Home Loan Servicing Solutions, which purchases some mortgage business from sister company Ocwen Financial, is bringing a mortgage servicer advance receivable to the market.
The asset-backed securitization will be collateralized by Ocwen (OCN) serviced mortgages, comprised of former Homeward Residential Holdings paper.
The deals are being marketed as the $425 million Advance Receivables-Backed Notes Series 2013-T2 and $425 million Advance Receivables-Backed Notes Series 2013-T3.
In December 2012, Ocwen purchased Homeward Residential Holdings $2.267 billion servicing portfolio. $703.2 million of that contributes to the existing collateral in the facility.
The securitization of mortgage servicing advances are becoming more and more common.
Earlier this year North-Texas based servicing giant Nationstar Mortgage Holdings (NSM) priced a securitization from its special purpose vehicle Nationstar Agency Advance Funding Trust for an estimated $900 million in mortgage servicer advance receivable-backed notes.
Credit enhancement in the HLSS deal is primarily via overcollateralization with a subsequent reserve fund to cover any investor shortfall.
S&P remarked on the strength of the deal, adding Ocwen’s commitment to continue to make advances on delinquent loans until the servicer deems them nonrecoverable, as a clear positive. And it’s listed as such in the Pooling and Servicing Agreement.
Tranches are mainly and preliminarily rated investment-grade.
However, there remains some unknowns related to foreclosure litigation, the pre-sale states. And HLSS’ ability to advance payment to investors is based on the ability of Ocwen to keep the payments coming.
S&P ranks Ocwen highly as a mortgage servicer, prompting it to downplay this risk in its analysis.