Thank you for standing by. This is the conference operator. Welcome to the Ocwen Financial Corporation Second Quarter Earnings Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]. I would now like to turn the conference over to Hugo Arias, Managing Director, Investor Relations and Treasury. Please go ahead, sir.

Good morning, and thank you for joining us for Ocwen's second quarter 2019 earnings call. Please note that our second quarter 2019 earnings release and slide presentation have been released and are available on our Web site. Speaking on the call will be Ocwen's Chief Executive Officer, Glen Messina; and Chief Financial Officer, June Campbell. 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 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. 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 statements 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 expenses, excluding MSR valuation adjustments net and notables; and pre-tax loss, excluding notables and amortization of NRZ, lump sum cash payments, among others. 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 these factors I just discussed, please refer to our presentation and today's earnings release as well as the company's filings with the Securities and Exchange Commission, including Ocwen's 2018 Form 10-K, and once filed its second quarter 2019 Form 10-Q. Now, I will turn the call over to Glen Messina.

Thank you, Hugo. Good morning and thank you for joining us. Today, I'll provide an update regarding our progress in executing our key business initiatives and plans to achieve profitability. I will also discuss the actions we are taking to address evolving market conditions and to reposition Ocwen to deliver value creation for our shareholders. Our CFO, June Campbell, will follow with a review of our second quarter 2019 financial results. I will then close the call with some brief remarks before opening it up for questions. Please turn to Slide 4. Since our last earnings call, we have continued to make substantial progress with respect to our key business initiatives to position the company for profitability. Our team is executing well, committed to delivering on the objective of our key initiatives and we’re energized by our accomplishments to-date and the opportunities ahead. We completed the boarding of approximately 1 million legacy Ocwen loans to the Black Knight MSP pipeline as well as the merger of Ocwen Loan Servicing and PHH Mortgage. We are tracking ahead of expectations for our cost re-engineering initiative, and have realized annualized run rate expense savings, excluding net MSR valuation adjustments and notable items, of $246 million in the second quarter of 2019 as compared to the second quarter of 2018 for the combined Ocwen and PHH. We closed on MSR acquisitions with approximately $11 billion in UPB through the second quarter and are rebuilding our MSR acquisition pipeline after a lull of market activity. We commenced origination through our correspondent forward lending channel and launched EquityIQ, our proprietary reverse mortgage product. We closed a committed $300 million MSR financing facility on July and borrowed an initial amount of $144 million. The facility provides us with the initial borrowing capacity to support our near-term MSR…

Thank you, Glen. My comments today will focus on our second quarter results as compared to the prior quarter. As previously noted our second quarter investor presentation includes more details on our results and is available on our Web site. Please turn to Slide 12. Our second quarter 2019 reported net loss of $90 million compares unfavorably to the net loss of $44 million in the first quarter of 2019. Our second quarter was impacted by $41 million of pre-tax unfavorable net fair value changes driven by changes in interest rates and valuation assumptions and $10 million of pre-tax severance, retention and other re-engineering cost. As a reminder, our first quarter results included the $31 million pre-tax recovery of amounts previously expensed from a service provider. The positive pre-tax earnings impact from the amortization of the lump sum cash payments received from NRZ in 2017 and 2018 was $31 million in the second quarter and $16 million in the prior quarter. The amortization of these lump sum cash payments will have an $88 million positive impact to our pre-tax income over future quarters through April of 2020. Revenue of $274 million decreased by $30 million from the prior quarter, servicing revenue of $243 million decreased $17 million primarily due to continued portfolio run-off. Offsetting this, servicing fees remitted to NRZ were down $13 million compared to the prior quarter and were recorded in interest expense. Revenues net of fees remitted to NRZ was down $4 million partially due to the timing of loan modification processing associated with the final MSP loan boarding in June. To the extent we are unable to replenish our volume due to unfavorable market conditions, we intend to offset negative revenue trends through higher cost reductions. Lending revenue of $29 million declined $12 million from the…

Thank you, June. Please turn to Slide 16. Since our last earnings call, we have continued to make substantial progress with respect to our key business initiatives to position the company for profitability. Our team is executing well, committed to delivering on the objectives of our key initiatives and we’re energized by our accomplishments to date and the opportunities ahead. We’re taking decisive actions to address evolving market conditions by strengthening our portfolio recapture capability, diversifying our MSR sources, taking incremental cost reduction actions, reducing our cost of capital and exercising discipline and prudent allocation of capital. We expect continued dynamic industry and business conditions while operating with a largely predetermined revenue structure in a highly competitive rules-based environment. As a result, we believe sustainability, profitability and competitiveness will be driven by advantages in cost structure, operational execution, reputation of customers and regulators, recapture performance and ancillary income generation capabilities. Chasing tides [ph] per economies of scale to gain the competitive advantage will lead to subpar returns and what we thought were challenges is still tough and underperforming operating platform, loans with poor collateral quality and/or poor legacy service and practices. We believe Ocwen is well positioned to lead in each of the capabilities critical for long-term success. We have replatformed our operating systems to establish a technology foundation for future automation and technical innovation, so our technology balance are being implemented in the areas of robotics, optical character recognition, machine learning and digital workforce. We have global operations that provide us access to highly skilled, energized and experience talent pool who are committed to creating positive outcomes for consumers, investors and communities. We’ve commenced our second phase of business re-engineering focused on consumers improvement in speed, cost, compliance and customer experience. The strength of our operational execution had earned…

Certainly. We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Bose George with KBW. Please go ahead, sir.

Hi. Good morning. Actually first on the subservicing portfolio that was moved, are there any other portfolios that you think are at risk of being moved? You noted the 6 billion in the third quarter, but just anything else that we need to think about?

Good morning, Bose. The $6 billion portfolio is the only thing that we are aware of.

Okay. And in terms of – so this was really a client that was acting based on – obviously the transfer has kind of been in the works for a while, so was there something incremental that caused it or was this I guess sort of in line with expectations? Like how would you characterize what happened?

Yes. Bose, I’d say it was in line with expectations. On a previous earnings call I had said that we would expect subservicing run off to exceed subservicing replenishment. So we did have advance notice of this client termination. At the end of the first quarter we had a large $20 billion servicing acquisition award, which were to nearly offset the UPB and more than offset the revenues. But again, the revenue impact here of the subservicing termination is about $5 million, relatively small.

Okay, great. Thanks. And then actually can you just remind me what happens when – after the amortization of the NRZ cash goes away, is the impact largely one of optics or is there anything – is there an operating impact that we should think about?

There’s no operating impact, Bose. The amortization of lump sum payment is purely an accounting event. The cash has already been received and we’re amortizing that cash balance over the original term of the contract. Once the amortization stops, the economics in our P&L will look like an additional subservicing arrangement.

Okay, great. Thanks. And then actually the 31 million impact that you mentioned, the non-MSR expenses, the change related to the previously expense numbers. Can you just go over what happened there just from an accounting standpoint?

I think you’re referring to a notable item we reported in the first quarter related to a settlement with a service provider which were a positive $31 million, that did not recur in the second quarter.

So let me just make sure. Actually I was looking at – okay, so that was in the first quarter, you’re right. Thank you. Thanks for clarifying that. So, okay, thanks. That’s all for me.

[Operator Instructions]. This concludes the question-and-answer session. I would like to turn the conference back over to Glen Messina for any closing remarks.

Thank you, operator. To all those who joined the call, thank you very much for being with us and for your support of Ocwen and look forward to talking to you next quarter.

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.