Ocwen Purchases Saxon in $59.3 Million Deal
Morgan Stanley has announced the sale of Saxon Mortgage Services Inc., a provider of servicing and subservicing of residential mortgage loans, to Ocwen Financial Corporation for the base purchase price of $59.3 million, plus an estimated $1.4 billion for servicing advance receivables outstanding. The transaction is targeted to close in the first quarter of 2012 and is not expected to have a material impact on financial results. Ocwen plans to finance the transaction primarily with a combination of cash on-hand, cash generated through operations, available credit and two new servicing advance facilities that are committed to finance up to $1.1 billion of Saxon's servicing advances. Ocwen reported a net income of $20.2 million for the third quarter of 2011, compared to a net loss of $8.8 million for the third quarter of 2010. Ocwen incurred $18.7 million of transaction-related expenses associated with its Litton Loan Servicing LP acquisition in the third quarter of 2011 resulting in normalized pre-tax earnings of $47.7 million. Income from operations was $56.8 million for the third quarter of 2011, as compared to $2.2 million for the third quarter of 2010. Revenue for the third quarter was $122.5 million, up 28 percent compared to the third quarter of 2010. Ocwen reported that it completed 15,743 loan modifications, with Home Affordable Modification Program (HAMP) modifications accounting for 16 percent of completed modifications. "Our modification performance in the third quarter was at the high-end of our guidance, with 15,743 completed modifications," said Ron Faris, Ocwen presdient and chief executive officer. "An increasing number of these modifications were our shared appreciation modification or 'SAM,' where delinquent borrowers with underwater mortgages who stay current on their modified loan are forgiven principal over a three-year period, but must also share some of the appreciation in the property with investors should home prices recover. I am proud of innovations like SAM, as they allow Ocwen to keep more borrowers in their homes, while also optimizing proceeds to mortgage investors."