Ocwen Financial has found a new way to fund its rapid expansion in mortgage servicing: issuing notes tied to the fees that it earns from managing government-backed loans.

The $123.5 million of notes do not amortize, making only interest payments for 14 years. Monthly payments will be calculated as 0.21% of the principal balance of a pool of mortgages, according to a person familiar with the transaction. The initial balance of this pool is approximately $11.8 billion. So if some of the mortgages are paid off because they mature or because the home is sold or refinanced, reducing the servicing fees Ocwen earns, investors will receive a commensurately smaller amount of interest.

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