Ocwen Financial Corp. (OCN) raised less than underwriters expected by selling bonds tied to fees from managing government-backed loans as the mortgage servicer’s shares fell to the lowest in 10 months.
The sale raised $123.6 million, compared with projected proceeds of about $136 million, according to a person with knowledge of the offering, who asked not to be named because the information isn’t public. The notes, which are secured by mortgage-servicing rights, are subject to Ocwen’s credit risk and offer payments that will shrink as the related loans are retired, the person said.
Ocwen slumped as much as 7.6 percent in New York trading, paring the drop to 1.8 percent after the Atlanta-based company was able to complete the offering, closing at $35.63, the lowest since April 22. Mortgage servicers’ shares tumbled today following a speech by a Consumer Financial Protection Bureau official at a conference this week that underscored increasing attention by regulators to nonbanks in the industry.
“In this speech to the Mortgage Bankers Association, CFPB Deputy Director Steve Antonakes left no doubt that the agency expects servicers to do a better job,” Jaret Seiberg, a policy analyst at Guggenheim Securities LLC’s Washington Research Group, wrote today in a report. “That means servicing is an expensive business where companies that try to cut costs may find themselves in regulatory hot water.”
Katarina Wenk-Bodenmiller, a spokeswoman for Ocwen at Sommerfield Communications Inc., declined to comment on its bond sales.
Ocwen said Feb. 6 that it had agreed “to put an indefinite hold” on its plans to purchase servicing rights on $39 billion of loans without government backing from Wells Fargo & Co.
The deal was blocked by Benjamin M. Lawsky, head of New York’s Department of Financial Services, who said independent servicers were getting “too big, too fast.”
Ocwen, the largest non-bank servicer, has a speculative-grade issuer rating of B from Fitch Ratings partly because of its “aggressive acquisition strategy,” the rankings firm said in a Feb. 11 statement.
Barclays Plc and Morgan Stanley managed its bond sale, which was expected to offer cash for the company to finance or refinance purchases or originations of servicing rights, the person said.
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