Ocwen Financial Corporation, parent company of PHH Mortgage Corp. and Liberty Reverse Mortgage, is preparing to close a sale of reverse mortgage-backed securities. With a note balance of $264.9 million, the sale is comprised of loans originated between 2006 and 2021, according to a pre-sale report authored by DBRS Morningstar.
The collateral — designated as Ocwen Loan Investment Trust, 2023-HB1 — has a cut-off date of March 31 and an estimated $267.6 in unpaid principal balance (UPB) from 1,054 “performing and nonperforming” Home Equity Conversion Mortgage (HECM) loans, in addition to real estate owned (REO) assets secured by first liens.
About 249 of the loans in the package are performing, accounting for just over one-quarter (25.14%) of the total UPB.
Another 805 of the loans are nonperforming, with 431 (or 44.01% of the total UPB) either in or referred for foreclosure. About 19%, or 221 of the loans, are in default, while the remaining loans are liquidated, called due-and-payable after reaching a maturity event or in bankruptcy.
However, insurance from the U.S. Department of Housing and Urban Development (HUD) mitigates losses, with the metric of loan-to-value ratio (LTV) adjusted with HUD insurance, DBRS Morningstar said in its report.
Ocwen will use a sequential structure to repay investors, the report notes. Over a quarter of the loans in the package are in New York, followed by California (14.36%) and Florida (9.08%).
Potential loss drivers include LTVs, home price index projections and interest rate projects when determining losses, the report said. Failure to pay out by June 2026 will trigger a mandatory auction of all the assets, DBRS Morningstar said.
According to HECM endorsement data compiled by Reverse Market Insight (RMI), Liberty was the fifth largest lender in the industry as of May 31, recording 2,299 endorsements in the prior 12-month period.
In an earnings call last month, Ocwen leadership said that while the company incurred a $40 million loss in Q1 2023, its reverse mortgage servicing and origination divisions posted gains, with origination posting a profit.
Last month, PHH also entered into a new reverse mortgage subservicing agreement with Finance of America Reverse (FAR), in line with PHH’s goal to bolster its subservicing portfolio, according to PHH’s EVP and Chief Servicing Officer Scott Anderson.
“This agreement is consistent with one of our core business strategies of growing our subservicing portfolio and is a testament to the strength and quality of our servicing platform as a premier subservicer for both forward and reverse mortgages,” Anderson said at the time.
