Ocwen Dumps Servicing Rights on $25 Billion in Mortgages

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Just a month ago, mortgage servicer Ocwen Financial Corp. (NYSE: OCN) sold servicing rights to a portfolio of some 81,000 performing loans owned by Fannie Mae and Freddie Mac, valued at about $9.8 billion, to Nationstar Mortgage Holdings Inc. (NYSE: NSM). On Tuesday morning, the two companies announced that they have agreed to a similar deal involving 142,000 agency-backed loans with an approximate value of $25 billion.

No closing date on the transaction was given, but the two companies expect the deal to close before mid-year.

Ocwen said Monday that the New York Stock Exchange had threatened to delist the stock for the company’s failure to file its 2014 annual statement on time. The company also said that it did not know when it would be able to file the documents.

The transaction announced Tuesday totals nearly $35 billion toward an announced goal to shed servicing rights to $55 billion in agency-backed loans. The company has said that it expects the sales to generate approximately $550 million in proceeds over the next six months.

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Regarding Tuesday’s announcement, Ocwen CEO Ron Faris said:

This transaction, on top of the one announced in February between Ocwen and Nationstar, furthers our announced corporate strategy and demonstrates the strong working relationship we have developed with Nationstar.

Jay Bray, CEO of Nationstar, commented:

This transaction builds upon our strong track record of portfolio acquisitions while serving the needs of homeowners, and we look forward to expeditiously closing and boarding this portfolio. We will continue to work cooperatively with Ocwen as they evaluate the sale of additional agency portfolios and look forward to continuing discussions with all counterparties.

As Ocwen sells what is arguably the good stuff — performing agency-backed loans — it will become smaller and its portfolio of less-good stuff, like nonperforming and subprime loans, will become a larger share of its business. That prospect has left trustees and master servicers for 119 agency-backed securities trusts with less-than-generous feelings about Ocwen. In a rebuttal published Monday to a January letter from the trustees charging the company with nonperformance, Ocwen countered that it is “uniquely positioned in the market to handle the special demands of servicing subprime loans in a manner consistent with servicing standards that achieve positive investor outcomes.”

Ocwen’s shares traded down more than 6% in Tuesday’s premarket session to around $8.20. Shares closed at $8.80 on Monday, in a 52-week range of $5.66 to $40.44.

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