Ocwen Financial Corp., which has seen a recent spate of regulatory enforcement actions that have hurt its operations and decimated its stock, continues to sell off its mortgage servicing rights (MSRs) as it attempts to reorganize.
The company reports that its subsidiary, Ocwen Loan Servicing, is selling residential mortgage servicing rights (MSRs) on a portfolio consisting of about 55,500 loans owned by Freddie Mac, with a total principal balance of approximately $9.6 billion, to Green Tree Loan Servicing, an indirectly held, wholly owned, subsidiary of Walter Investment Management Corp.
Sale of the portfolio, which consists mostly of performing loans, is still subject to a definitive agreement, approvals by Freddie Mac and the Federal Housing Finance Agency and other customary conditions. The deal is expected to close by April 30, with loans transferring to Green Tree in May.
In a statement, Ron Faris, CEO of Ocwen, says he is pleased that the company is executing on its plan to reorganize – which includes divesting itself of the bulk of its mortgage servicing rights on agency loans.
‘Over the next several months, we expect to generate proceeds of at least $650 million from sales and transfers of mortgage servicing rights,’ Faris says. ‘We are also committed to ensuring a smooth and accurate transfer of informationÂ to the buyers of these mortgage servicing rights.’
The announcement follows a report from the Wall Street Journal on Tuesday that Ocwen has agreed to sell $45 billion of MSRs to JPMorgan Chase & Co.
It also follows Ocwen's announcement in late February that it had agreed to sell $9.8 billion in MSRs to Nationstar Mortgage Holdings Inc. That deal is expected to close by March 31, and the loans are expected to transfer to Nationstar in April.
Ocwen had previously hinted at the deal with JPMorgan in an update on March 2. In that statement, company officials said Ocwen had signed a letter of intent with a buyer that was interested in acquiring a portfolio consisting of approximately 277,000 performing loans owned by Fannie Mae with a total unpaid principal balance (UPB) of approximately $45 billion.
The deal with JPMorgan is also still subject to approvals. Ocwen expects the transaction to close by mid-year and the loan servicing to transfer over the course of the second half of this year, the WSJ reports.
No sale price was disclosed; however, Ocwen indicated in its March 2 update that the MSR sales with Nationstar and JPMorgan would result in about $550 million in proceeds.
JPMorgan's acquisition of the portfolio is in contrast with statements made by the bank's CEO, Jamie Dimon, a year ago when he said that JPMorgan was looking to get out of the mortgage servicing business altogether.
The sale of the MSRs to Nationstar and JPMorgan will significantly shrink Ocwen's footprint in the mortgage servicing industry.
In its update, Ocwen reiterated that it expects to report a loss for the fourth quarter of 2014 and for the 2014 fiscal year. In a recent regulatory filing, the company disclosed that it had recorded an additional $50 million expense related to its $150 million settlement with the New York Department of Financial Services. In December, William Erbey, the company's executive chairman, resigned as part of that settlement, and Ocwen said it would withdraw from the business of servicing mortgages backed by the U.S. government.
Ocwen said it also expects to increase expenses related to uncollectable receivables and other servicing expenses by about $64 million. What's more, it reported that the expense for third-party monitoring costs related to regulatory enforcement in the fourth quarter would be approximately $13 million.
In addition, the company says its fourth quarter results will be impacted by a non-cash charge to write-off goodwill of $370 million to $420 million, as well as the creation of a $15 million reserve that will be used to address problems that resulted in thousands of borrower letters related to the denial of loan modifications to be misdated.
In February, Ocwen suffered another major setback when investors from two major trusts voted to terminate Ocwen as the servicer on two pooling and servicing agreements (PSAs) representing about $260 million of UPB or 0.07% of Ocwen's overall servicing portfolio.
‘We regret the decision made by this particular group of investors who have been critical of Ocwen's superior loan modification results but [we] are pleased that in the majority of the affected securities investors are keeping Ocwen as their servicer,’ commented Ron Faris, president and CEO of Ocwen, in a Feb. 27 statement. ‘We were also gratified to see reports earlier this week by Morgan Stanley â�¦ confirming Ocwen has been more effective at keeping borrowers in their homes, and it is unlikely that investors will replace Ocwen in the small percentage of cases where the servicer ratings have fallen below the minimum criteria set forth in certain PSAs.’