After enduring more than a week of bad press, investors in Ocwen Financial Corporation (NYSE: OCN) woke up to some brighter news Monday morning.
The West Palm Beach, Fla.-based servicer announced the planned transfer of about $117 billion in mortgage servicing rights to New Residential Investment Corporation (NYSE: NRZ), a New York City-based real estate investment trust. Ocwen would continue to subservice the loans under a deal worth a total of $425 million upfront.
The rights in question had previously been “rights to mortgage servicing rights”; this deal would solidify New Residential’s control over the portfolio, according to an Ocwen statement released this morning.
“We are excited about the prospect of this new arrangement and expect that this agreement will further strengthen what I view as an already strong partnership by eliminating some of the uncertainties inherent in the existing arrangement, which will be good for shareholders of both companies,” Ocwen president and CEO Ron Faris said in the statement.
Back in 2015, New Residential purchased Home Loan Servicing Solutions — a former subsidiary of Ocwen founded by its ousted CEO, William C. Erbey — and its existing portfolio. In turn, Ocwen retained the servicing rights to those loans through April 2017, according to a contemporary Street Insider report.
In addition to gaining the mortgage servicing rights, New Residential snagged a 4.9% ownership stake in Ocwen.
Ocwen’s stock landed on Seeking Alpha’s list of premarket gainers Monday morning amid the news, seeing a 31% spike just after the market opened at 9:05 a.m. EDT. As of this posting at around 12:15 EDT on Monday, Ocwen’s stock had gained about 36%.
Those numbers represent a significant shift from last week, when OCN lost more than half its value after the company suffered regulatory attacks on multiple fronts. On April 20, the Consumer Financial Protection Bureau slapped Ocwen with a federal lawsuit over multiple alleged violations, including improper handling of escrow accounts and illegal foreclosure actions. Not to be outdone, 21 states and the District of Columbia hit Ocwen with cease-and-desist orders preventing the company from acquiring new servicing rights or originating loans.
As RMD reported last week, Ocwen fought back with requests for emergency restraining orders in Illinois and Massachusetts, as well as filings that ask a federal court to declare the CFPB and its authority unconstitutional.
Ocwen services reverse mortgages through its Liberty Home Equity Solutions subsidiary, which remains largely unaffected by the bans and lawsuit; an RMD investigation into the matter found that only Illinois explicitly named Liberty in its order, and then only to ensure that Ocwen doesn’t attempt to circumvent the ban by shifting its “forward” mortgage servicing operations to Liberty.
Written by Alex Spanko