PHH, a subsidiary of Ocwen, will buy $ 48 billion in mortgage rights

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PHH Mortgage Corp., a subsidiary of Ocwen Financial, announced on Monday that it plans to acquire a $ 48 billion portfolio of mortgage servicing rights from AmeriHome, a lender that Western Alliance Bank acquires

PHH plans to acquire MSR unpaid at the close for a total of approximately $ 607 million, adjusted for churn, and will reimburse AmeriHome for outstanding service advances, as per the company’s related Securities and Exchange Commission filing 8-K.

If the last planned purchase by an Ocwen subsidiary massive MSR clarifies all prerequisites, including approval of a funding agreement between PHH and Western Alliance, which could be closed by the end of June. Following this closure, a formal handover could take place in September and increase PHH’s portfolio by 16%. AmeriHome’s portfolio contains 178,000 home loans sold or securitized by one of two government-funded businesses, Fannie Mae and Freddie Mac. This will add to Ocwen’s total portfolio of 1.1 million loans.

The deal is critical to achieving the goal that Ocwen announced in its preliminary first quarter earnings report of accumulating MSR with a total outstanding principal balance of up to $ 150 billion this year as part of efforts to improve scalability and expand its customer base. It is also one of the largest servicing rights deals since the sale to Citigroup. $ 97 billion portfolio represented the vast majority of his business in 2018. As of December 31, 2020, AmeriHome Mortgage’s portfolio of services totaled $ 99 billion.

“We believe that performing a massive MSR transaction of this magnitude reflects the strength, quality and scalability of our service platform,” Ocwen President and CEO Glen Messina said in a press release.

Monday’s announcement pushed Ocwen’s stock price up 2.8% on the day to $ 34 per share.

Ocwen said in its preliminary reports that it has enough letters of intent to meet roughly half, or $ 68 billion, of its ideal MSR purchase target. The deal with AmeriHome is included in this amount.

Earlier this year, Ocwen announced that PHH would buy the $ 14 billion MSR portfolio from Texas Capital Bank. Western Alliance noted when it closed a deal in April to buy AmeriHome parent Aris Mortgage Holding, which will sell a smaller MSR stake for $ 750 million.

Buying large mortgages may put more pressure on banks to sell service rights due to Basel III restrictions on Tier 1 capitalso they must weigh this consideration against the cost of the client-borrower relationship. The proportion of Tier 1 capital or fixed capital that can be MSR is capped at 10% or 25% for banks with assets less than $ 50 billion. On top of that, a landmark year for long-term, fixed-rate loans increases the likelihood that depositories relying on short-term funding will have overflowing balance sheets that they want to free up. According to the Mortgage Bankers Association, last year total loans totaled about $ 3.8 trillion, a record for the industry. As a result, rights servicing transactions have become larger.

“What we are starting to see are those whose balance sheets have grown beyond what they have ever had before and are starting to roll back,” Tom Pearcey, managing director of Incenter Mortgage Advisors, said in an interview.



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