Servicers recoup yesterday's lost ground

Looking golden at the moment is Compass Point's Kevin Barker, who stepped into yesterday's major decline in the specialty servicers with an upgrade to Ocwen Financial (OCN +3.9%). The decline was sparked by a story - later confirmed by Ocwen - that Ben Lawsky's NY Dept. of Financial Services had blocked Ocwen's purchase of MSR's from Wells Fargo.

If Lawsky's concern is Ocwen's ability to properly service a massive influx of new loans, this isn't an issue, says Barker as the company can take steps to ensure compliance. If Lawsky is upset about Ocwen's current servicing practices, that's a more complicated issue, but Barker doesn't believe this to be so.

He's got a price target of $60 assuming the Wells deal gets done and Ocwen continues buying MSRs, and utilizes free cash flow for stock repurchases or an accretive acquisition.

Down 14% at one point yesterday, Ocwen is back to near where it was before the news hit. Also bouncing back are Nationstar (NSM +8.3%) and Walter Investment (WAC +3.1%).

Others of interest: PennyMac Mortgage (PMT +0.7%), New Residential (NRZ +1.2%).

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Comments (3)
  • Micah
    , contributor
    Comments (499) | Send Message
    the recent high for $OCN is $60, so this guy isn't exactly sticking his neck out.
    7 Feb 2014, 02:39 PM Reply Like
  • Matthew Mazurczak
    , contributor
    Comments (1479) | Send Message
    He isnt exactly sticking his neck out but calling for 30% upside in the stock. Take a look at the chart. Takes some stones for an analyst to come out on a day like yesterday and say the stock is work 30% more then its trading after it had been getting pounded for a month straight.
    7 Feb 2014, 11:24 PM Reply Like
  • Matthew Mazurczak
    , contributor
    Comments (1479) | Send Message
    My question to anyone oppossed to the deal is if OCN or NSM does not service the mortgages who will? OCN has only a 5% marketshare and you have TRILLIONS of MSRs that the banks want to get rid of. The WFC deal was only 2% of their MSR portfolio!!!!! Then you have Citi, etc.
    OCN has stated multiple times there is going to be a large shift in servicing. Doesnt it make sense then that are able to absorb the servicing and prepared for it, when they have mentioned it coming for over a year?
    7 Feb 2014, 11:27 PM Reply Like
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