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Ocwen refinancing $300M of notes backed by reimbursement rights

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Ocwen is refinancing $300 million of bonds backed by reimbursement rights to funds it has advanced on residential mortgages it services. The two new series of notes will both extend the maturity of the debt issued by the securitization trust and reduce the interest rate.

Both series will be issued from the Ocwen Master Advance Receivables Trust and are backed by the same collateral as other notes issued by OMART, including principal and interest payments that borrowers have not paid on time; property taxes and insurance premiums that the borrowers have not paid on time; and expenses incurred during the foreclosure, preservation and sale of mortgaged properties.

In addition, servicer advance receivables owned by PHH Corp. may be contributed to the trust once Ocwen completes its acquisition of the smaller servicer later in the third quarter.

The series 2018-T1 consists of three tranches of one-year notes totaling $150 million; the senior tranche, which is rated AAA by S&P Global Ratings, priced at 65 basis points over the eurodollar synthetic forward curve.

The series 2018-T2 consists of three tranches of two-year notes totaling $150 million; the senior, AAA-rated tranche pays 75 basis points over the interpolated swaps curve.

Barclays Bank is the administrative agent.

Proceeds will be used to redeem the $250 million of series 2017-T1 notes issued in September of last year. Those notes, which had a weighted average life of one year, paid interest of 110 basis points over the eurodollar synthetic forward curve.

Once the two new offerings close and the series 2017-T1 notes are repaid, only two other series will remain outstanding, the series 2016-T2 of term notes and the series 2015 variable funding notes, according to S&P.

One of the primary risks to any servicer advance receivables securitization is the operational strength of the servicer itself, which can affect recovery speeds. And any disruption or slowdown of recovery speeds would worsen the transaction’s negative carry. However, the transaction includes triggers that would cause the notes to be repaid early if recovery speeds fall to certain levels.

S&P believes that the addition of PHH as a servicer and its collateral to the trust will have a minimal impact on the reimbursement speeds. While PHH tends to get reimbursed at a slower rate than Ocwen, its receivables will only be around 6% of the total pool, and so are unlikely to affect overall reimbursement speeds.

In addition, S&P expects pace of PHH reimbursements to pick up as "the merged entity adopts the best practices across both organizations and benefits from applying some of Ocwen's servicing practices."

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RMBS Ocwen Financial PHH Mortgage