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UPDATE: Compass Point Downgrades Ocwen Financial Corp (OCN) to Sell

February 27, 2015 7:50 AM EST
Get Alerts OCN Hot Sheet
Price: $23.49 +0.04%

Rating Summary:
    3 Buy, 8 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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(Updated - February 27, 2015 8:05 AM EST)

Compass Point downgraded Ocwen Financial Corp (NYSE: OCN) from Neutral to Sell with a price target of $7.00 (from $7.50). Analyst Kevin Barker thinks litigation and operation risks are high.

"After further review of the NRZ-HLSS (NYSE: NRZ) (NYSE: HLSS) acquisition, we believe the increased cost of maintaining the relationship with HLSS, combined with operational changes required by regulators, will have a material adverse impact on OCN's servicing margins over the long-term," said Barker.

"In addition, we believe the risk of having servicing pulled on private label trusts or transferred by New Residential is high. If this were to occur, it would have a serious adverse impact on the sustainability of OCN's business model," continued the analyst.

"Finally, the revelation from Gibbs & Bruns that they believe OCN's servicing practices caused $26 billion of damages to the RMBS trusts that the company serviced from 2008 to 2013 creates an enormous litigation and operational risk," Barker added. "We believe these risks represent some of the severe hurdles OCN will need to address in the next several quarters/years and the riskreward of owning the stock is unfavorable. In the near-term, we expect OCN to trade below TBV and even if the company were to weave its way through all of the litigation and regulatory overhangs, the outlook for returning to an adequate servicing profit margin is grim."

For an analyst ratings summary and ratings history on Ocwen Financial Corp click here. For more ratings news on Ocwen Financial Corp click here.

Shares of Ocwen Financial Corp closed at $9.78 yesterday.



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