UPDATE 3-Ocwen Q1 net triples, eyes revenue from Obama plan

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NEW YORK, May 7 (Reuters) - Ocwen Financial Corp (OCN.N), a top subprime mortgage servicing company, said on Thursday its first-quarter net income nearly tripled as it cut costs of extending payments on delinquent loans, and a narrower loss on trading securities.

It also said it expects "significant" revenue from President Barack Obama's housing plan that pays servicing companies to modify home loans facing foreclosure.

The company earned $15.1 million, or 24 cents a share, compared with $5.3 million, or 8 cents a share, a year earlier, it said in a statement.

Shares of Ocwen jumped 11.4 percent to $12.24 in early afternoon trading on the New York Stock Exchange.

Interest expenses for the quarter declined to $16.7 million from $26.1 million in the year-ago period. The drop came as funded advances to owners of loans in default plunged to $881 million as of March 31 from $1.1 billion on Dec. 31, 2008.

Ocwen is among the most aggressive among servicers in modifying loans to troubled borrowers, a practice pushed by policymakers as the best solution to stopping foreclosures that have riddled the economy since 2006.

The pace may quicken after the United States this year rolled out financial incentives for servicers to boost modifications under its Homeowner Affordability and Stability Plan, the company said.

"Beginning in the third quarter, we expect to receive significant revenues from this program," Ocwen Chief Executive Officer William Erbey said in the statement.

Ocwen has said it shifted its focus from Wall Street, where it used to pick up business from heady production of risky loans, to policy matters in Washington.

Critics claim servicers sometimes modify loans for their own financial gain, ignoring interests of investors in mortgage-backed securities.

The U.S. plan that pays servicers $1,000 up front for each loan modified, together with U.S. legislation that aims to protect such companies from lawsuits for breaking bond contracts, could entice servicers to fix loans even if they are still prone to default, investors said.

When a modification is completed, servicers recoup money advanced to investors during a loan's delinquent phase, and reduce their own borrowings.

Losses on Ocwen's trading securities totaled only $380,000 compared with a loss of $12 million a year earlier, it said.

The West Palm Beach, Florida-based company also said it expects to complete the spinoff of its business process outsourcing operation, Ocwen Solutions, during the third quarter.