Ocwen To Use Money From MSR Sales to Pay Part of Senior Secured Term Loan

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Today, Ocwen Financial Corporation announced that it will use payments connected with previous mortgage servicing rights (MSRs) sales to pay down $53.2 million of its senior secured term loan, according to the company’s recent 8-K filing with the Securities and Exchange Commission (SEC). As of now, Ocwen still has approximately $939.4 million left outstanding under its senior secured term loan.

Embarking on the journey to transfer its MSRs at the end of last year, Ocwen has been busy selling and paying off the MSRs. The companyannounced in February that it sold the MSR on a portfolio of about 81,000 performing residential loans owned by Freddie Mac with an unpaid principal balance (UPB) of about $9.8 billion to Nationstar. One month later, Ocwen announced that they were selling another MSR portfolio with $25 billion in UPB to Nationstar Mortgage. Together, the two MSR deals between Ocwen and Nationstar included about 223,000 residential mortgage loans with $34.8 billion in UPB.

“This transaction, on top of the one announced in February between Ocwen and Nationstar, furthers our announced corporate strategy and demonstrates the strong working relationship we have developed with Nationstar,” said Ron Faris, CEO of Ocwen.

Ocwen’s ratings were recently upgraded by Moody’s Investor Service and president and CEO of Ocwen, Ron Faris commented on those ratings in a press release on Friday expressing his excitement with the results.

“We are pleased to see that the strategy we have deployed is working and achieving its objectives,” Faris said. “Execution on sales of a portion of our Fannie Mae and Freddie Mac servicing portfolios has resulted in increased liquidity, reduced corporate leverage and a simplified operating structure. We are pleased that Moody’s has upgraded our Corporate Family Rating, Senior Secured Bank Credit Facility rating, and Senior Unsecured Debt rating. We are also pleased to see that Moody’s has changed its outlook for all of these ratings to stable.”

Faris also addressed the CreditWatch announcement by Standard and Poor’s Ratings Services (S&P) in the press release on Ocwen’s servicer rankings.

“We were surprised by the S&P announcement and specifically their reasons because we believe that we have made significant progress in resolving past regulatory concerns, strengthened our financial condition, and, over the past couple of years, continually invested in the quality and capacity of our risk, compliance, and internal audit functions,” Faris said. “As previously reported, we are not aware of any unresolved issues with state agencies that would have a material financial impact on the Company.”

Ocwen further noted in the release that downgrades in its servicer ratings or rankings could affect the company’s terms of or its ability to sell or fund servicing advances in the future, the release says. Negative action ratings or rankings could also affect the terms and availability of debt financing facilities that it may seek in the future and could impair its ability to consummate future servicing transactions or adversely affect its dealings with lenders, other contractual counterparties, and regulators. This would include its ability to maintain its status as an approved servicer by Fannie Mae and Freddie Mac.

In an effort to monitor the Ocwen’s loan servicing operations, the state of California’s Department of Business OversightCommissioner Jan Lynn Owen announced today in a press release that out of 31 candidates, it has named Fidelity Information Services (FIS) as the independent, third-party auditor that will review the California mortgage servicing operations of Ocwen Loan Servicing, LLC. FIS will be responsible for assessing servicing practices and compliance with consumer protection laws.

“The DBO has a duty to ensure its licensees fully comply with laws and regulations designed to protect California homeowners,” said Owen. “FIS will help us fulfill that duty with respect to Ocwen.”

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