Ocwen Financial Services, parent company of top 10 reverse mortgage lender Liberty Reverse Mortgage, announced on Friday that its wholly-owned subsidiary PHH Mortgage Corporation has acquired the operations, employees and assets of Reverse Mortgage Solutions (RMS) from its previous owner, Mortgage Assets Management, LLC (MAM). PHH will also acquire all of the outstanding equity interests in the RMS real estate-owned business, REO Management Solutions, LLC (“REO”).
The sale is reportedly valued at approximately $12.4 million, and is subject to post-closing adjustments. It is expected to be completed in the third quarter of 2021, and will itself also be subject to any relevant regulatory requirements that may be applicable.
Sale to Ocwen/PHH
“Under the terms of the agreement, subservicing contracts for the reverse residential mortgages currently subserviced by RMS would be assigned to PHH,” according to an announcement by the buyer. “As of March 31, 2021, RMS serviced approximately 35,000 reverse mortgages, or approximately $7.8 billion in unpaid principal balance. As part of the transaction, PHH expects to assume the vast majority of the RMS reverse servicing and REO employees and PHH will become the subservicer under a five-year subservicing agreement for reverse mortgages owned by RMS and MAM.”
The purchase by PHH/Ocwen was reportedly made in the interest of further strengthening the market position of Liberty, according to Ocwen President and CEO Glen Messina.
“We are very pleased to announce the proposed acquisition of the RMS reverse mortgage servicing and REO platforms,” Messina said in a statement announcing the purchase. “The acquisition is expected to double our reverse servicing/subservicing portfolio and will provide us with a high-quality reverse servicing platform, experienced people and customized reverse technology. In addition to our current relationship with Waterfall across the reverse mortgage product spectrum, we are excited and honored to broaden our partnership with them through the long-term subservicing agreement and to support their asset growth and investment objectives in the reverse mortgage industry.”
In terms of incorporating RMS into its reverse mortgage operations at Liberty, Messina said that this sale should prove to strengthen Liberty’s overall position in the reverse mortgage space but stopped short of detailing any additional components of the integration arrangement the company leadership is contemplating.
“Our Liberty Reverse Mortgage platform is one of the premier reverse mortgage lenders in the industry, and we believe this transaction complements our existing capabilities and further solidifies our leadership position,” he said. “We look forward to closing this transaction, welcoming the RMS team, clients and customers to the Ocwen/PHH family, and continuing our long-term partnership with Waterfall.”
RMD reached out to additional representatives of Liberty and RMS, but did not hear back as of press time. This is a developing story, and we will update our audience when additional details become available.
Ocwen and Liberty
Ocwen has aimed in recent years to stabilize its own financial position, with Messina describing actions that the company has taken in recent years to return to profitability. A regular fixture of positive financial performance for Ocwen has been Liberty, according to company statements and earnings releases.
Most recently in terms of company performance, Ocwen posted preliminary first quarter 2021 adjusted pre-tax income of $6.6 million, a swing from an adjusted pre-tax loss of $23.4 million seen at the same point in 2020. Adding to the company’s more positive outlook is its reverse mortgage division, according to Glen Messina.
“[W]e continue to see great strength in the reverse mortgage market,” Messina said in an April earnings call. “We think it’s a great long-term opportunity for the company. Our platform performed really well in the first quarter as industry volume levels and margins there remain relatively high.”
In Q4 2020, Ocwen also praised the performance of its reverse mortgage business as a key driver of profitability for the organization.
RMS sold again, MAM
This is the second time in two years that RMS has been acquired by another company. In late 2019, RMS was first acquired by MAM after an odyssey of legal and financial issues plaguing RMS’ previous parent company, Ditech Holding Corporation, which aimed to sell RMS in order to resolve some of its other ongoing financial problems.
After legal complications put the original plans for the sales of the servicing businesses in doubt due to issues the presiding bankruptcy judge expressed over equitably addressing the concerns of previous Ditech customers, Ditech submitted an amended plan that addressed those consumer concerns. When a committee of consumer creditors and the presiding bankruptcy judge approved the amended plan, the legal roadblocks dissipated and set the involved parties on a course to closing the sales of both its forward and reverse servicing businesses.
The sale of RMS to MAM also serves as the basis for a civil lawsuit filed by MAM against former executives that reportedly helped to facilitate the initial sale. Subjects of that lawsuit previously told RMD that there is “no basis” for MAM’s civil complaint.
According to Home Equity Conversion Mortgage (HECM) endorsement data compiled by Reverse Market Insight (RMI), Liberty is the fourth largest reverse mortgage lender in the industry, recording 3,133 endorsements over the 12-month period ending in May, 2021.