Billions worth of mortgages once handled by Saxon Mortgage Services received more principal write downs since Ocwen Financial Corp. ($41.60 0%) took over the portfolio.
Ocwen, now the largest subprime servicer in the U.S., completed its October 2011 acquisition of Saxon from Morgan Stanley ($24.70 0%) in April 2012.
More than $22 billion in mortgages transferred through the deal.
Just 11% of all modifications done on these loans included a principal reduction as of May. But in the three months since, Ocwen wrote down principal on 56% of modifications on Saxon loans, according to Laurie Goodman, chief analyst at Amherst Securities.
"This is not a surprise as Ocwen is in the process of on‐boarding Saxon servicing and is known to do principal modifications," Goodman wrote in a note to mortgage bond investors.
Principal was reduced on 48% of all private-label mortgage modifications in August, the highest percentage of any type of workout, according to Amherst.
Roughly one year ago, Ocwen released a program that would reduce principal for underwater borrowers to 95% of the home's value over three years. In return, the borrower shares 25% of the appreciated value afterward.
Nearly 19,000 borrowers took advantage of the program in the first year.
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