Home Loan Servicing Solutions Ltd., a newly formed Cayman Island corporation controlled by Ocwen CEO Bill Erby, plans to sell 18.3 million shares in its initial public offering, raising $316.3 million from investors.
According to recently filed details on the IPO, HLSS not only will buy nonprime MSRs in the secondary market but intends to “purchase substantially all of the remaining mortgage servicing rights currently owned by Ocwen Loan Servicing…”
However, HLSS will not build its own servicing platform and instead will use OLS as its subservicer.
Erby is chairman of Ocwen Financial Corp., Georgia, a publicly traded company with a market capitalization rate of roughly $1.3 billion.
OLS is the nation's third largest nonprime servicer with $55 billion of MSRs, according to National Mortgage News and the Quarterly Data Report. Ocwen is in the process of buying Litton Loan Servicing from Goldman Sachs.
Once HLSS goes public, the company said it plans to distribute “at least 90% of our net income” to shareholders in the form of a monthly cash dividend. And after the IPO Erby will own less than 4% of the company.
According to SEC documents, HLSS was incorporated as a Cayman Islands “exempted company” in December of last year. To date, the company's operations have been limited to negotiating MSR purchase and subservicing agreements with OLS and other parties. It also has talked to firms such as Altisource Portfolio Solutions, S.A. about service agreements.
Altisource was spun off by Ocwen two years ago. Erby still owns 17,500 shares of that company, which is based in Luxembourg. Ocwen is Altisource's largest customer.
Ocwen substantially expanded its MSR portfolio last year when it bought HomEq Servicing from Barclays Bank. Barclays Capital, an affiliate of the bank, and Wells Fargo Securities are the underwriters of the HLSS IPO.
Erby, who founded the new company, has agreed to purchase $10 million of HLSS' shares through a private placement.