Ocwen Financial is teaming up with affiliates of Oaktree Capital Management to create a new venture that could purchase up to $100 billion in aggregate of government-sponsored enterprise mortgage servicing rights.
The venture is called MAV Canopy HoldCo I, and the partners are expected to invest up to $250 million of equity capital to be used to purchase the MSRs over a three-year period, according to a Securities and Exchange Commission filing. Under the agreement Ocwen will contribute 15% and Oaktree 85%; however, under certain circumstances Ocwen could receive a larger portion of MAV Canopy's distributable income.
In turn, the venture will operate a licensed entity that will have the corporate name MSR Acquisition Vehicle. Until MAV Canopy is fully funded, Ocwen has an obligation to give the venture a first look at opportunities to acquire Fannie Mae or Freddie Mac MSRs that meet certain criteria.
Ocwen's PHH subsidiary will subservice the loans MAV acquires. The company said MAV Canopy could add between $50 billion and $60 billion of subservicing for Ocwen.
The transaction is expected to close in the first half of 2021, at which time Oaktree may exercise an option to purchase up to 4.9% of Ocwen's common stock at a price per share of $23.15. In addition, Ocwen will issue Oaktree warrants to purchase an additional 3% of its stock at an exercise price of $24.31.
Those options are priced below Ocwen's stock price on Dec. 21, the day before the deal became public, when it closed at $26.31 per share. The following day it closed at $30.16, while it opened on Dec. 23 at $32.15.
"This transaction will support our subservicing and portfolio recapture growth objectives, drive increased scale and provide access to growth capital in order to acquire MSRs in a cost and risk efficient manner," Ocwen President and CEO Glen Messina said in a press release. "We look forward to working with Oaktree to launch MAV and realize its growth potential."
Ocwen also provided an update on its fourth quarter activities. It entered into "multiple contracts" with undisclosed lenders to provide subservicing, portfolio recapture and MSR transaction services with a projected subservicing volume between $16 billion to $24 billion.
Those loans should start being onboarded in the first quarter of 2021.
Furthermore, Ocwen signed three bulk MSR purchase agreements totaling approximately $16 billion, which should close by year-end and transfer in the first quarter.
The servicing purchases come two months after the company wrapped up
At the end of
On the originations side, Ocwen said it produced approximately $10 billion of volume in the first two months of the fourth quarter. This exceeded its volume levels for the comparable period in the third quarter by 32%. It also added 23 new correspondent sellers and MSR co-issue clients in October and November.
