SecProbe.io

CORRESP
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filename1.htm

January
13, 2015

VIA EDGAR

Mr. Gus Rodriguez

Accounting Branch Chief

Division of Corporation Finance

Securities and Exchange Commission

100 F Street, N.E.

Washington,
DC 20549

 Re: Ocwen
                                         Financial Corporation

                                         Amendment #1 to Form 10-K for
                                         the Fiscal Year Ended December 31, 2013

                                         Filed August 18, 2014

                                         Form 10-Q for Fiscal Quarter
                                         Ended September 30, 2014

                                         Filed October 31, 2014

                                         Response dated August 22, 2014

                                         File No. 001-13219

Dear
Mr. Rodriguez:

This
letter is submitted as the response of Ocwen Financial Corporation (the “Company” or “Ocwen”) to the additional
comments of the staff of the U.S. Securities and Exchange Commission contained in a letter from you dated December 18, 2014 (the
“Comment Letter”), regarding the Company’s Amendment #1 to Form 10-K for the fiscal year ended December 31,
2013 and the Company’s Form 10-Q for the fiscal quarter ended September 30, 2014 (the “Third Quarter Form 10-Q”).
Any capitalized terms not defined in this letter have the meanings given to them in the respective filing.

Set
forth below are the Company’s responses to the comments raised in the Comment Letter. For your convenience, we have included
each of your comments from the Comment Letter and followed it with our response.

Form
10-K/A for the Fiscal Year Ended December 31, 2013

Note
1A – Restatement and Revision of Previously Issued Consolidated Financial Statements, page F-17

 1. Please
                                         explain the nature of the error in the application of the interest method in accounting
                                         for a financing liability which resulted in the restatement of the financial statements
                                         for the fiscal year ended December 31, 2013 and the interim period ending March 31, 2014.
                                         Please address the previous accounting, why you revised your accounting and why you consider
                                         the accounting revision the correction of an error in accordance with GAAP.

Response

The
Rights to MSRs transactions are accounted for as secured financings. Prior to the restatement, the amortization of the financing
liability was estimated based upon actual amortization of the MSRs underlying the financing liability. To the extent the carrying
value of the financing liability was within 5% of the fair value of the MSRs underlying the financing liability (the net present
value of the estimated cash flows), the Company viewed the carrying value as approximating fair value at each reporting date.
The Company estimated the fair value of the financing liability by obtaining the fair value of the MSRs underlying the Rights
to MSRs transactions from independent third party valuation experts, a level 3 valuation. To the extent the carrying value was
outside a threshold of 5% of the fair value of the underlying MSRs, the Company would have adjusted its carrying value of the
financing liability.

The
Company concluded the use of the 5% threshold was an error in its determination of the carrying value of the financing liability
and corrected the error as part of the restatement.

 2. Given
                                         that the Company entered into transactions with HLSS beginning with the initial transaction
                                         on March 5, 2012, please explain to us how you concluded that the error in the application
                                         of the interest method for a financing liability did not also impact the 2012 audited
                                         financial statements.

Response

The
error did impact the 2012 financial statements, however, the Company concluded the 2012 quarterly and annual errors were immaterial
based upon a review of both quantitative and qualitative factors.

The
Company evaluated the impact of the error to all periods from the inception of the transactions considering both the roll-over
and iron curtain methods. The annual impact on 2012 net income was 4.0% under both the roll-over and iron curtain methods and
the quarterly impact on net income for each quarter of 2012 under both the roll-over and iron curtain methods was 4.0% or less,
except for the fourth quarter of fiscal year 2012, for which the impact on 2012 net income was 10.2% under the roll-over method.
Although the fourth quarter of fiscal year 2012 had a higher percentage impact relative to the reported net income for period,
the amount of the error was $7.3 million, which is below the Company’s annual materiality threshold. Based on the foregoing,
management concluded the uncorrected misstatements in the quarterly and annual periods ended December 31, 2012 were immaterial
from a quantitative perspective. Management also considered the qualitative factors outlined in Topic 1.M. of the Staff’s
Accounting Bulletin codification and concluded the uncorrected misstatements in the quarterly and annual periods ended December
31, 2012 were immaterial from a qualitative perspective.

 3. Please
                                         tell us the specific internal controls implemented to properly allocate cash payments
                                         between principal and interest in connection with the financing liability.

Response

Monthly,
the Senior Financial Analyst, Finance calculates the principal repayment and interest expense for MSRs pledged to a third party
and accounted for as a financing liability to record to the general ledger, and adjusts the financing liability to fair value.
The Assistant Manager reviews and approves the calculation and journal entry.  Control is evidenced by approved journal entry.

Note
25 – Business Segment Reporting, page F-69

 4. We
                                         note the net margin on non-Agency servicing is higher than margins on the conventional
                                         and government insured servicing. Please tell us how the company determines the net margins
                                         on each of the different types of servicing provided.

Response

Net
margin in this case represents the difference between contractual service and ancillary fee income less the costs associated with
servicing in accordance with those contracts.

We
have disclosed average contractual services fees of 44, 29 and 32 basis points in connection with our non-Agency, conventional
and government insured owned servicing, respectively. We also note that non-Agency owned servicing provides the opportunity for
higher ancillary income.

Delinquencies
are generally higher in our non-Agency servicing portfolio. The cost of servicing delinquent (non-performing loans) is
generally higher than the cost of servicing performing loans primarily because the loss mitigation techniques that we must
employ to keep borrowers in their homes or to foreclose, if necessary, are more costly than the techniques used in handling a
performing loan. This increase in operating expenses is offset in part by increased late fees for loans that become
delinquent but do not enter the foreclosure process. Incentive and other ancillary fee income serves as compensation for
these higher servicing costs.

While
the cost of servicing performing loans may be lower, there are additional costs incurred solely in connection with our
conventional and government insured servicing, including penalties in connection with loan resolution timelines over
contractual standards, strict limits on the types and amounts of costs that are reimbursable and contractual loss sharing of
delinquent interest and principal losses. We may also have higher costs due to indemnifications we provide to conventional
and government insured investors.

As
discussed in our response to your comment letter of August 8, 2014, our servicing operations are organized functionally (i.e.,
without regard to type of investor serviced). Accordingly, we do not measure or track net margin by investor type. However, our
qualitative conclusion is supported by the above, whereby higher costs to service non-Agency portfolios are offset by higher ancillary
income opportunities and the lower costs to service conventional and government-insured portfolios are offset by additional costs
unique to these portfolios. As noted above, there are, on average, lower contractual service fees earned on conventional and government-insured
portfolios, leading to our statements in regards to lower net margins.

 5. Please
                                         disclose in future filings revenues generated from the conventional, government insured
                                         and non-Agency servicing portfolios in each of the last three fiscal periods as well
                                         as the interim reporting periods during 2014 in accordance with ASC 280-10-50-40.

Response

We
believe our existing disclosures comply with the requirements of ASC 280-10-50-40. We respectfully submit that ASC 280-10-50-40
does not require us to disclose revenues generated from our conventional, government insured and non-Agency servicing portfolios.
As discussed in our response to your comment letter of August 8, 2014, our servicing operations are organized functionally (i.e.,
without regard to type of investor serviced). For example, the same loss mitigation function supports the entire servicing operating
segment. We do not record our revenues in terms of investor type and we do not generate discrete financial results by investor
type. While the Company does provide certain general disclosures related to contractual servicing fees by investor type and notes
certain differences between these investor types in its disclosures, our servicing operations are not conducted by type of investor
serviced. Accordingly, the servicing provided to each type of investor does not constitute a different service or product that
would require disclosures of separate revenues under ASC 280-10-50-40.

Form
10-Q for Fiscal Quarter Ended September 30, 2014

Notes
to Unaudited Consolidated Financial Statements

Note
11- Borrowings

Covenants,
page 35

 6. Please
                                         tell us whether you are in compliance with all the qualitative and quantitative covenants
                                         as of September 30, 2014. We note you revised your disclosures that “We are in
                                         compliance with all of our qualitative and quantitative covenants” at June 30,
                                         2014 to “We believe that we are in compliance with all of our qualitative and quantitative
                                         covenants” at September 30, 2014.

Response

The
Company modified its disclosure simply because it is the Company’s belief that it is in compliance while as a technical
matter a counterparty could take a different view. No counterparty has asserted that we are not in compliance with the qualitative
and quantitative covenants in our borrowing agreements as of September 30, 2014.

Note
22 – Commitments and Contingencies, page 47

Litigation
Contingencies

 7. Please
                                         further explain the nature of the tolling agreements related to certain securitizations
                                         in your next response letter and the estimated dollar amount of potential claims under
                                         these agreements.

Response

Between
February and May 2013, Ocwen entered into tolling agreements with Amherst Advisory & Management, LLC, the purported advisor
or manager to one or more certificate holders in eight securitizations.  The agreements tolled for one year potential claims
that could be asserted by Amherst or the trustee for each securitization, who was named as a third party beneficiary of the agreements,
against Ocwen related to the types of alleged claims set forth at Note 22, namely repurchase claims brought against mortgage loan
sellers based on alleged breaches of representations and warranties.  Seven of these agreements were amended in March 2014
for an additional one-year period.  Amherst represented that its clients sold their certificates related to the eighth securitization
and therefore did not seek to amend the eighth tolling agreement.  We believe that any such tolled claims would be without
merit and, if necessary, would vigorously defend against them. At this time, we are unable to predict the ultimate outcome of
these tolled claims, the possible loss or range of loss, if any, associated with the resolution of these claims or any potential
impact they may have on us or our operations. If, however, we were required to compensate claimants for losses related to the
alleged loan servicing breaches, then our business, financial condition and results of operations could be adversely affected.

Regulatory
Contingencies

 8. We
                                         note you accrued $100 million during the quarter ended September 30, 2014 for losses
                                         that you believed were probable and reasonably estimable related to the New York Department
                                         of Financial Services litigation. Please more fully explain how you determined this accrual
                                         in the most recent quarter ended.

Response

GAAP
has specific requirements that if met require the recognition of a liability or the disclosure of activities that may give rise
to future liabilities. In general, recognition of a loss contingency is required when both of the following conditions are met:

 1. Information
                                         available prior to the issuance of the financial statements indicates that it is probable
                                         that a liability had been incurred at the date of the financial statements, and

 2. the
amount of the loss can be reasonably estimated1.

 1 Per
                                         ASC 450-20-25-2.

In
addition to the requirement to accrue a liability, if no accrual is made or if an exposure to loss exists in excess of the amount
that is accrued, disclosure of the contingency shall be made when there is at least a reasonable possibility2 that
a loss or an additional loss may have been incurred. This disclosure shall indicate the nature of the contingency and shall give
an estimate of the possible loss or range of loss or state that such an estimate cannot be made3.

Finally,
for unasserted claims, disclosure is not required when there has been no manifestation by a potential claimant of an awareness
of a possible claim or assessment unless both of the following conditions are met:

 1. It
is considered probable that a claim will be asserted, and

 2. there
is a reasonable possibility that the outcome will be unfavorable4.

As
disclosed in our Third Quarter Form 10-Q, we were cooperating with the New York Department of Financial Services (NY DFS) with
respect to a number of matters. On September 8, 2014, the Company’s counsel orally communicated to the NY DFS a good faith
outline of a settlement proposal (Proposal) comprised of monetary and non-monetary components, including the payment of $100.0
million and agreement on such matters as the future role of an independent monitor and expansion of the Ocwen Board of Directors.
The Company, through its counsel, had been discussing the broad outlines of a possible resolution for some time and believed that
it was approaching