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Ocwen’s Erbey: Lawsky hold has frozen all MSR deals

HLSS reports 1Q net income of $43.7M

frozen

During the conference call for Home Loan Servicing Solutions (HLSS) first-quarter earnings, HLSS Chairman William Erbey said the New York Department of Financial Services’ indefinite hold on the $2.7 billion MSR deal between Ocwen Financial (OCN) and Wells Fargo (WFC) has put a freeze on all MSR deals in the market.

During the earnings conference call, Erbey, who also serves as executive chairman for Ocwen, was asked about ongoing MSR deals.

“Until we resolve – this relates to Ocwen – until we resolve New York State we’re not acquiring any new (MSR) portfolios at all. As a matter of fact the entire market – nothing is being put out for bid right now,” Erbey said. “The whole market has stopped until that gets resolved.”

In February, Benjamin Lawsky, director of the DFS, sent a letter to Ocwen’s general counsel Timothy Hayes charging that Ocwen is potentially harming borrowers and pushing homeowners “unduly into foreclosure.” While Ocwen is an Atlanta-based company, it is chartered as a New York bank.

HousingWire obtained a copy of the letter (click here to read it) which states that the DFS is concerned about conflicts between Ocwen and four publicly traded companies chaired by Erbey.

Ocwen is one of the leading generation of nonbank mortgage servicers as, increasingly, traditional banks move away from mortgage servicing. It is one of the biggest mortgage servicing companies in the country with 2.3 million mortgages under service.

HLSS reported net income of $43.7 million, or $0.61 per ordinary share, for the first quarter of 2014.

Additionally, the company's board of directors today declared monthly dividends of $0.16 per ordinary share for April, May and June 2014.

"Lower prepayment speeds led to another quarter of record earnings at HLSS," Erbey said. "Prepayment speeds declined due to a reduction in the already low refinancing activity and slower liquidations on seriously delinquent loans. While the prepayment speed for this non-agency portfolio could rebound in the near term, I believe that the longer-term trend remains favorable and that the company is very well positioned."

HLSS earned a record $43.7 million, or $0.61 per ordinary share. Earnings include a $0.06 per ordinary share benefit as a result of the lower annualized prepayment speed of 9.9% this quarter relative to the 12.4% annualized prepayment speed in the fourth quarter of 2013.

The company also completed first acquisition of Government National Mortgage Association whole loans through the GNMA early buy-out program. The purchase price for these loans was $556.6 million.

HLSS also opened a new $600 million mortgage loan facility to finance the GNMA EBO purchase, and completed the issuance of $600 million of one-year term notes and $200 million of three-year term notes secured by servicing advance receivables at a weighted average interest spread over LIBOR of 1.09%.

"Our purchase of Ginnie Mae early-buyout loans marks the beginning of our diversification into other asset classes," said President and CEO John Van Vlack. "We are pleased to have added new assets with an attractive risk and return profile that are similar to our existing portfolio and look forward to continuing discussions with servicers beyond Ocwen."

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