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Ocwen Shared Appreciation Program Slashes Average Mortgage by $75k+


Ocwen Financial Corp. ($19.19 -0.1%) reduced principal for 18,924 mortgage borrowers as of May as part of its shared appreciation program launched one year ago.

The average monthly payment on principal and interest shrank to $624 from $1,270 before the modification was granted. Ocwen reduced an average $75,500 per loan.

Fewer than 10% of the modified loans went 60 days or more delinquent six months after the workout, according to data provided to HousingWire.

Comparatively, 14.1% of third-quarter modifications by all servicers regulated by the Office of the Comptroller of the Currency went just as delinquent after the same amount of time, according to government data.

Ocwen will write down qualified mortgages to 95% of the underlying property's market value. The amount written down is forgiven in one-third increments over three years as long as the homeowner remains current.

When the house is later sold or refinanced, the borrower will be required to share 25% of the appreciated value with the investor.

Paul Koches, general counsel and vice president at Ocwen, said the firm averages between 2,000 and 3,000 shared-appreciation modifications per month and likely passed the 20,000 total in July.

"It's continued to perform very well," Koches said in an interview. "We think we're on to something here."

Since July of last year when the program was announced, Ocwen performed nearly 60,000 modifications through March 31, according to its most recent financial filings.

During the same time Ocwen grew its servicing portfolio to $106.1 billion to roughly $128 billion in the second quarter to become the largest servicer of subprime mortgages.

None of the shared-appreciation modifications go to Fannie Mae and Freddie Mac loans as the Federal Housing Finance Agency continues work to determine whether to allow principal reduction. Each modification also passes the net-present value test used by investors to determine if the workout is more profitable than a foreclosure.

More than 11.4 million borrowers owe more on their mortgage than their home is worth, but that number is on a slow decline, according to CoreLogic ($20.89 0.42%). More servicers used principal reduction to keep these borrowers current, too.

More than 10% of modifications in the first quarter included a principal write down, up from 3% just one year ago, according to Office of the Comptroller of the Currency data.

Ocwen executives believe the program provides the best incentive to keep people paying on their home loan, and other parties are interested in how it's doing.

"We've been responding to a lot of requests from various parties both public and private," Koches said.

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