The deal comes weeks after the servicer was urged to cut ties with Ocwen, and the acquisition could weaken hedge fund BlueMountain Capital, which recently took a major bet against the company.
Mortgage REIT New Residential Investment Corp. has agreed to purchase Ocwen Financial spinoff Home Loan Servicing Solutions (HLSS) for $1.3 billion, just weeks after HLSS was urged to cut ties with Ocwen.
The news sent the HLSS stock price up 3.82% to $17.40 per share in premarket trading.
New Residential will pay $18.25 a share for HLSS as the real estate investment trust (REIT) works to expand its relationships with servicers such as Nationstar Mortgage and Ocwen Financial. HLSS was formed by former Ocwen chairman William Erbey to acquire the servicing rights and other income streams from servicing mortgages.
Earlier in February Mangrove Partners Master Fund Ltd. had urged Home Loan Servicing to cut ties with the troubled mortgage-servicing firm Ocwen threatening to launch a campaign to replace HLSS' board at its annual meeting, according to the Wall Street Journal.
In January, hedge fund BlueMountain Capital took a major bet against HLSS by stating the company would collapse after it claimed a default against the company’s notes.
According to Forbes, BlueMountain made a short trade against HLSS shares and said that Ocwen’s various missteps had caused the company to violate trust agreements on its mortgage bonds. When unveiling the short, BlueMountain sent a letter to the company notifying both HLSS and Ocwen that regulatory sanctions against Ocwen constituted a breach of contract and default on certain notes serviced by HLSS.
The New Residential deal is expected to close in the second quarter. The REIT experienced unusually high volume Tuesday, as the stock gained 8.86% to a closing price of $14.25. The stock saw 5.59 million shares trade hands over the course of the day on 27,163 trades, normally it is around 1.01 million shares a day, according to Equities.com.
