Ocwen Financial Corp. agreed to sell $45 billion of
mortgage-servicing rights to J.P. Morgan Chase & Co., following
through on previous statements that it planned to shrink the
business, people with knowledge of the transaction said.
No sale price was disclosed but earlier this month Ocwen said in
a statement that it was on track to sell mortgage servicing rights
for loans with an unpaid balance of $55 billion, and that it
already had an agreement to sell almost $10 billion of those rights
to Nationstar Mortgage Holdings Inc.
Ocwen said earlier that the sale of the $55 billion in servicing
rights would result in about $550 million in proceeds.
The sale was reported earlier Tuesday by Inside Mortgage
Finance.
The acquisition of the $45 billion portfolio may indicate a
reversal of J.P. Morgan's strategy. Like other big banks, it had
pulled back from the mortgage servicing industry due to increased
regulatory scrutiny and costs, as well as new international rules
that require banks to hold extra capital against those rights. Last
year, James Dimon, the bank's chief executive officer, told
analysts, "If I had a choice, I would never be into bulk servicing
again."
A J.P. Morgan spokesman said the bank declined to comment about
its stance on owning such rights.
For Ocwen, the deal continues its dramatic evolution into a much
smaller firm.
Following a two-year investigation by New York state regulators
of allegations that Ocwen was mishandling distressed borrowers, the
firm agreed in December to a $150 million settlement and the
appointment of a monitor to scrutinize its practices. Its executive
chairman and largest shareholder, William Erbey, was also forced to
resign.
The company said that it was also going to sell off the rights
to service mortgages owned by the government-supported entities,
Freddie Mac and Fannie Mae. The sale of the $55 billion in
servicing rights involves such agency-owned mortgages, Ocwen said
earlier.
In addition, an affiliated company, Home Loan Servicing
Solutions Ltd., said in February it had agreed to be acquired by
New Residential Investment Corp., an affiliate of Nationstar. And
in recent months some large institutional investors have sought to
have Ocwen removed as the servicer of some large portfolios in
mortgage-backed securities, saying that it had performed poorly and
had defaulted due to recent downgrades of its rating by
credit-rating firms.
Write to James Sterngold at james.sterngold@wsj.com
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