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Beware: Ocwen To Expand

New Residential Investment Corporation and Ocwen Financial Corporation have announced the companies have signed definitive agreements for the transfer of Ocwen’s interest in mortgage servicing rights (MSRs) and subservicing relating to approximately $110 billion of non-agency MSRs. Upon the transfer of the MSRs to New Residential, the subservicing agreement will replace certain existing agreements between New Residential and Ocwen.

Under the MSR transfer agreement, Ocwen will transfer to New Residential, a wholly-owned subsidiary of NRZ, approximately $110 billion of seasoned non-agency MSRs subject to the parties’ current agreements. Upon obtaining the required third-party consents and the transfer of the MSRs, a subsidiary of NRZ will make a lump sum restructuring fee payment to Ocwen upon each transfer in exchange for Ocwen forgoing payments under the existing agreements. These lump sum restructuring fee payments may total up to approximately $400 million in aggregate if all of the applicable MSRs are transferred to NRM. Subject to the approval of certain counterparties to the related securitizations and other customary closing conditions, the transfers may begin as early as September 2017 and continue into 2018.

“New Residential has been a close business partner and this new arrangement extends and builds upon a mutually beneficial relationship,” said Ronald M. Faris, President and Chief Executive Officer of Ocwen. “We look forward to working closely with New Residential to help homeowners in their servicing portfolio.”

Concurrently with the MSR transfer agreement, NRM has entered into a five-year subservicing agreement with Ocwen, pursuant to which Ocwen will subservice the mortgage loans underlying the transferred MSRs. In connection with the transaction, NRZ has agreed to make an equity investment of approximately $13.9 million to purchase approximately 4.9 percent of Ocwen’s common equity.

“This is a great transaction for both companies and we are extremely pleased to announce our new strategic partnership with Ocwen,” said Michael Nierenberg, Chairman and Chief Executive Officer of New Residential. “We believe the new subservicing arrangement will further secure our interests in our MSR investments and provide additional stability to the overall servicing industry. We are encouraged by the performance of our investment portfolio to date and remain optimistic in our ability to continue driving shareholder value going forward.”

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