[Update 1 reflects clarified stock prices.] West Palm Beach-based Ocwen Financial Corp. Inc. (OCN) on Thursday joined the ranks of the first servicers to receive federal funds through the Treasury Department in order to facilitate participation in the Making Home Affordable Modification Program. The Treasury investment is not the only source of outside funding Ocwen stands to recieve, as its operational model continues to change and improve, according to a credit rating agency. Ocwen became the seventh servicer to receive the promise of Troubled Asset Relief Program funds to modify mortgages of at-risk borrowers, the Treasury announced in its most recent TARP transaction report. The other six servicers included Chase Home Finance LLC (which received up to $3.55bn), Wells Fargo Bank NA ($2.87bn), CitiMortgage Inc. ($2.07bn), GMAC Mortgage Inc. ($633m), Saxon Mortgage Services Inc. ($407m) and Select Portfolio Servicing ($376m). Treasury bases investment figures on the size of each company’s respective servicing portfolios, however the government lender may adjust the actual dollar amount based on servicer usage. So far, program fund promises total $10.57bn to the seven servicers, a fraction of the Treasury’s $75bn program to try to prevent foreclosures and help borrowers refinance into new loans. The government plans to pay servicers a $1,000 one-time fee for modifying a mortgage down to a 38% payment-to-income ratio for five years. Modified loans must survive a 90-day trial in order to be eligible for the incentive payment. Government funds will also match the cost of further interest-rate reductions or other modifications to bring payments down to 31% of a borrower’s income. If borrowers perform in their newly-modified mortgages, servicers would be eligible to receive $1,000 per annum for three years under the government incentive program. A Treasury spokesperson told HW the servicers are added on a rolling basis to the transaction report, meaning the seven already posted — including Ocwen — represent only the beginning. “There are more servicers in the pipeline that will be added this week,” she said. The most recent addition to the servicer list, Ocwen received Treasury’s promise of up to $659m for mortgage modifications. Even before its TARP investment, the servicer touted its believed role as the first servicer in the country to begin executing loan modifications under the Obama administration’s plan, indicating the servicer may be trying to demonstrate a recovery from recent losses of revenue and investor confidence. As a result of questions over Ocwen’s liquidity in recent months, Fitch Ratings put the subprime servicer and technology provider onto negative rating watch but said in late March the servicer’s financial picture brightened considerably in recent weeks. The rating agency said it will maintain its negative rating watch on the company, but cited “several positive developments” likely to effect a resolution of the negative watch within the next few months. “Funding challenges aside, Fitch expects operating performance to improve in light of additional third-party servicing opportunities from the public sector,” the rating agency said. For instance, mortgage finance giant Freddie Mac (FRE) said in early February it selected Ocwen for a pilot program to manage at-risk non-performing mortgages. Ocwen shares fluctuated in mid-morning trading — from trading up 0.85%, to down 0.81% at $11.08  — when this story went to press. Write to Diana Golobay at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.