Ocwen Mortgage Subprime Servicing Now Number 1

Ocwen Financial Corporation, known to most Americans as either Ocwen Mortgage or Ocwen Mortgage Servicing, has plans to grow even larger. Ocwen is already the largest servicer of subprime mortgages. Here is the tie-in: Home Loan Servicing Solutions, a foreign investment firm designed to buy mortgage servicing rights from Ocwen Financial Corporation, is planning an initial public offering (IPO).

We verified the information with the Securities and Exchange Commision. HLSS will use proceeds from the IPO to buy mortgage servicing rights (MSRs) from Ocwen.

Home Loan Servicing Solutions, Ltd. was formed to acquire Ocwen Financial Corporation’s mortgage servicing business. The Cayman Islands-based company plans to list on the NASDAQ under the symbol HLSS. Founder and Chairman is William Erbey, who is also the current Chairman of Ocwen and its former CEO and President.

Definition of ‘Mortgage Servicing Rights – MSR’
A contractual agreement where the right, or rights, to service an existing mortgage are sold by the original lender to another party who specializes in the various functions of servicing mortgages. Common rights included are the right to collect mortgage payments monthly, set aside taxes and insurance premiums in escrow, and forward interest and principle to the mortgage lender. (Courtesy of Investopedia)

The end goal for Ocwen is to have more money to expand even more. Ocwen Financial Corp already bought Saxon Mortgage from Morgan Stanley, and Litton Loan Servicing from Goldman Sachs.

That makes Ocwen Financial the largest subprime player, with approximately $106 billion of the Ocwen portfolio as subprime. The next closest subprime servicer is JPMorgan Chase with approximately $87 billion. Ocwen expects to close on another $15 billion of subprime MSRs in early 2012.

So now the sub-prime crisis is being sorted out. Companies went broke since the height of the crisis in 2005-2007. Banks went under, and entire countries were hit hard. In the end it looks like Ocwen Financial Corp and Ocwen Mortgage Servicing will have most of the subprime business.