Correction: An earlier version of this story misstated the date of an investor meeting. It was Dec. 3.
Ocwen Financial Corp. is developing an origination channel through a strategic alliance with Lenders One, a mortgage cooperative with close ties to the servicer.
"Lenders One will be our primary origination network," Ocwen Executive Chairman William Erbey said at an investors meeting Dec. 3. The St. Louis-based co-op's members originate 12% of all U.S. mortgages.
"We can provide competitive pricing for their mortgages, retain the servicing and distribute the prepayment risk to other investors," Erbey said. "It is not our intention to hold this exposure long-term on our balance sheet."
Four years ago, Lenders One was acquired by Altisource Portfolio Solutions, a publicly-traded company that was spun off from Ocwen in 2009. In 2012, former Ocwen and Lenders One executives launched Correspondent One to acquire closed mortgages from nonbank lenders. The company was initially said to be privately held, with Ocwen as an investor, but the Correspondent One website now says it has been integrated into Ocwen's Homeward Residential Solutions business.
Ocwen is the seventh largest residential servicer in the U.S., according to National Mortgage News' Quarterly Data Report. Its management appears to see an opportunity in the origination business due to tight credit conditions and the Consumer Financial Protection Bureau's new qualified mortgage rule.
This week, Ocwen halted a deal to buy a large servicing portfolio from Wells Fargo at the request of New York State regulator Benjamin Lawsky, who is concerned that the nonbank is growing too fast.
At the Dec. 3 investor meeting, Erbey stressed that the supply of mortgage credit is being restricted by "tighter underwriting standards and the decline in the creditworthiness of the U.S. borrower." This tight credit is "going to be further exacerbated by the QM rule."
The new alliance will allow Lenders One members to "expand into nonagency, nonprime product with the attendant higher margins," he said.
In response to a question, Erbey said that Ocwen will not take the risk of making non-QM loans because the penalties are significant. However, he said, he believes the company will be able to securitize non-agency loans.
The capital markets are" healing themselves and they are accepting more and more asset classes," Erbey said.
Ocwen's chief financial officer, John Britti, reiterated in an email Friday that these loans will be QM eligible.
Other correspondent investors have relationships with the lender cooperative, including Affiliated Mortgage Company, a wholly owned subsidiary of Dallas-based Benchmark Bank that became a member of the group in 2011.