Ocwen Financial Corporation (NYSE: OCN) on Tuesday announced a deal to purchase non-bank mortgage lender and servicer PHH Corp. (NYSE: PHH) for $360 million in cash.
The combined company would have a servicing portfolio of 1.9 million loans with an unpaid principal balance (UPB) of $328 billion, the West Palm Beach, Fla.-based Ocwen said in a release about the transaction.
A merged Ocwen-PHH would eventually originate $3 billion in residential mortgage loans — including reverse mortgage products — each year, according to Ocwen; the company currently originates Home Equity Conversion Mortgages through its Liberty Home Equity Solutions arm.
“PHH is a high-quality servicer with complementary capabilities and business lines to Ocwen, making it a great strategic match for us,” Ocwen president and CEO Ron Faris said in a statement.
Ocwen management expects the deal to close by the second half of 2018, with $260 million of PHH’s available cash going toward the overall $360 million purchase price. Once the deal closes, Ocwen plans to assume $119 million of PHH’s existing corporate debt.
The $360 million price tag is a 35% discount off of PHH’s book equity as of December 31, 2017, according to Ocwen.
Both companies had notable brush-ups with the Consumer Financial Protection Bureau: Ocwen found itself the subject of a CFPB lawsuit over its servicing practices — along with multiple state-level cease-and-desist orders last year — while PHH sued the government over the CFPB’s constitutionality.
Ocwen has slowly but steadily worked to free itself of its regulatory issues, reaching deals with 29 jurisdictions as of this week, while PHH recently lost its fight against the bureau in a federal courtroom. Ocwen also played a hand in that legal battle, filing a request for an expedited ruling on the CFPB’s constitutionality.
Last fall, Ocwen indicated that was mulling the potential sale of its Liberty arm in a filing with the Securities and Exchange Commission and again on its third quarter earnings call with investors. The firm also sold off its wholesale forward lending business to an unnamed buyer in October.
The company will discuss its fourth-quarter 2017 earnings in a call scheduled for early Wednesday morning.
OCN stock jumped 11.57% in after-hours trading in the wake of the announcement, while PHH stock rose 24.4%.
Written by Alex Spanko