Ocwen Financial Corp. has disclosed that it will restate its financial statements. The adjustment will effectively move income reported for this year to 2013.
The Atlanta-based company’s board of directors and its audit committee decided Tuesday that the restatement is necessary, according to a public filing.
A decision that financial statements for all of last year and the first-quarter 2014 can no longer be relied upon to have been compliant with generally accepted accounting principles followed consultation with Ocwen’s accounting firm, Deloitte & Touche LLP.
According to the filing with the Securities and Exchange Commission, first-quarter 2014 pre-tax income will be reduced by $17 million, while full-year 2013 income will be increased by the same amount.
Ocwen explained that the restatement is tied the sale of mortgage servicing rights to affiliate Home Loan Servicing Solutions Ltd.
“The changes we are contemplating principally relate to the valuation methodology of our financing liability — MSRs pledged in connection with certain rights to receive servicing fees, excluding ancillary income, with respect to certain mortgage servicing rights, a level 3 asset, sold to a third party, Home Loan Servicing Solutions Ltd.,” the filing stated. “At March 31, 2014, the financing liability — MSRs pledged, the valuation of which is the cause of the restatement, had a reported carrying value of $634.4 million, or approximately 10 percent of total liabilities.”
Ocwen said it adopted accounting practices in 2012 that used a third-party valuation range of 5 percent on the carrying value of financial liability for MSR sales.
As of June 30, Ocwen stopped using a range. No impact is expected on previously reported second-quarter 2014 results.
In a separate SEC filing, Ocwen said it will be late filing its second-quarter 2014 10-Q.
