OCWEN FINANCIAL CORPORATION (NYSE:OCN) Files An 8-K Entry into a Material Definitive AgreementItem 1.01 Entry into a Material Definitive Agreement.
On July 23, 2017, Ocwen Financial Corporation and certain subsidiaries of Ocwen Financial Corporation (collectively, Ocwen) entered into a series of agreements (collectively, the Agreements) with New Residential Investment Corp. and certain subsidiaries of New Residential Investment Corp. (collectively, New Residential) that modify and supplement the arrangements among the parties set forth in (i) the Master Servicing Rights Purchase Agreement, dated as of October 1, 2012, as amended by Amendment No. 1 to Master Servicing Rights Purchase Agreement and Sale Supplements, dated as of December 26, 2012, and Amendment No. 2 to Master Servicing Rights Purchase Agreement and Sale Supplements, dated as of April 6, 2015 (as so amended, the Existing MSR Purchase Agreement) and (ii) certain sale supplements to the Existing MSR Purchase Agreement, as amended by Amendment No. 1 to Master Servicing Rights Purchase Agreement and Sale Supplements, dated as of December 26, 2012, Amendment to Sale Supplements dated as of July 1, 2013, Amendment to Sale Supplement, dated as of September 30, 2013, Amendment to Sale Supplements, dated as of February 4, 2014, Amendment No. 2 to Master Servicing Rights Purchase Agreement and Sale Supplements, dated as of April 6, 2015, and February Amendment, dated as of February 17, 2017 (as so amended, the Existing Sale Supplements and, together with the Existing MSR Purchase Agreement, the Existing Agreements). In addition, Ocwen sold New Residential 6,075,510 shares of Ocwen common stock, par value $0.01 per share, at a price per share of $2.29 for gross proceeds of approximately $13.9 million. These transactions are described in further detail below.
Transfer of Remaining Interests in MSRs
On July 23, 2017, Ocwen and New Residential entered into a master agreement (the Master Agreement) and a transfer agreement (the Transfer Agreement) to which Ocwen and New Residential agreed to undertake certain actions to facilitate the transfer from Ocwen to New Residential of Ocwen’s remaining interests in the mortgage servicing rights relating to loans with an aggregate unpaid principal balance of approximately $110 billion that are subject to the Existing Agreements (the Subject MSRs) and with respect to which New Residential holds the Rights to MSRs (as defined in the Existing Agreements).
The Master Agreement provides, among other things:
| · | the parties will cooperate to obtain any third-party consents required to transfer Ocwen’s rights to the Subject MSRs to New Residential; |
| · | upon obtaining the required third-party consents and the transfer of the applicable Subject MSRs to New Residential, New Residential will pay a lump sum restructuring fee to Ocwen upon each transfer of such Subject MSRs in exchange for Ocwen forgoing payments under the existing agreements. These lump sum restructuring fees may total up to approximately $400 million in the aggregate if all of the Subject MSRs are transferred to New Residential. Upon transfer, Ocwen will subservice the mortgage loans related to such Subject MSRs to the Subservicing Agreement (as defined below); |
| · | in the event that the required third-party consents are not obtained within one year (by July 23, 2018) or such earlier date mutually agreed to by the parties, the applicable Subject MSRs may (i) become subject to a new mortgage servicing rights agreement to be negotiated between Ocwen and New Residential, (ii) be acquired by Ocwen at a price determined in accordance with the terms of the Master Agreement, (iii) be sold to one or more third-parties in accordance with the terms of the Master Agreement, or (iv) remain subject to the Existing Agreements; and |
| · | New Residential agrees to up to an eighteen month standstill with respect to certain rights it has under the Existing Agreements (until January 23, 2019, subject to certain conditions) on the rights of New Residential to replace Ocwen as named servicer with respect to the Subject MSRs. |
Subservicing
On July 23, 2017, Ocwen and New Residential entered into a subservicing agreement (the Subservicing Agreement) to which Ocwen will subservice the mortgage loans related to the Subject MSRs that are transferred to New Residential to the Master Agreement. In consideration for subservicing such mortgage loans, Ocwen will receive a subservicing fee as set forth in the Subservicing Agreement. The initial term of the Subservicing Agreement is five years. At any time during the initial term, New Residential may terminate the agreement for convenience, subject to Ocwen’s right to receive a termination fee and proper notice. Following the initial term, New Residential may extend the term of the Subservicing Agreement for additional three month periods by delivering written notice to Ocwen of its desire to extend such contract thirty days prior to the end of such three month period. Furthermore, the Subservicing Agreement may be cancelled by Ocwen on an annual basis. In addition, New Residential and Ocwen shall have the ability to terminate the agreement for cause if certain conditions specified in the Subservicing Agreement occur.
Share Purchase
On July 23, 2017, Ocwen and New Residential entered into a share purchase agreement (the Share Purchase Agreement) to which Ocwen sold New Residential 6,075,510 shares of newly-issued Ocwen common stock (representing approximately 4.9% of Ocwen’s outstanding common stock) at a price per share of $2.29, which price was based on the closing price of Ocwen common stock at the time Ocwen and NRZ reached an agreement in principle for the transactions described herein. The shares have not been registered under the Securities Act of 1933 (Securities Act) and were issued and sold in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder. The shares may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Securities Act.
Item 3.02 Unregistered Sales of Equity Securities.
The disclosure included under Item 1.01, above, concerning the sale of Ocwen common stock to New Residential is incorporated by reference herein.
About OCWEN FINANCIAL CORPORATION (NYSE:OCN)
Ocwen Financial Corporation is a financial services holding company. The Company, through its subsidiaries, operates as a mortgage company. The Company’s segments include Servicing, Lending, and Corporate Items and Other. The Company’s Servicing segment consists of its core residential servicing business. The Company’s Lending segment is focused on originating and purchasing conventional and government-insured residential forward and reverse mortgage loans. The Company’s Corporate Items and Other segment includes business activities that include providing secured floor plan lending to used car dealerships through its Automotive Capital Services (ACS) venture and providing financing to investors to purchase single-family homes and apartments for lease through its Liberty Rental Finance venture. The Corporate Items and Other segment also includes the diversified fee-based businesses, which provide property valuation, real estate owned (REO) management, title and closing services.