Fitch Eyes Ocwen's Debt Ratings

Fitch Ratings has placed a "negative outlook" on its short-term and long-term debt ratings for Ocwen Financial Corp. after a deal to privatize the publicly traded company fell through. The failure of Ocwen CEO William Erbey and his investor group to buy all of the outstanding common shares of the company is "a ratings neutral event," Fitch said. But the rating agency added that the "fluid state" of Ocwen's corporate structure, a difficult environment for servicing subprime mortgages, and the challenges related to dislocation in the capital markets all add negative pressure to the company's debt ratings. Fitch said that while recent performance has supported Ocwen's current ratings, higher delinquency and foreclosure rates will increase Ocwen's direct servicing costs and make the financing of servicing advances ore expensive as well. In addition, the company faces long-term pressure because demand for third party, subprime mortgage servicing may diminish, Fitch said.