Ocwen Financial Corp. is marketing $500 million of notes backed by reimbursement rights to funds it has advanced on residential mortgages that it services.
The two-part transaction marks Ocwen’s first trip to the securitization market since November 2015. It consists of $200 million of Series 2016-T1 two-year notes and $300 million of Series 2016-T2 three-year notes, according to Standard & Poor’s.
Barclays Bank, Morgan Stanley, and Credit Suisse are the administrative agents.
Both series will be issued from the Ocwen Master Advance Receivables Trust (OMART), and are backed by the same collateral as other notes issued by OMART. Proceeds from issuance of the Series 2016-T1 and 2016-T-2 will be used to repay the outstanding Series 2015-T1 and 2015-T2 notes. That will leave four other series outstanding, the 2014-VF3, 2014-VF4, 2015-VF5 and the 2015-T3.
Since June 2015, Ocwen has had a ‘below average’ servicer ranking from S&P; the servicer’s loan administration subranking, which includes its servicer advancing policies, is ‘average.’
These low rankings have “minimal” impact on S&P’s analysis of Ocwen’s securitization of servicer advance receivables, however. The rating agency expects to assign an ‘AAA’ to the senior tranche of both the Series 2016-T1 and Series 2016-2 notes. That’s partly because it still expects Ocwen’s to advance and recover funds according to prudent industry practices.
The transaction also includes triggers that could cause the notes to amortize more quickly should Ocwen’s servicing practices or operational strength slow the pace of reimbursement.
Even if Ocwen were to be terminated as servicer, however, S&P believes there is a “strong likelihood” that the incoming servicer would reimburse the outstanding advances, in full. That’s what has happened in prior instances when the servicer was terminated. And it could result in an even faster recover of advances.