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Ocwen to Buy MSRs Worth $78 Billion

Zacks Equity Research

Adding to Ocwen Financial Corp.’s (OCN) list of acquisitions, the company announced a deal to buy mortgage servicing rights (MSRs) from Calif.-based OneWest Bank, FSB. The company will be paying nearly $2.53 billion for MSRs worth $78 billion.

Of the total purchase price, $446 million will be paid with respect to MSRs and roughly $2.1 billion to be paid for servicing advances. Ocwen will be financing the deal through available cash in hand, funds generated from operations and available credit.

The deal, still subject to customary closing conditions and regulatory approvals, is expected to close by the end of this year. Further, both Ocwen and OneWest Bank have agreed to termination fees of $50 million if the transaction is not completed by Jan 31, 2014. Moreover, the majority of the loans will be integrated in to the company’s primary servicing platform licensed from Altisource Portfolio Solutions S.A.

Over the last couple of years, Ocwen has been on an acquisition spree. In Apr 2013, the company acquired Genworth Financial Home Equity Access, Inc. from Genworth Financial, Inc. (GNW) for approximately $22 million in cash. In the same month, it also completed the acquisition of $84.6 billion worth of Fannie Mae’s MSRs from Ally Bank.

Earlier, in Feb 2013, collaborating with Walter Investment Management Corp., Ocwen acquired Residential Capital LLC’s MSRs. In Dec 2012, the company completed the acquisition of Homeward Residential Holdings Inc. from WL Ross & Co. LLC for $766 million.

Additionally, in Apr 2012, Ocwen completed the acquisition of particular MSRs and related assets from Saxon Mortgage Services Inc. – a mortgage subsidiary of Morgan Stanley (MS). Prior to that, in 2011, Ocwen had acquired Litton Loan Servicing from The Goldman Sachs Group, Inc. (GS).

All these deals have resulted in a notable improvement in Ocwen’s financial performance. In first-quarter 2013, the company’s earnings more than doubled year over year, driven by top-line growth due to acquisitions. As the housing sector gradually rebounds, Ocwen is expected to get further opportunities to acquire distressed servicing portfolios at attractive prices.

Currently, Ocwen carries a Zacks Rank #3 (Hold).

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