Ocwen Financial Corp. OCN continues with its strategy of selling residential mortgage-servicing rights (“MSRs”) with an aim to restructure and shrink its servicing operations. The company, through its subsidiary Ocwen Loan Servicing, LLC, signed an agreement in principle with Nationstar Mortgage LLC, for the sale of a $25 billion portfolio of MSRs.
Nationstar Mortgage LLC is an indirectly held, wholly owned subsidiary of Nationstar Mortgage Holdings Inc. NSM. These residential MSRs comprise nearly 142,000 loans owned by Freddie Mac FMCC and Fannie Mae.
Further, the deal, subject to definitive agreement, requires approvals from Freddie Mac, Fannie Mae and the Federal Housing Finance Agency. Ocwen expects the deal to close by June-end this year.
Notably, this deal comes in addition to the sale of a $9.8 billion portfolio of MSRs, backed by Freddie Mac, to Nationstar in Feb 2015. Apart from this, Ocwen has entered into two more agreements in principle – sale of a $45 billion portfolio of MSRs owned by Fannie Mae to JPMorgan Chase & Co. JPM and a $9.6 billion portfolio of MSRs of performing loans owned by Freddie Mac to Green Tree Loan Servicing LLC.
However, we fail to understand when the company will stop shrinking its servicing business and start focusing on its operations. Also, Ocwen faces another problem – a threat that its shares would be de-listed from trading on the NYSE owing to its failure to file the 2014 annual report within the permitted timeframe (read more: Defensive Ocwen Faces Delisting Risk; Will Troubles End?).
Before the current sale of MSRs, Ocwen expected to receive roughly $650 million as proceeds from the sale of MSRs over the next few months. We believe this amount will increase, following the sale of the latest MSR portfolio.
Currently, Ocwen carries a Zacks Rank #2 (Buy).
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