Top five mortgage business Ocwen ready to buy more
Ocwen Financial Corporation (OCN) is now either the fourth or the fifth largest mortgage servicer in the U.S., depending who you ask.
In a filing today with the Securities and Exchange Commission, Ocwen declares itseld fifth. Amherst Securities says its in fourth place, instead.
Either way, Ocwen is ready, and funded, to buy more mortgage businesses.
Ocwen jointly purchased the mortgage servicing and origination platform assets of Residential Capital in an auction sponsored by Bankruptcy Court. This, after also buying the reverse mortgage lender from Genworth Financial (GNW). And on October 3, Ocwen entered into a merger agreement that will make Homeward Residential Holding a subsidiary.
"The strong market acceptance of the HLSS follow-on offering and their recently completed term note issuance positions Ocwen well to fund expected growth at a reduced cost," said Ocwen chair Bill Erbey. "HLSS, combined with our track-record of strong cash-flow from operations, will likely enable us to execute both the Homeward and ResCap transactions without issuing new equity beyond the $162 million of preferred shares used to acquire a portion of Homeward."
The ResCap portfolio, composed of $374 billion of UPB, is comprised of 68% agency loans that are insured or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. Walter Investment Management, who shared the bid with Ocwen, will obtain the Fannie Mae mortgage servicing rights that total $50 billion, as well as the capital markets platform and the origination.
As 68% of the portfolio consists of agency loans, the 32%, or $120 billion, that remains are private label securities loans and bank portfolio loans.
After deducting Walter Investment’s $50 billion, Ocwen will obtain $324 billion from their recent acquisition. This addition will bring their servicing portfolio to $524 billion, doubling its size. Therefore, the acquisition of ResCap will thrust Ocwen to the fourth largest mortgage servicer in the nation, behind Wells Fargo (WFC), Bank of America (BAC) and JP Morgan Chase (JPM).
“Our record-setting results in the third quarter of 2012 show the strong earnings power of the business currently on the books and points to our ability to generate strong results on acquired portfolios," said Ocwen CEO Ron Faris. "Our financial performance also indicates that our revenue ramp-up and delinquency performance on recently boarded portfolios continue to track well against our pro forma expectations.”