Over the last few months, New Residential Investment significantly increased its mortgage servicing rights portfolio through deals with PHH and Ocwen Financial.
In the Ocwen deal, the company will 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 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.
As part of the deal, New Residential also acquired approximately 4.9% of Ocwen’s outstanding shares for approximately $13.9 million.
But that’s not the only new connection between Ocwen and New Residential, as a company that has a close relationship with Ocwen just inked a new deal with New Residential – Altisource Portfolio Solutions.
Under the terms of the agreement, Altisource will “exclusively” provide marketing and listing services for real estate owned properties included in the MSR portfolio that New Residential purchased from Ocwen, for a period of eight years.
Specifically, the companies said entered in an 8-year Cooperative Brokerage Agreement, which covers the $110 billion Ocwen MSR portfolio, as well as an approximately $6 billion non-agency MSR portfolio that New Residential agreed to acquire from PHH in December 2016.
Under the terms of the deal, Altisource’s licensed real estate brokerage subsidiaries will begin to receive REO referrals as the MSR portfolios transfer to New Residential. New Residential’s licensed real estate brokerage subsidiary will then receive a referral commission for each REO sold by Altisource on its behalf.
In a release, the companies said the agreement includes termination events, vendor oversight and audit rights and reporting requirements, and provisions designed to “ensure pricing for REO marketing and listing services remains competitive throughout the term of the contract.”
In a separate presentation for its investors, Altisource said that it expects the deal to generate service revenue of approximately $2 billion total between 2018 and 2025.
During that same time period, the company expects to generate $700 million in adjusted pretax income from the deal.
Altisource also touted the establishment of a relationship with New Residential as a significant benefit of the deal.
“I am very pleased to establish a relationship with New Residential, one of the largest and most active mortgage servicing rights owners in the industry,” Altisource CEO William Shepro said in a statement. “These agreements strengthen Altisource’s existing position as a leading provider of services to the mortgage industry, provide greater visibility into Altisource’s revenue and earnings from the Ocwen Portfolio and provide a great opportunity to develop and grow relationships with New Residential and PHH Corporation.”
Altisource’s relationship with Ocwen, on the other hand, has come under fire in recent years.
Earlier this year, Altisource said that it reached a $32 million settlement in a class action lawsuit brought by Altisource investors who claimed financial harm after Altisource’s stock plummeted after the New York Department of Financial Services began investigating the company’s relationship with Ocwen in early 2014.
The NYDFS investigation covered Ocwen’s relationship with several of its affiliated companies, all of which were chaired by Ocwen’s founder, William Erbey.
The investigation led to the NYDFS fining Ocwen $150 million and forcing Erbey to resign from his position as chairman of Ocwen and his position as chairman of several Ocwen affiliates, Altisource Portfolio Solutions, Altisource Residential Corporation, Altisource Asset Management Corporation, and Home Loan Servicing Solutions.
Altisource also disclosed earlier this year that the Consumer Financial Protection Bureau is looking into its relationship with Ocwen, and last year, Ocwen was fined $2 million by the Securities and Exchange Commission for its relationship with Altisource, and other infractions.
Now, considering that New Residential owns nearly 5% of Ocwen as part of that big MSR deal along with this new agreement between New Residential and Altisource, the relationship between all those companies just got a little bit more complex.
“We are pleased to announce this new partnership with Altisource. By leveraging Altisource’s suite of mortgage and real estate services, we aim to maximize returns for investors in the underlying loans and improve the performance of our MSR portfolio,” Michael Nierenberg, chairman and chief executive officer of New Residential, said. “We believe this is a mutually beneficial partnership and we look forward to working closely with Altisource.”