ResCap, Ocwen Financial -- and HLSS?

Now that the dust has settled (sort of) on Ocwen Financial’s purchase of $365 billion of servicing rights from Residential Capital Corp., what of Home Loan Servicing Solutions? HLSS, as you might recall, was spun off by Ocwen in March, raising $184 million in proceeds.  It appears that its sole reason for being is that gives Ocwen a way to monetize its MSRs. Here’s my theory: Ocwen can’t recognize the true asset value of its MSRs – but if it sells the product to a third-party (HLSS) then it can. HLSS is the owner of the MSRs and Ocwen acts as the subservicer. In a recent SEC filing HLSS notes: “We pay Ocwen a monthly base fee equal to 12% of the servicing fees collected each month.” HLSS is incorporated in the Cayman Islands (for tax purposes) and as NMN readers know quite well, Ocwen has thousands of its servicing workers housed in India – where white collar labor is cheaper.