Walter Investment Management Corp (WAC)

[56Chevy]

Ocwen Said to Win $3 Billion Rescap Bankruptcy Auction

By David McLaughlin and Dakin Campbell - Oct 24, 2012 10:12 AM PT

Ocwen Financial Corp. (OCN) won a $3 billion auction for Residential Capital LLC’s loan-servicing unit, beating Nationstar Mortgage Holdings Inc. (NSM), to become at least the fifth-largest U.S. mortgage servicer.

Ocwen will become the biggest non-bank in the mortgage- servicing industry, a business that becomes more profitable with greater scale, according to Wilbur Ross, who sold his Homeward Residential Holdings Inc. to Ocwen this month. He paid $750 million in cash and convertible preferred stock and has a continuing stake in the firm. Ocwen teamed up for the ResCap bid with Walter Investment Management Corp. (WAC)

“The ResCap Board of Directors has given its preliminarily approval of the bid by the team of Ocwen and Walter Investment for $3 billion as the highest and best bid,” said Susan Fitzpatrick, ResCap’s communications director, in a statement.

Ocwen rose as much as 7.5 percent to $38.91 on news of the bid and fell 35 cents to $35.85 as of 1:10 p.m. in New York Stock Exchange trading. Nationstar fell as much as 15 percent and was down $5.44 to $29.42 at 1:10.

The bidders were betting they can profit as banks retreat from the $9.6 trillion mortgage servicing industry, a business that used to generate monthly revenue of 0.25 percent to 0.4 percent of loan balances. Federal and state probes of foreclosure practices led to new regulations that are driving up costs, and a pending change in bank capital requirements also made the business less desirable.

Nationstar’s head of investor relations Marshall Murphy didn’t return a call for comment. Katarina Wenk-Bodenmiller, an outside spokeswoman for Ocwen at Sommerfield Communications Inc., didn’t immediately have a statement from the company.

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http://www.bloomberg.com/news/2012-10-24/ocwen-said-to-win-3-billion-rescap-loan-servicing-auction.html