It seems Ocwen is finally getting a reprieve from its recent streak of bad news. The servicer’s stock has spiked since a recent acquisition announcement by New Residential Corporation, which will purchase a portion of Ocwen’s mortgage servicing rights for the next five years.
Ocwen stock rose as high as 46 percent following the announcement, reaching $3.32 per share at its peak. Shares currently sit at $3.08 as of 1 p.m. May 2—a stark contrast to prices just a few weeks before.
Ocwen shares have plummeted since the Consumer Financial Protection Bureau, along with 21 U.S. states, sued the lender for committing errors in its mortgaging process. At one point, Ocwen’s shares dropped more than 50 percent, hitting as low as $2.23 toward the end of April.
Stock on New Residential Corp. has also jumped following the acquisition announcement, rising more than 3 percent just this week; it now sits at $16.90 per share.
According to the deal, New Residential act as a subservicer for Ocwen for the next five years, taking on $117 billion in mortgage servicing rights. It will also pay an upfront fee of $425 million, as well as an equity investment. The investment will entitle New Residential to 4.9 percent of the company. The two companies had partnered previously, though New Residential’s servicing rights were never “fully-owned.”
"We are excited about the prospect of this new arrangement and expect that this agreement will further strengthen what I view as an already strong partnership by eliminating some of the uncertainties inherent in the existing arrangement, which will be good for shareholders of both companies," said Ron Faris, President and CEO of Ocwen.
Ocwen has made lots of headlines as of late, as the CFPB and numerous states filed suit against it. The company responded by filing restraining orders against cease and desists issued by the Illinois Department of Financial and Professional Regulation and the Commissioner of Banks of the Massachusetts Division of Banks. Ocwen has also filed two motions to expedite a court ruling on the constitutionality of the CFPB, as well as a third motion to invite the Department of Justice to take part in the case.
Fitch Ratings recently issued a new Servicer Rating for the organization, dropping it from “Stable” to “Negative.”