Ocwen Financial is refinancing a $1.8 billion facility used to finance its advances to holders of private label mortgage bonds.

The new facility, called Ocwen Master Advance Receivables Trust (series 2014-VF3, 2015-VF5 and 2015-T1, is backed by reimbursement rights to interest and principal payments that Ocwen advances to when homeowners fall behind on their mortgage payments.

The sponsor plans to issue $300 million of term notes and up to $900 million of variable funding notes, according to Standard & Poor’s. Most servicer advance master trusts are structured with these two components; variable funding notes are revolving lines of credit typically placed with one or a handful of banks or other institutional investors.  They It can be drawn and paid down, sometimes within the same month, to fund the servicer’s advances to bondholders. 

The term notes will be assigned ratings that range from ‘AAA’ to ‘BBB’.  Credit Suisse, Morgan Stanley and Barclays are the lead managers.

Issuance of term securities backed by repayment rights came to a halt in April of last year, when S&P announced it was revising its criteria for evaluating the risks in deals. S&P published its revised criteria in October, but the first rated deals have only come to market this year.

In June, Ocwen restarted the market when it completed $450 million servicer advance refinancing of its Freddie Mac financing facility (formerly OFSART). The transaction securitizes the reimbursement rights to funds advanced on mortgages insured by Freddie Mac.

In August, New Residential Investment Corp. came to market with a $1.5 billion deal dubbed NRZ Advance Receivables Trust 2015-ON1. The deal  refinances two existing securitizations, HLSS Servicer Advance Receivables Trust (HSART) and HLSS Servicer Advance Receivables Trust.

The first deals incorporate the new features of S&P’s recalibrated servicer advance rating methodology.  

S&P revised its ratings criteria because it was concerned that its existing methodology did not adequately reflect the potential for extended timelines on advance reimbursements, the liquidity risk of the notes under stressed conditions, and the servicer’s ability to continue advancing based on its credit quality.  It has extended reimbursement timelines for advance receivables based on historical loan-level performance data and assumes that the reimbursement will be 100% in all ratings scenarios.

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