JPMorgan Buying $45 Billion in Servicing Rights from Ocwen

Inman News - Transaction expected to bring JPMorgan’s MSR portfolio to nearly $1 trillion.

JPMorgan Chase & Co. has finally been identified as the buyer of $45 billion in mortgage servicing rights (MSRs) from Ocwen Financial Corp., according to a Bloomberg report published this week.

On March 2, Ocwen said it had signed a letter of intent to sell the MSRs on a portfolio of 277,000 Fannie Mae loans, but it did not name the buyer. The transaction still requires approval from Fannie Mae and the Federal Housing Finance Agency, in addition to the fulfillment of other customary conditions.

In outing JPMorgan as the buyer on March 17, Bloomberg cited “a person familiar with the transaction” who requested anonymity. But pay no attention to that bank behind the curtain — although several media outlets have picked up the story, JPMorgan, Ocwen and Fannie Mae have all declined to comment on it.

JPMorgan, the nation’s second-largest mortgage servicer behind Wells Fargo & Co., purchased MSRs on $70 billion of mortgages from MetLife Inc. in 2012. That transaction, along with the Ocwen purchase, will bring JPMorgan’s MSR portfolio to nearly $1 trillion.

Ocwen said in its March 2 announcement that it expects to complete the transaction by midyear, after which it will hand off servicing rights to the buyer. The company is unloading servicing rights following a settlement with the New York Department of Financial Services in December that requires the company to improve its processes. Last month, Ocwen agreed to sell MSRs on $9.8 billion worth of Freddie Mac loans to Nationstar Mortgage Holdings Inc., a transaction that is expected to generate about $550 million over the next six months.

According to Zacks Equity Research, JPMorgan’s mortgage originations fell 53 percent year over year to $78 billion in 2014. JPMorgan’s third-party MSRs totaled $751.5 billion at the end of fiscal-year 2014, while the company earned $3.61 billion in servicing-related revenues.

“Hence, we believe that after the completion of the aforementioned deal, JPMorgan will be better positioned to earn more revenues from servicing loan portfolios,” the analyst said.