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What: Shares of loan servicer Ocwen Financial
So what: Ocwen will pay $588 million in cash and $162 million in convertible preferred stock for Homeward, which services about 422,000 mortgage loans with an aggregate unpaid principal balance of more than $77 billion. Homeward launched its origination business just last year and is already operating at a $10 billion annual run-rate, giving Ocwen investors plenty of confidence in the deal's potential to bolster growth.
Now what: After normalizing for transition-related expenses, the acquisition is expected to be immediately accretive to Ocwen's earnings. "We are excited about the synergistic combination of the attractive servicing portfolio and platform, as well as the origination platform which will provide organic growth and will further Ocwen's ability to work with existing borrowers on refinancing opportunities," Ocwen CEO Ron Faris said. With the stock busting through to a new 52-week high and now up a whopping 170% over the past year, however, I'd wait for a significant pullback before buying into that bullishness.
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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.