- An upgrade to "average" servicer rating is crucial not just to Ocwen Financial (OCN +3.1%) stakeholders, but to the entire servicing industry, writes John Devaney of United Capital Markets, in an open letter to S&P.
- The bottom line according to Devaney, citing the recent LL funds White Paper and his contacts who make up a sizable proportion of holders of RMBS serviced by Ocwen: Ocwen is tops in the industry, and the RMBS owners have no desire to see servicing transferred away from the company.
- Recent news further supports an upgrade, argues Devaney, noting the possible nearing of a settlement with the California monitor, the settlement of the Qui Tam case, and a Moody's report saying Ocwen is #1 in cure rate and cash flow.
- He notes Ocwen is stuck in a bureaucratic negative feedback loop in which regulators want to see the company upgraded before greenlighting more MSR buys, but S&P wants to see Ocwen greenlighted for those buys before it upgrades. He reminds Ocwen is also being held back by the perception New Residential (NYSE:NRZ) could exercise its option to transfer servicing from Ocwen should an upgrade not happen by early next year. Devaney doesn't believe NRZ would do this as returns would go down, but the issue nevertheless is out there.
- Other tickers of interest: ASPS, RESI