Fitch lowers Ocwen Financial

Fitch Ratings said it downgraded Ocwen Financial Corp.'s long-term issuer default rating to B and maintained it on Rating Watch Negative.

Fitch also said it has placed Ocwen's short-term issuer default rating on Rating Watch negative.

The downgrade reflects Ocwen's continued aggressive mortgage-servicing acquisition strategy, Fitch said, and the impact of this strategy on the company's financial metrics, operational/integration flexibility and potential legal liability associated with acquired entities/portfolios.

On Oct. 24, the company successfully won a $3 billion joint bid with Walter Investment Management Corp. for the mortgage-servicing and origination platform assets of Residential Capital LLC, subject to bankruptcy court approval.

Ocwen's portion of the bid comprises of about $830 million of mortgage-servicing rights, master servicing and subservicing contracts, as well as $1.63 billion of advances, Fitch said.

This follows Ocwen's Oct. 3 announced acquisition of Homeward Residential Holdings, Inc. for $750 million, subject to regulatory approval, the agency added.

Fitch said it remains concerned regarding the potential leverage implications and integration risks associated with the company's ongoing growth through large, opportunistic portfolio acquisitions.

Regardless of whether either or both of the transactions are ultimately consummated, the agency said it believes that Ocwen's broader acquisition strategy and increased willingness to assume direct or indirect leverage indicate an increased level of credit risk.

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