Ocwen Set to Buy $15 Billion in MSRs from JPMorgan

""JPMorgan Chase & Co."":www.jpmorganchase.com/ has a buyer for $15 billion in mortgage servicing rights from the financial institution, with the announcement that ""Ocwen Financial Corp."":www.ocwen.com/ would purchase the bank's MSRs for a rumored $950 million. Ocwen's acquisition follows the company's decision to raise $375 million in new equity through offering 25 million shares of public common stock.

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The equity transaction is set to close on November 16, prior to the finalization of the MSR deal with JPMorgan, and Ocwen's public common stock will be priced at $13 per unit. The company has previously stated that it intended to use proceeds from the sale to purchase JPMorgan's MSRs, and that acquisition will close on January 1, 2012.

JPMorgan's MSRs are valued at around $165 million when advances are removed from the calculations; the approximate total equates to 110 basis points. It's worth noting, however, that analysts have widely varied opinions on the value of the

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acquisition, with lower estimates indicating that the MSR price stands at closer to $82 million.

The $950 million pay out for JPMorgan's MSRs is based on data that encompasses servicing advances, but a solid figure remains elusive. According to information from the ""Securities and Exchange Commission"":www.sec.gov/, Ocwen's purchase of JPMorgan's MSRs includes 82,000 subprime mortgages, ringing in at an unpaid principal balance of $15 billion. Of the $950 million Ocwen will pay to buy the MSRs, $625 million of the deal will then be financed by the servicing company.

The purchase deal represents around 2 percent of JPMorgan's entire mortgage servicing portfolio, and the transaction represents the most recent major move for Ocwen. The company has been experiencing a buying season during 2011, and the entity also bought ""Saxon Mortgage Services"":www.saxononline.com/ from ""Morgan Stanley"":www.morganstanley.com/ in October, as well as ""Litton Loan Servicing LP"":https://www.littonloan.com/ from ""Goldman Sachs"":www.gs.com/ back in June.

Adding in the buy out of JPMorgan's MSRs, Ocwen has taken on the servicing rights to roughly $110.8 billion in subprime loans since September 2010, based on the unpaid principal balance on each transaction conducted since then. Ocwen's CEO, Roger Faris, stated in a third-quarter call with investors that the purchase phase isn't over for the company, adding that it would be pursuing additional servicing rights going forward.

The equity move by Ocwen is being managed by ""J.P. Morgan Securities LLC"":www.jpmorgansecurities.com/, ""Bank of America Merrill Lynch"":www.ml.com/, and ""Citi Group Global Markets Inc."":www.citigroup.com/ ""Keefe, Bruyette & Woods, Inc."":www.kbw.com/, is serving as co-manager for the deal. Additionally, Ocwen gave company underwriters a 30-day option to buy another 3.75 million shares, in order to compensate for over allotments.