Fitch lowers outlook on Ocwen mortgage servicer rating
Fitch Ratings lowered its outlook for Ocwen Financial (OCN) servicer rating based on concerns over its Litton Loan Servicing acquisition. Ocwen currently holds a subprime servicer rating of "RPS2" and a special servicer rating of "RSS2" just one notch below the highest possible rating for both categories. The deal to buy Litton from Goldman Sachs (GS) is expected to close by the end of the year. Fitch raised concerns over Ocwen's ability to integrate the 468,000 loans with an unpaid principal balance of more than $71 billion. The amount subprime and highly defaulted loans Ocwen must service will increase 125%, according to Fitch. At the end of December, Litton serviced roughly 287,000 subprime loans with an unpaid principal balance of $45.1 billion. Ocwen closed on a deal with Barclays Capital (BCS) at the end of last year to acquire the mortgage servicing arm HomEq. More than 144,000 mortgages with an unpaid principal balance of $24.9 billion went to Ocwen on that deal. Roughly 98% of those loans were subprime. Such a large incoming portfolio came close to costing Ocwen. The Treasury released its report of the top-10 servicers participating in the Home Affordable Modification Program. Ocwen long held one of the highest conversion rates from trial to permanent modifications. But the Treasury said in its report Ocwen needed "significant improvement." The only reason why it didn't withdraw HAMP payments to Ocwen in May was because of the HomEq deal. Since HAMP launched in March 2009, Ocwen took responsibility for more than 300,000 mortgages and the firm said earlier Thursday it was "surprised" the Treasury saddled it with the actions of other servicers. "Fitch will continue to monitor Ocwen's servicing portfolio performance during its integration of the Litton servicing platform and its subsequent movement," Fitch said. Write to Jon Prior. Follow him on Twitter @JonAPrior.