small with Compass Point. Please go ahead.

Hey. Thanks for taking my questions. So just first one assuming that your servicer ratings with the ratings agencies stay where they are currently, is there still a risk that NRZ can transfer servicing away from Ocwen next April?

We don't believe there is.

Okay. Thanks. Then, looking at MSRs and the potential for acquisitions there, what are the -- I mean assuming everything, assuming you get cleared by and not from under the consent orders with the monitors. What are the most attractive areas for you right now that you would look, I mean I know there's not a lot of non-agency may be out there for sale, but would you look for Ginnie servicing or there are specific areas you would want to acquire?

Yes. Definitely, our strength is the non-agency world, which as you pointed out. There may not be much of that available. We are originating FHA loans and so – and we have a portfolio of FHA servicing, so we not to oppose to looking at as an opportunity. But it really will just depend on what's available and whether it would make sense for us at that point in time.

Okay. Thanks. Then on the -- just following up on Bose's question about HAMP. Can you provide any color on the profitability of HAMP revenues number one? And number two, as I guess the application deadline is the end of this year, but the markets will continue to be approved through I think September, will you continue to receive the upfront fees sort of over that, will they trickle in over the nine months or does that sort of all end this year?

So there is an opportunity for certain type of HAMP notes as long as certain things have occurred before the end of the year to still finalize and be eligible for paying them next year as you just kind of described, I would expect however that the follow up in the new modifications under HAMP will be pretty significant after the end of this year. So there will be some but I would expect it will be pretty significant follow up after that point of time.

Okay, got it. And then just on the profitability of revenues that you're getting from HAMP mods, does that basically just all fall to the bottom line or how should we think about the costs associated with that?

Yes, I mean as Michael said we are going to continue to do modification so I don’t know that there will be much of a change in our cost structure simply because of the end of HAMP. As we do modifications we do that does allow us to recover advances, it does allow us to basically record deferred servicing fees which is you know we don’t record in until we resolve alone. So there still are benefits from continuing to do modification some which would be included in revenue through deferred servicing fee and then you know reducing advances flow come through in lower interest expense, but I wouldn’t model in anything for any need for reduction in operating cost just because the program is ending.

Got it. Okay. On – then just maybe it could be on the presentation and I just haven’t seen it, but on the ACS business can you just maybe explain number one where that is flowing through the – where we see the impact of that in P&L or its flowing through? And then on you know just thinking about the business as its scales, what sort of a good run rate profitability or operating margin to assume for that business?

Yes, so maybe taking the first part of your question first, Fred I mean the way it will show up and I mean in the quarter it’ still relatively immaterial but you’ve got a couple of million, yes the expectation is, you have obviously revenue flowing through kind of this fee income and other revenues, your expense categories you’ll have kind of CMB [Ph] in compensation and benefits you’ll have your provisions for loan loss reserves that will hit OpEx and then you’ll have some other income from kind of – the interest income basically. So your income components will be split between kind of your revenue line or your other income and then you’ll have OpEx and then to the extent we are successful in putting together first our warehouse financing you know hopefully in the coming quarters you’ll then report interest expense as well. So that’s kind of how you would expect to see it right now, those all flow through the corporate segments and you can see the impact there but it doesn’t yet stand out. I think just to be clear in the quarter you know ACS lost about $1 million and we are excited to see that business continue to grow and get leverage on its cost structure and begin earning money for us. From a return profile, you know it’s consistent with what we’ve said back when we first introduced the business in February. We are excited about this business. As Tom mentioned, you know it’s kind of a 9% interest rate on the top line and then you have a chance to earn potentially an amount similar to that and different fees as Tom gave some examples of that dealers can basically decide to do and that comes in the form of additional income. The operating expenses are going to be driven by the people and Tom talked about having potentially 175 folks scale. You know your loss reserves and then your interest expense. So, we think this is an attractive, you know could be very attractive from a return standpoint and I would defer you to some of the earlier comments we’ve made, but you know we think we can earn well above our cost capital in this business.

Okay, great. Thanks a lot for taking my questions and congrats on the improvements.

Thanks, Fred.

Thanks, Fred.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program and you may all disconnect. Have a wonderful day everyone.