In May, Ocwen announced it would sell its mortgage servicing rights to New Residential Investment Corporation, a wholly owned subsidiary of NRZ. The sale, which includes $117 billion in unpaid principal balance, leaves Ocwen as a sub-servicer under a five-year contract with New Residential. As such, Fitch does not foresee “any change or disruption to servicing activity” that would warrant an update in ratings.
“Fitch believes that the agreement allows Ocwen to continue to perform key activities and to receive ongoing fee income in its sub-servicing role,” according to Fitch. “The agreement may also reduce the servicing disruption risk, as it is generally easier to replace sub-servicers than primary servicers in the event the servicer's financial condition or performance deteriorates.”
In addition to purchasing Ocwen’s servicing rights, New Residential also bought a 4.9 percent equity state in the company. The announcement of the sale sent Ocwen stock soaring. In the days following the news, stock rose 46 percent, hitting a peak of $3.32 per share.
The jump in stock was welcome good news for the servicer which, just days before the sale, was sued by the Consumer Financial Protection Bureau as well as a number of states. Both parties filed suit against Ocwen alleging the company “engaged in significant and systemic misconduct at nearly every stage of the mortgage servicing process.” Ocwen responded by filing a motion to expedite a court ruling on the constitutionality of the CFPB in the case of PHH Corp. v. CFPB.
A three-judge panel from the Washington, D.C. Circuit Court of Appeals deemed the CFPB structure unconstitutional back in October. The full Court is set to rehear the case later this year.