Ocwen, Walter Make Waves With $3 billion ResCap Servicing Bid

Ocwen Loan Servicing, LLC, and Walter Investment Management Corp. were awarded the winning the bid for Residential Capital’s mortgage servicing and origination platform assets at auction this week. The bid, with a purchase price of $3 billion, is subject to documentation and Bankruptcy Court approval.

With this acquisition, Ocwen will become at least the fifth-largest U.S. mortgage servicer in the U.S., according to Bloomberg News

“The acquisition of ResCap significantly advances Ocwen’s planned growth initiative to add high return servicing assets to our portfolio and to expand our servicing capacity through retention of a significant portion of ResCap’s high quality servicing organization,” said Ocwen’s Executive Chairman William Erbey. 

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In early September 2012, Walter announced the acquisition of Reverse Mortgage Solutions (RMS), a reverse mortgage lender and subservicer. The company said the $120 million deal represented the company’s keen interest in the reverse mortgage industry. Now together with Ocwen—an approved Ginnie Mae issuer—the companies look to be establishing themselves as even more major mortgage players. Ocwen has previously hinted at its interest in the space.

At March 31, 2012, ResCap was servicing over 2.4 million loans with an aggregate unpaid balance of $374 billion. Of these, approximately 68% of the loans are owned, insured or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. 

The joint bidding arrangement will place Walter in possession of Fannie Mae’s mortgage servicing rights portion of ResCap’s portfolio, representing $50.4 billion in UPB, as well as the origination and capital markets platform.

The transaction is subject to completion of definitive acquisition documents which are expected to provide customary representations, warranties and covenants for a transaction of this magnitude.

The sale approval hearing before the Bankruptcy Court is set for November 19, 2012. Neither Ocwen nor Walter anticipates the need to raise any additional equity capital to close the transaction.

Written by Jason Oliva

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  • It is clear the money in our industry is not in origination but in servicing.  Unless our industry becomes more robust, it is hard to believe there is much value in HMBS issuance.

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