Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Ocwen Financial Corp. (OCN 1.93%) rose in pre-market trading, only to plunge by more than 10% in the first hour of trading. Shares are now in positive territory for the day, up by nearly 6% as of noon EST.
So what: Ocwen announced that it would sell servicing rights to a $9.8 billion portfolio of mortgages to Nationstar Mortgage Holdings (NYSE: NSM).
Separately, an affiliated company, Home Loan Servicing Solutions (NASDAQ: HLSS), announced it would be acquired by New Residential Investment Corp. (NRZ 1.42%) at a price equal to the company's book value.
The sale of mortgage servicing rights will see the transfer of more than 81,000 performing loans from Ocwen to Nationstar. The sale represents a small part of the company's total servicing portfolio. Ocwen had $411.3 billion in unpaid principal balances in its residential servicing portfolio as of Sept. 30, 2014.
The sale of Home Loan Servicing Solutions to New Residential is not expected to affect Ocwen, which currently services a portfolio of mortgages for the company. New Residential management indicated it had the right to terminate Ocwen's role as the servicer, but that it doesn't expect to do so. Shares regained their lost ground as analysts were reassured of Ocwen's role on the conference call to explain the transaction.
In recent months, Ocwen has been under fire by regulators for its mortgage servicing practices. The company currently faces as many as 21 legal cases in 15 states because of its failures to adequately service mortgages. The company has been chastised for inaccurate documentation, often sending delinquency notices to borrowers who had in fact paid on time, among other problems.
Now what: Following approval from Freddie Mac and the Federal Housing Finance Agency, Ocwen and Nationstar expect the transaction to close by March 31, 2015, and loan servicing to transfer in April 2015.
This is just one of the many sales that will come as Ocwen follows a requirement to exit the servicing of agency mortgage loans as part of a December 2014 settlement with the state of New York.
