Ocwen reaches mortgage settlements with two more states, inks new deal with New Residential

SEC filing reveals cavalcade of news about nonbank

Ocwen Financial is getting closer to putting its mortgage servicing issues with more than half the country’s state regulators in the past.

The company disclosed Friday in a filing with the Securities and Exchange Commission that it reached a settlement with two more of the 31 states that took regulatory actions against the nonbank last year over alleged escrow and other servicing issues.

But that wasn’t the only interesting item that Ocwen disclosed in its 8-K filing.

Ocwen also disclosed that it inked a new version of its massive mortgage servicing rights deal with New Residential Investment, followed through on issuing 2.5 million shares of company stock as part of a $49 million class action settlement over the company misstating its net income in 2013 and 2014, paid down some of its senior secured debt, and plans to focus going forward on its mortgage business only.

Ocwen’s shifting business

Back in October, Ocwen disclosed that it was considering exiting its Automotive Capital Services business, which provides floor plan lending to independent car dealers.

At the time, Ocwen said that it “still believes that this business has long-term potential,” but cautioned that “it is a relatively capital intensive business.”

On Friday, Ocwen said that it is indeed exiting the automotive lending business as part of a plan to “leverage its competitive advantages by focusing the company’s operations on mortgage servicing and originations.”

Ocwen said that it expects to have fully exited the business by the end of the second quarter of 2018, and does not expect the exit to have a material impact on the company’s earnings.

More mortgage servicing settlements

As stated above, Ocwen also disclosed that it reached mortgage servicing settlements with two more states, bringing its total number of settlements to 27 of the 31 jurisdictions that brought regulatory action against the nonbank last year.

The first round of settlements included Georgia, Idaho, Illinois, Maine, Michigan, Mississippi, Montana, Rhode Island, South Carolina, and Wisconsin. Then came New Mexico, Virginia, West Virginia; followed by Alabama and Minnesota; then Arkansas, Tennessee, and the District of Columbia; then TexasHawaii; then Nebraska, followed by Oregon and Wyoming.

On Friday, Ocwen disclosed that it reached new settlements with North Carolina and South Dakota.

According to the company, the settlements are “similar” to many of its earlier agreements with other states, previous settlements, which prohibit the nonbank from acquiring any new residential mortgage servicing rights until April 30, 2018.

Previous settlements also stipulate that Ocwen develop a plan to move away from REALServicing, Ocwen’s proprietary platform that is used to process and apply borrower payments, communicate payment information to borrowers, and maintain loan balance information.

That plan will be achieved by Ocwen moving its servicing to Black Knight’s platform, a deal that was announced in early November.

In its SEC filing, Ocwen said that continues to seek resolutions with the remaining four regulatory agencies and two state attorneys general that have outstanding actions against it.

New deal with New Residential

Ocwen also disclosed that it signed new versions of its $400 million MSR deal with New Residential.

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

The deal would also 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.

The details of the new agreements are complex (click here for all the details in Ocwen’s SEC filing), but it appears that Ocwen will continue servicing the loans in question while it works to receive the “necessary third party consents.”

Ocwen also appears set to receive a “lump-sum ‘Fee Restructuring Payment’ of $279.6 million” from HLSS Holdings as part of the deal.

Completes share payout to class action members

Ocwen also disclosed that it followed through on its agreement to issue 2.5 million shares of company stock to the plaintiffs as part of a $49 million settlement over the company misstating its net income for the last three quarters of 2013 and the first quarter of 2014 due to a flaw in the company’s system.

As part of the settlement, Ocwen also agreed to give $7 million in company stock to the plaintiffs.

Back in December, the company said that it sue a total of 2.5 million shares of company stock to the plaintiffs within 30 days of Dec. 22, 2017.

And Friday, the company disclosed that it did just that.

Paying down its debt

Finally, Ocwen disclosed that it voluntarily paid down $20 million of its senior secured term loan. Following the pay down, the company has approximately $298.3 million outstanding under its senior secured term loan.

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