Ocwen terms on Chase deal look better than Litton purchase
Ocwen Financial Corp. (OCN) may experience better terms on its purchase of mortgage servicing rights from JPMorgan Chase (JPM) than it did on its acquisition of Litton Loan Servicing, analysts said Friday. The subprime servicing giant disclosed it was purchasing $15 billion worth of servicing rights from Chase for $950 million. Of that, Ocwen will advance roughly $868 million to investors on the loan, leaving $82 million the analysts at Stern Agee expect Ocwen will end up paying Chase for the right to service these mortgages. That's roughly 55 basis points of the unpaid principal balance, compared to 87 bps Ocwen had to pay on the $38.6 billion of subprime mortgages it received in the Litton deal with Goldman Sachs (GS). The analysts also said Ocwen has historically been able to recoup advances it makes over a one- to two-year period. The 82,000-loan deal represents 2% of the Chase overall servicing portfolio. "Ocwen indicated it had entered into an agreement to acquire less than 2% of JPM's mortgage servicing portfolio," the analysts said. "Depending on the source of the data, 2% of JPM's servicing portfolio would be $18 to $24 billion." According to the latest data, Chase is servicing $88 billion in just subprime loans, the analysts said. Write to Jon Prior. Follow him on Twitter @JonAPrior.