Moody's Upgrades Ocwen Financial (OCN) to 'B2'; Follows Recent Announced MSR Sales

Moody's Investors Service has upgraded the following ratings of Ocwen Financial (NYSE: OCN):

• Corporate Family Rating: B2 from B3
• Senior Secured Bank Credit Facility: B2 from B3
• Senior Unsecured Debt: B3 from Caa1

The outlook for all ratings is stable.

RATINGS RATIONALE

The rating actions follow the company's recently announced mortgage servicing rights (MSRs) sales which will provide the company significant liquidity. The company has stated their intention to use the cash generated from the sales to deleverage, if so, we estimate that the cash from the announced and proposed 2015 sales would be sufficient to fully repay the company's outstanding senior secured term loan (SSTL). Furthermore, we estimate that cash plus unencumbered servicer advances would provide the company with sufficient liquidity to fully repay the company's unsecured debt, if it so elected. In addition, the company's receipt of an unqualified audit opinion is a positive development.

The company has signed letters of intent to sell or has already closed on approximately $90 billion in unpaid principal balance of performing agency loans, which comprises approximately 23% of loans the company serviced and subserviced as of December 31, 2014. In addition, the company has stated that it intends to sell a portion of its MSRs on non-performing agency loans. It is expected that the majority of the MSR sales will be completed by the end of 2015.

While we believe once the announced MSR sales close that the company will have sufficient resources to repay its outstanding corporate senior secured loan and senior unsecured notes, Ocwen still faces significant challenges to reestablish a resilient business model.

The outlook is stable reflecting our expectation that the announced MSR sales will close providing the company with significant liquidity to deleverage its balance sheet.

Ocwen's ratings could be downgraded in the event that the announced MSR sales do not close as expected or in the event that it is subject to additional regulatory action resulting in material fines. In addition, the ratings could be downgraded if a) its business model is expected to shift to areas with even greater operating risk, or b) if the company's servicing performance or financial fundamentals materially weaken.

Given the challenges Ocwen faces to reestablish a resilient business model, an upgrade is unlikely at this time.

The principal methodology used in these ratings was Finance Company Global Rating Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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