philly value Posted February 23, 2015 Share Posted February 23, 2015 What a roller coaster. Rumor spread this morning that HLSS acquisition would increase likelihood of Ocwen terminated as servicer, stock down 10%; conference call confirmed OCN will remain as servicer, stock now up 5%... Which call? I missed it. Wasn't an OCN call, New Residential call discussing HLSS: http://seekingalpha.com/news/2317026-conference-call-comments-boost-ocwen Link to comment Share on other sites More sharing options...
Guest roark33 Posted February 23, 2015 Share Posted February 23, 2015 NRZ hosted a call, I think the replay is available via the number on the press release from HLSS. Since this is a message board, I will give my two cents, which is purely an opinion. I think NRZ wants to re-cut the deal with OCN based on the technical defaults, but needs to do this after it has acquired HLSS. That re-cut deal value currently belongs to HLSS, but after the closing of the merger, NRZ gets that value. It is in the interest of NRZ to say that nothing is going to change with OCN, but I highly doubt that. Even if they don't terminate the deals, which I think is technically hard to do given transfer issues, I think NRZ will have a strong negotiating position to re-cut the payments made under the sub-servicing agreement. Link to comment Share on other sites More sharing options...
usdtor05 Posted February 23, 2015 Share Posted February 23, 2015 I'll give mine as well. I wouldn't bet against something like that but at the same time the margins on the sub-servicing aren't very good when you re-cast the financials for what they really look like ex-UPB that is still on their books but is HLSS' and also re-cast the P&L. So they may want to re-cut those and might get into it with Ocwen but they is not a ton of margin to go after...this isn't like when Ocwen buys non-agency and makes large margins. One more thought, if NRZ does fund them prospectively (say a year or two out) once the MSR purchases are allowed, even at a worse margin, that is a positive for Ocwen. If these asset sales go through and they can delever and then utilize NRZ to grow that is positive for OCN long-term. Lot of ifs but I would still argue its more positive than most people presume. I think 2 years out OCN is a completely different company and I don't mean that negatively. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted February 23, 2015 Share Posted February 23, 2015 What a roller coaster. Rumor spread this morning that HLSS acquisition would increase likelihood of Ocwen terminated as servicer, stock down 10%; conference call confirmed OCN will remain as servicer, stock now up 5%... Which call? I missed it. http://ir.hlss.com/releasedetail.cfm?ReleaseID=897623 Conference Call & Additional Information The management teams of New Residential and HLSS will host a conference call on Monday, February 23, 2015, at 11:00 AM Eastern Time to discuss the acquisition. All interested parties are welcome to participate on the live call. The call may be accessed by dialing 1-866-393-1506 (from within the U.S.) or 1-706-634-0623 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference "New Residential & HLSS Investor Call." A telephonic replay of the call will also be available two hours following the call's completion through 11:59 P.M. Eastern Time on Monday, March 9, 2015 by dialing 1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference conference code "92940476." Prior to the conference call, the Company expects to post a presentation about the transaction in the Investor Relations section of its website, www.newresi.com. PRESENTATION: http://ir.newresi.com/file.aspx?IID=4347089&FID=1500068580 Link to comment Share on other sites More sharing options...
Guest roark33 Posted February 23, 2015 Share Posted February 23, 2015 In terms of NRZ funding Ocwen 1-2 years out--any ability of them to buy MSRs would be great (And I would be a buyer at that point). My big issue with the sale of HLSS is I don't really understand how it benefits NRZ/NSM if they aren't able to re-cut the Ocwen deals. I guess they could cut back office costs because they are both basically financing shells, but I think the real upside is re-cutting or transferring the sub-servicing rights to NSM. This would hurt both OCN and ASPS. I would love to hear how this HLSS deal is good for OCN. Link to comment Share on other sites More sharing options...
mcmaaaaath Posted February 23, 2015 Share Posted February 23, 2015 My big issue with the sale of HLSS is I don't really understand how it benefits NRZ/NSM if they aren't able to re-cut the Ocwen deals. Fund at 1.3x Book Value (NRZ stock), buy at 1.0x Book (HLSS) seems to be a good trade to me, with more upside from any cost synergies. Link to comment Share on other sites More sharing options...
Guest roark33 Posted February 23, 2015 Share Posted February 23, 2015 Understandable from NRZ perspective, but I am curious why people think this might be good for Ocwen. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted February 23, 2015 Share Posted February 23, 2015 Understandable from NRZ perspective, but I am curious why people think this might be good for Ocwen. Apparently on the conference call management seemed to indicate that servicer would stay at Ocwen. “[it] is clear from listening to the tone of the call that the focus is on building a working partnership between the post acquired HLSS/NRZ companies and OCN. Not, as we and other had feared, on moving servicing away from OCN,” Sterne Agee analyst Henry Coffee said in a client note. He called Monday’s deal “quite a coup for both parties.” http://www.forbes.com/sites/antoinegara/2015/02/23/mortgage-merger-deals-blow-to-bluemountain-short-strengthens-ocwen/2/ Link to comment Share on other sites More sharing options...
guowei58 Posted February 24, 2015 Share Posted February 24, 2015 In terms of NRZ funding Ocwen 1-2 years out--any ability of them to buy MSRs would be great (And I would be a buyer at that point). My big issue with the sale of HLSS is I don't really understand how it benefits NRZ/NSM if they aren't able to re-cut the Ocwen deals. I guess they could cut back office costs because they are both basically financing shells, but I think the real upside is re-cutting or transferring the sub-servicing rights to NSM. This would hurt both OCN and ASPS. I would love to hear how this HLSS deal is good for OCN. the NRZ/HLSS deal is a good thing for OCN. anything that makes an OCN affiliate stronger is a good thing at this point. Reduces risks from BlueMountain and Mangrove also. Gives time for OCN to get its operations in order so that there's no more noise of potential servicing rights transfers. So far, I think the NRZ/HLSS deal is one of the most concrete event that helps to support value for OCN. The deal lowers the probability of a disaster scenario. I find it hard to believe that NRZ would mislead investors regarding their intention of keeping OCN as a servicer, at least in the near-term. the deal is a good strategic and financial transaction for NRZ and helps them to diversify servicing risk (right now NSM is the other servicer for NRZ). NRZ is a going-concern public company, and to think they would mislead investors on the call, and transfer servicing away from OCN to NSM so that they increase their risk of servicing and potential disruption to RMBS cash flow and borrowers, is wishful thinking by the shorts. I would estimate that there's a 80% chance that OCN stays on as servicer for the next two years at least...beyond the next two years, it's anyone's guess. But assuming OCN gets its operations in order, I think the chances of OCN keeping the servicing is very high beyond the next two years, probably higher than 80% as OCN hopefully will reduce its regulatory issues by then. Although I think transfer servicing is tough logistically, "recutting" the deal with OCN is even more difficult in my opinion. Think about the regulatory shitstorm if OCN is switched out so that NRZ can save a few bps (and breaking a business contract in the process). Is NRZ willing to risk disruptions of cash flow to borrowers and RMBS investors to attempt to do this? and what's the basis of coming to the table to break a contract and recut the deal? I think NRZ has less leverage than people think. Obviously, we can always interpret this event negatively. but I think it's a low probability that NRZ will switch out OCN. In the event that NRZ does, I think the impact to OCN would not be as high as some people imagined. The MSR value on the balance sheet, net of the HLSS debt is less than $2 per share...It's interesting that the MSRs are still technically owned by OCN, and not by HLSS. OCN still have not received all approval to derecognize these MSRs from their balance sheet. Link to comment Share on other sites More sharing options...
Guest roark33 Posted February 24, 2015 Share Posted February 24, 2015 I think you are probably right about NRZ deal in the near term. On the one hand, if NRZ wants to be a partner with Ocwen in the future, like 2 years from now, I doubt they would re-cut the deal following the merger to gain a few bps. On the other hand, it does provide a safe backstop for HLSS shareholders should anything catastrophic happen to Ocwen. Always interesting to watch.... Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted February 24, 2015 Share Posted February 24, 2015 In terms of NRZ funding Ocwen 1-2 years out--any ability of them to buy MSRs would be great (And I would be a buyer at that point). My big issue with the sale of HLSS is I don't really understand how it benefits NRZ/NSM if they aren't able to re-cut the Ocwen deals. I guess they could cut back office costs because they are both basically financing shells, but I think the real upside is re-cutting or transferring the sub-servicing rights to NSM. This would hurt both OCN and ASPS. I would love to hear how this HLSS deal is good for OCN. the NRZ/HLSS deal is a good thing for OCN. anything that makes an OCN affiliate stronger is a good thing at this point. Reduces risks from BlueMountain and Mangrove also. Gives time for OCN to get its operations in order so that there's no more noise of potential servicing rights transfers. So far, I think the NRZ/HLSS deal is one of the most concrete event that helps to support value for OCN. The deal lowers the probability of a disaster scenario. I find it hard to believe that NRZ would mislead investors regarding their intention of keeping OCN as a servicer, at least in the near-term. the deal is a good strategic and financial transaction for NRZ and helps them to diversify servicing risk (right now NSM is the other servicer for NRZ). NRZ is a going-concern public company, and to think they would mislead investors on the call, and transfer servicing away from OCN to NSM so that they increase their risk of servicing and potential disruption to RMBS cash flow and borrowers, is wishful thinking by the shorts. I would estimate that there's a 80% chance that OCN stays on as servicer for the next two years at least...beyond the next two years, it's anyone's guess. But assuming OCN gets its operations in order, I think the chances of OCN keeping the servicing is very high beyond the next two years, probably higher than 80% as OCN hopefully will reduce its regulatory issues by then. Although I think transfer servicing is tough logistically, "recutting" the deal with OCN is even more difficult in my opinion. Think about the regulatory shitstorm if OCN is switched out so that NRZ can save a few bps (and breaking a business contract in the process). Is NRZ willing to risk disruptions of cash flow to borrowers and RMBS investors to attempt to do this? and what's the basis of coming to the table to break a contract and recut the deal? I think NRZ has less leverage than people think. Obviously, we can always interpret this event negatively. but I think it's a low probability that NRZ will switch out OCN. In the event that NRZ does, I think the impact to OCN would not be as high as some people imagined. The MSR value on the balance sheet, net of the HLSS debt is less than $2 per share...It's interesting that the MSRs are still technically owned by OCN, and not by HLSS. OCN still have not received all approval to derecognize these MSRs from their balance sheet. The conference call talks about the issues with transferring service away. Transcript here: http://www.sec.gov/Archives/edgar/data/1513161/000151316115000022/ex991conferencecalltranscr.htm It could be that the issue is that servicing transfers require the co-operation for the last servicer. Without it, a lot of loan mods and borrowers will get lost in the shuffle. (And there are also issues with continuity of escrow, taxes, and insurance.) Because of the new regulations, it will be really bad for the new servicer if they allow previously approved loan mods to be rejected. They may also have certain obligations about mailing stuff by a certain date, responding to loan mods and short sale proposals. Contractually, ocwen is supposed to provide "commercially reasonable" efforts to help servicing transfers. Legally it seems that NRZ/HLSS management is suggesting that Ocwen will do a bad job at making the transfers less ugly because they don't have a financial incentive to help (beyond not breaching their contract with HLSS). Link to comment Share on other sites More sharing options...
Guest roark33 Posted February 24, 2015 Share Posted February 24, 2015 Kingstown opposes deal with NRZ/HLSS. 13D filed. Always interesting. http://www.sec.gov/Archives/edgar/data/1418673/000092189515000496/sc13d07352001_02232015.htm Link to comment Share on other sites More sharing options...
Guest roark33 Posted February 24, 2015 Share Posted February 24, 2015 This would appear to be a (or the) key provision in the merger agreement between NRZ and HLSS. Section 4.21 Termination Events. From January 1, 2014 until the date of this Agreement, none of the Company or any Company Subsidiary has (i) waived or otherwise prejudiced any rights in respect of any “Termination Event” under the Master Servicing Rights Purchase Agreement or under any Sale Supplement executed in connection the Master Servicing Rights Purchase Agreement or (ii) has waived or otherwise prejudiced any material rights or remedies under or in connection with any Material Contract. In other words, NRZ has ensured that HLSS has preserved all rights to terminate its relationship with Ocwen. Link to comment Share on other sites More sharing options...
TeddyLampert Posted February 25, 2015 Share Posted February 25, 2015 Kingstown opposes deal with NRZ/HLSS. 13D filed. Always interesting. http://www.sec.gov/Archives/edgar/data/1418673/000092189515000496/sc13d07352001_02232015.htm Kingstown's objection seems pretty standard for deals of this sort: they believe the acquirer is purchasing the target for a steal, and they are angling for a higher price. It does not appear they are objecting on the grounds that the merger will jeoparodize the OCN servicing arrangement per se (in which Kingstown has an economic interest). Regarding OCN, it seems like Kingstown is putting a stake in the ground by saying that HLSS is better off using OCN's servicing (bolded), whether the merger goes through or not. This could just be Kingstown's strategy to reach a compromise with NRZ: 'continue using OCN and we'll drop our activism' Item 4. Purpose of Transaction. The Reporting Persons oppose the announced transaction between New Residential Investment Corp. (“NRZ”), Hexagon Merger Sub, Ltd. and the Issuer pursuant to that certain Agreement and Plan of Merger, dated February 22, 2015 (the “Merger Agreement”). The Reporting Persons do not believe a transaction at GAAP book value adequately compensates the Issuer’s shareholders for the value of its assets, which have historically traded between 1.2x - 1.3x book value according to the Issuer’s September 2014 Investor Presentation. The Reporting Persons further note the overly conservative nature of the assumptions underlying the Issuer’s book value, including (i) an assumed weighted average prepayment rate of 18% versus the actual 10.3% for the nine months ending September 30, 2014, (ii) an assumed weighted average delinquency rate of 25% versus actual non-performing residential assets of 18.5% of UPB as of September 30, 2014, (iii) an assumed weighted average discount rate of 19% versus a 10% discount rate used by NRZ to value its own MSR assets, and (iv) the exclusion of any value from deferred servicing fees, which were $470M at year-end 2013. The Reporting Persons believe that adjusting these assumptions to reflect recently observed rates and the discounted value of deferred servicing fees, among other factors, could add more than $7 per share of additional value above the stated book value. Notwithstanding a higher offer from NRZ or others, the Reporting Persons believe the most value-enhancing strategies for the Issuer are continuing its servicing relationship with Ocwen Financial Corporation, completing refinancing initiatives recently highlighted by management and executing the Issuer’s growth initiatives as its financing and operations normalize in due course. Link to comment Share on other sites More sharing options...
BeerBBQ Posted February 27, 2015 Share Posted February 27, 2015 Does anyone know what the difference between these two pooling and servicing agreements is? This one: Http://www.sec.gov/Archives/edgar/data/1302012/000088237704001952/d257777.txt which appears to be a Homeward Residential serviced pool (see page 2 here - http://www.pottco.org/deed_pdf/2012/1/3/5/2012-13554.pdf ) It has language on page 140 that says “Upon removal or resignation of the Master Servicer, the Trustee, with the cooperation of the Depositor, (x) shall solicit bids for a successor Master Servicer as described below and… The Trustee upon receipt of the purchase price shall pay such purchase price to the Master Servicer being so removed…” and This one: http://www.sec.gov/Archives/edgar/data/1352494/000091412106000429/se885565-424b5.txt This is a PSA for one of the RMBS that OCN is being terminated from. This one does not have language like the one above. It doesn’t explicitly state that the terminated servicer can’t be compensated but it doesn’t mention anything about compensation either – see page S-85. I have looked at several PSA’s both with and without compensation language and haven’t been able to determine if there is any rhyme or reason to it. There are GSE related PSA’s that contain similar compensation language to the Homeward one above. I was wondering if PSA’s that govern GSE pools all have this language in them. If so, then is the amount of UPB that could be exposed to uncompensated termination small? OCN has roughly $200B UPB of Agency loans and if these are all under PSA’s with compensation language then these are not a risk for uncompensated termination. My understanding is that of the other half of UPB (~$177B non-agency), HLSS is 95% of that. Since as of now and taking NRZ at their word that OCN is a good servicer and they have no plans to switch, these seem relatively safe from uncompensated termination too. That leaves about $9B UPB that could be under PSA’s with unclear language as it relates to servicer termination and compensation. This also fits with the press release today (http://finance.yahoo.com/news/ocwen-comments-notice-trustee-175617211.html) that says the two RMBS terminating OCN are part of the 119 referenced in the February 5th 8-k. That 8k (http://finance.yahoo.com/news/ocwen-comments-notice-trustee-175617211.html) says the 119 pools relate to $9B UPB. Using the $800K value associated with the $260M UPB related to the two RMBS implies there is roughly $30M of MSR value at risk for uncompensated termination (assuming the Agency pools all have PSA’s with compensation language and NRZ is being truthful regarding their future use of OCN as servicer). Any feedback is appreciated. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted February 28, 2015 Share Posted February 28, 2015 I think the terms of the PSAs vary widely. e.g. some of them do not even allow for any loan modifications. Link to comment Share on other sites More sharing options...
BeerBBQ Posted February 28, 2015 Share Posted February 28, 2015 A couple of more questions: Do you have any thoughts on how much UPB is at risk of uncompensated transfer? What needs to transpire for a servicing transfer to occur? I am wondering if a forced uncompensated transfer looks good on paper but is not very practical in reality. If this is true, what are the reasons for this? What are the actual mechanics of a transfer and what could go wrong that would cause a receiving servicer to think twice about accepting a transfer without compensating the prior servicer? Is part of the reason uncompensated transfers have supposedly been rare because compensation ensures cooperation? Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted February 28, 2015 Share Posted February 28, 2015 A couple of more questions: Do you have any thoughts on how much UPB is at risk of uncompensated transfer? What needs to transpire for a servicing transfer to occur? I am wondering if a forced uncompensated transfer looks good on paper but is not very practical in reality. If this is true, what are the reasons for this? http://www.sec.gov/Archives/edgar/data/873860/000101905615000118/ex99_1.htm And finally, I would now like to turn your attention to the status of our existing non-agency RMBS servicing portfolio: · We are currently a servicer on approximately 4,000 private label securities (PLS) agreements. · Of these, approximately 695 with about $44.8 billion of UPB have minimum Servicer Ratings criteria. · While rating agencies have taken actions largely based on public information regarding issues with regulators, they have not pointed to actual servicing performance deficiencies. For example, the Fitch action of February 4th, 2015 starts by noting that “the company continues to perform servicing functions at a proficient level.” Objective data on PLS performance continues to show that Ocwen excels in managing loss mitigation timelines, bringing borrowers current on their payments and keeping them current. For these reasons, we believe it is in the best interests of all stakeholders to continue to keep Ocwen on the job. · To date, including the recent announcement from Fitch, our servicer ratings have fallen below the minimum criteria set forth in 482 PLS agreements. This represents approximately $34.6 billion in UPB serviced by Ocwen, or 8.7% of our total servicing portfolio. · We have not been notified by any RMBS trustee of any intent to move Non-Agency RMBS servicing as a result of changes in servicer ratings or any other reason. Link to comment Share on other sites More sharing options...
abitofvalue Posted February 28, 2015 Share Posted February 28, 2015 A couple of more questions: Do you have any thoughts on how much UPB is at risk of uncompensated transfer? What needs to transpire for a servicing transfer to occur? I am wondering if a forced uncompensated transfer looks good on paper but is not very practical in reality. If this is true, what are the reasons for this? http://www.sec.gov/Archives/edgar/data/873860/000101905615000118/ex99_1.htm And finally, I would now like to turn your attention to the status of our existing non-agency RMBS servicing portfolio: · We are currently a servicer on approximately 4,000 private label securities (PLS) agreements. · Of these, approximately 695 with about $44.8 billion of UPB have minimum Servicer Ratings criteria. · While rating agencies have taken actions largely based on public information regarding issues with regulators, they have not pointed to actual servicing performance deficiencies. For example, the Fitch action of February 4th, 2015 starts by noting that “the company continues to perform servicing functions at a proficient level.” Objective data on PLS performance continues to show that Ocwen excels in managing loss mitigation timelines, bringing borrowers current on their payments and keeping them current. For these reasons, we believe it is in the best interests of all stakeholders to continue to keep Ocwen on the job. · To date, including the recent announcement from Fitch, our servicer ratings have fallen below the minimum criteria set forth in 482 PLS agreements. This represents approximately $34.6 billion in UPB serviced by Ocwen, or 8.7% of our total servicing portfolio. · We have not been notified by any RMBS trustee of any intent to move Non-Agency RMBS servicing as a result of changes in servicer ratings or any other reason. what about transfers for reasons other than ratings downgrades? Has OCN disclosed what percentage of the non-agency pools have the right to transfer based on other criteria? There seem to be a fair number of reasons laid out in the PSA by which OCN would trigger an event of transfer / termination. Mangrove seems to have made the point that essentially all Non-agency servicing could be at risk of an uncompensated transfer. If that is indeed true, and NRZ seems to have made sure HLSS hasn't given OCN a waiver, then one could argue the 8.7% of UPB that OCN mentioned is pretty meaningless. The reason you don't see forced uncompensated transfers is a transfer is disruptive to performance of the underlying RMBS as mods get dropped, foreclosures take longer and generally underlying loan performance suffers. trying to do a transfer without any cooperation from the existing servicer is hard, which is why the PSA typically has provisions that require the current servicer to cooperate with a transfer. The bull argument is that well yes but level of cooperation will be so low at OCN that no other servicer would buy it (if such capacity even exists, which is the other the reason i hear for OCN to remain servicer) So one question then becomes do you take NRZ at it's word that OCN will remain servicer. The market seems to have a hard time believing that given the relationship between nrz / nsm, the amount of money that could flow to nrz from moving servicing (dont forget in addition to servicing fees, there are the call rights that typically go to the named servicer - currently OCN but would be lost if servicing moves - compensated or not), the relationship between edens and erbey etc.. Link to comment Share on other sites More sharing options...
BeerBBQ Posted February 28, 2015 Share Posted February 28, 2015 What is the edens erbey relationship? Link to comment Share on other sites More sharing options...
Guest roark33 Posted March 2, 2015 Share Posted March 2, 2015 I will try to write more later, but I thought I would just pass this along. RESI reported earnings today. They note in their press release that they added two new servicers an "transferred" about 1B in UPB. I think anyone using BV for OCN needs to reconsider that metric considering how quickly that number is dissipating. Forced terminations, transfers by affiliates, fines, etc. I am obviously bias, but I question why Ocwen would not disclosure something like this. You could read the tea leaves on this because RESI filed contracts with new servicers a few months back, but Ocwen is just really shady in terms of disclosure, in my mind. See below. http://ir.altisourceresi.com/releases.cfm Added two new mortgage loan servicers. Residential transferred $485 million of unpaid principal balance to Fay Servicing on February 28, 2015 and is in the process of transferring an additional $585 million of unpaid principal balance to BSI Financial Services in April 2015. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted March 2, 2015 Share Posted March 2, 2015 I will try to write more later, but I thought I would just pass this along. RESI reported earnings today. They note in their press release that they added two new servicers an "transferred" about 1B in UPB. I think anyone using BV for OCN needs to reconsider that metric considering how quickly that number is dissipating. Forced terminations, transfers by affiliates, fines, etc. I am obviously bias, but I question why Ocwen would not disclosure something like this. You could read the tea leaves on this because RESI filed contracts with new servicers a few months back, but Ocwen is just really shady in terms of disclosure, in my mind. See below. http://ir.altisourceresi.com/releases.cfm Added two new mortgage loan servicers. Residential transferred $485 million of unpaid principal balance to Fay Servicing on February 28, 2015 and is in the process of transferring an additional $585 million of unpaid principal balance to BSI Financial Services in April 2015. They lose subservicing revenues, not MSRs. Revenue-wise, it is likely immaterial. $485M + $585M = $1,070M in UPB. The latest 10-Q has a section on Portfolio of Assets Serviced. http://www.sec.gov/Archives/edgar/data/873860/000087386014000020/a2014093010q.htm $411B in UPB for servicing and subservicing. So it really is immaterial. Link to comment Share on other sites More sharing options...
jay21 Posted March 2, 2015 Share Posted March 2, 2015 Obligatory weekly material OCN event: http://finance.yahoo.com/news/ocwen-financial-corporation-provides-significant-211840218.html Link to comment Share on other sites More sharing options...
mcmaaaaath Posted March 2, 2015 Share Posted March 2, 2015 Obligatory weekly material OCN event: http://finance.yahoo.com/news/ocwen-financial-corporation-provides-significant-211840218.html This release is quite interesting. Some takeaways and questions I have: 64m in uncollectable receivables-- what is this? $45B UPB Agency sale-- that was fast! The $550m for 55B price seems to meet Ocwen's previous claims about the "fair market value" of their Agency MSRs of $1.5B or so relative to their $1.1B carrying value. The "amendment to the term loan" is VERY interesting. The SSTL required that cash derived from sales of the agency MSRs must go towards paying down the SSTL. Did they totally remove this requirement? What will they do with the money?? What is the financial covenant they increased? If they are not using the money to pay down debt, perhaps they will repurchase shares? The final line about hiring Barclays to "advise regarding adjustments to its capital structure" make me wonder. Or maybe they will pay a special dividend? Finally it appears the private label RMBS trusts that terminated Ocwen have about $280m in UPB (0.07% x $400B). So nothing material has happened as far as terminations go... yet. Also hilarious that they will actually book a gain due to the deferred servicing fees. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted March 2, 2015 Share Posted March 2, 2015 So they're receiving $550 million in proceeds for roughly 13% ($55 billion) of MSRs, being sold at a "significant premium" to stated book value. Last I checked, $550 million is roughly half of the market cap. 13% for half of the market cap. Don't worry, I'm sure this will be spun negatively, and there was 0.07% that was transferred last week (at a gain, by the way), so that must mean servicing rights are about to flee for free. I'm so tired of the lack of logic and overwhelming pricing according to the most negative outcome instead of evaluating the big picture and OCNs importance to the industry..but I still have a hungry stomach for value! Link to comment Share on other sites More sharing options...
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