Chase to Buy $45 Billion in Loan Servicing from Ocwen

It’s official: JP Morgan Chase & Co. (NYSE: JPM) will purchase an estimated $45 billion worth of mortgage servicing rights (MSRs) from Ocwen Financial Corporation’s (NYSE: OCN) subsidiary, Ocwen Loan Servicing LLC.

Ocwen previously announced in early March its intention to sell this portfolio of 266,000 Fannie Mae loans, as part of the company’s ongoing strategy to sell off agency MSRs.

“Buying this prime servicing book will improve the quality of our servicing portfolio and will help drive a stronger and less volatile mortgage business,” said Chase Mortgage Banking CEO Kevin Watters in a written statement. “We expect this portfolio, in addition to lower delinquency rates overall, will help improve the value of our business.”

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Chase will officially begin welcoming new customers—half of which already have another bank product—later this month, and will begin onboarding the loan portfolio on June 1. 

“We are pleased to welcome new customers to Chase Mortgage Banking and look forward to showing them why Chase is the number one large bank in customer satisfaction,” said Mike Weinbach, Chase Mortgage Banking head of servicing. “Delivering a great customer experience will be our top priority as we behind transitioning new customers in June.” 

The past year has been tumultuous for the Atlanta-based Ocwen, which is also parent company of top-5 reverse mortgage lender Liberty Home Equity Solutions, according to rankings from the most recent Reverse Market Insight report. 

In April, Ocwen reported a loss of $546 million for the year ended December 31, 2014, as the company saw its financial performance impacted by a number of factors, not the least of which were $186.1 million of legal expenses related to a settlement with the New York Department of Financial Services. 

First quarter operating results this year were also lackluster for the company, as it reported a net income of $34.4 million, or $0.27 per share, for the period ended March 31, 2015. During the same period a year ago, Ocwen’s net income totaled $60.5 million, or $0.43 per share.

“I am proud of what we have accomplished as far as managing the business through this difficult transition period,” said Ocwen President and CEO Ron Faris in a written statement. “We made great progress on our asset sale strategy, have returned to profitability and continue to generate substantial cash flow. However, I am not satisfied with only making $34 million in the quarter. We intend to do better.”

Written by Jason Oliva

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  • Let us be clear Ocwen is in trouble.

    Who else sells revenue producing assets unless the buyer is overpaying for the asset? The recent buyers of these servicing rights are no fools.

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