Ocwen to Perform Well: Receives ‘Outperform’ Rating At KBW (OCN, BCS)

Ocwen Financial OCN is a mortgage loan servicer specializing in servicing subprime loans. Ocwen (OCN) is headquartered in West Palm Beach, Florida but most of its operations are located abroad, primarily in India. Ocwen recently acquired Barclays’ BCS US mortgage servicing business for $1.3 billion. Ocwen took a $60 million charge and its effective equity contribution was $308 million. Barclays (BCS) agreed to provide $1.045 billion in financing. According to Keefe, Bruyette & Woods, the investment is likely to generate an ROE in the first year of over 25%. Therefore, 2010 estimates for the company have been adjusted accordingly. Ocwen has received an ‘Outperform’ rating and has been given a price target of $14. However, the company is likely to face risk factors such as a lack of opportunities to deploy capital.