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Ocwen, New Residential agree to $400 million mortgage servicing deal

New Residential will also acquire nearly 5% of Ocwen

Back in May, Ocwen Financial announced that it was nearing a massive mortgage servicing rights deal with New Residential Investment, in a deal that would also see New Residential acquire nearly 5% of Ocwen.

Now, the deal is signed and sealed.

Ocwen and New Residential announced Monday that the two companies reached a series of definitive agreements that will see Ocwen transfer the mortgage servicing rights on $110 billion in unpaid principal balance to New Residential Mortgage, a wholly-owned subsidiary of New Residential Investment.

But New Residential doesn’t intend to actually service the MSRs in question. Rather, Ocwen will continue to service the MSRs, but will now do so on behalf of New Residential under a new subservicing agreement.

Under the terms of the deal, New Residential could pay Ocwen as much as $400 million for the servicing rights.

Initially, Ocwen said the deal was for $117 billion in mortgage servicing rights and would have seen New Residential pay as much as $425 million, but both the total value of the MSRs and the price for the portfolio are now lower because of amortization of the unpaid principal balance in the two months since the deal was first announced.

Under the terms of the deal as signed, Ocwen will subservice the MSRs it’s selling to New Residential for a period of five years.

Additionally, New Residential will be acquiring approximately 4.9% of Ocwen’s outstanding shares for approximately $13.9 million.

Specifically, Ocwen sold New Residential 6,075,510 shares of newly issued common stock at a price of $2.29 per share.

Of the deal, the CEOs of both companies said the deal will have benefits for each company.

“This is a great transaction for both companies and we are extremely pleased to announce our new strategic partnership with Ocwen,” Michael Nierenberg, chairman and chief executive officer of New Residential, said.

“We believe the new subservicing arrangement will further secure our interests in our MSR investments and provide additional stability to the overall servicing industry,” Nierenberg continued. “We are encouraged by the performance of our investment portfolio to date and remain optimistic in our ability to continue driving shareholder value going forward.”

Ronald Faris, Ocwen’s president and CEO, added: “New Residential has been a close business partner and this new arrangement extends and builds upon a mutually beneficial relationship. We look forward to working closely with New Residential to help homeowners in their servicing portfolio.”

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