Kingstown Capital Boosts Ocwen Financial Stake

Michael Blitzer's hedge fund firm Kingstown Capital has filed an amended 13D with the SEC regarding its position in Ocwen Financial (OCN).  Per the filing, Kingstown now owns 9.97% of Ocwen with over 12.5 million shares (though they have an aggregate economic exposure to 14 million shares due to cash-settled total return swaps).

This is up from the 12 million shares they owned at the end of the first quarter. The filing was made due to activity on August 4th.  The return swaps were purchased on August 4th and 5th at prices of $8.0053, $7.6299, and $7.7450.

The 13D contains the standard activist boilerplate that they may meet with management etc.  Kingstown was the largest reported institutional shareholder of OCN shares as of the end of Q1.

Shares of OCN were hit pretty much all throughout 2014 as regulator Benjamin Lawsky came down hard on the company, forcing its Chairman Bill Erbey to resign, among other changes.  OCN fell from $55 to $15 in 2014 and has continued to fall in 2015 down to current levels of $8.11.  Kingstown initiated their position in the first quarter of this year and has just recently bought more.

As we've highlighted earlier this year, Kingstown was also involved in shares of Home Loan Servicing Solutions (HLSS), another one of the companies that was in Bill Erbey's previous empire.

Per Google Finance, Ocwen Financial is "a financial services holding company. The Company through its subsidiaries is engaged in the servicing and origination of mortgage loans. The Company operates in three segments such as, servicing, lending, and corporate items and other. The Company develops programs, such as Shared Appreciation Modification (SAM) which incorporates principal reductions and lower payments for borrowers while providing a net present value positive loss mitigation outcome for investors, including the ability to recoup losses if property values increase over time."

Lee Cooperman Trims Altisource Portfolio Solutions Stake

Omega Advisors' Lee Cooperman has filed a Form 4 with the SEC regarding his position in Altisource Portfolio Solutions (ASPS).  Per the filing, Cooperman has sold around 262,000 shares.

He was selling on March 16th and 17th at weighted average prices of $16.33 and $15.57.  ASPS has since continued to slide lower and currently trades around $12.73.  We've outlined the ASPS situation here previously.

Per Google Finance, Altisource Portfolio Solutions is "a provider of marketplace and transaction solutions for the real estate, mortgage and consumer debt industries. The Company operates through three business segments: Mortgage Services, Financial Services and Technology Services. The Company offers mortgage services, such as Asset management, Insurance services, Residential property valuation, Default management services and Origination management services. Financial Services provide collection and customer relationship management services to debt originators, servicers and the utility and insurance industries. Technology Services provides software applications and technologies that manage the end-to-end lifecycle for residential and commercial mortgage loan servicing, including the automated management and payment of a distributed network of vendors."

We've detailed other recent portfolio activity from Cooperman here.

Kingstown Capital Files 13D on Home Loan Servicing Solutions

Michael Blitzer's hedge fund Kingstown Capital has filed a 13D with the SEC regarding shares of Home Loan Servicing Solutions (HLSS).  Per the filing, Kingstown now owns 5.1% of the company with 3.6 million shares.

This is a newly disclosed position for the firm and their 13D indicates that they oppose the announced transaction between the company and New Residential Investment Corp (NRZ).

They write that they "do not believe a transaction at GAAP book value adequately compensates the Issuer's shareholders for the value of its assets, which have historically traded between 1.2x - 1.3x book value according to the Issuer’s September 2014 Investor Presentation.  The Reporting Persons further note the overly conservative nature of the assumptions underlying the Issuer’s book value, including (i) an assumed weighted average prepayment rate of 18% versus the actual 10.3% for the nine months ending September 30, 2014, (ii) an assumed weighted average delinquency rate of 25% versus actual non-performing residential assets of 18.5% of UPB as of September 30, 2014, (iii) an assumed weighted average discount rate of 19% versus a 10% discount rate used by NRZ to value its own MSR assets, and (iv) the exclusion of any value from deferred servicing fees, which were $470M at year-end 2013.      

Kingstown went on to write:

"The Reporting Persons believe that adjusting these assumptions to reflect recently observed rates and the discounted value of deferred servicing fees, among other factors, could add more than $7 per share of additional value above the stated book value.  Notwithstanding a higher offer from NRZ or others, the Reporting Persons believe the most value-enhancing strategies for the Issuer are continuing its servicing relationship with Ocwen Financial Corporation, completing refinancing initiatives recently highlighted by management and executing the Issuer’s growth initiatives as its financing and operations normalize in due course.  The Reporting Persons plan to communicate with the Issuer’s shareholders, management and Board of Directors (the “Board”) as well as other third parties to oppose the current transaction and may present other proposals that offer the Issuer’s shareholders more value. "

Per their 13D, Kingstown was buying HLSS shares throughout January and February at prices ranging from $12.xx to $18.xx.

It's also worth noting that Kingstown holds a large position in Bill Erbey's company Ocwen Financial (OCN) as well (9.5% of the company according to a February 13D filing.) 

They originally started an OCN position in the third quarter of 2014 and were buying on the way down as the company came under siege from the New York Department of Financial Services and regulator Benjamin Lawsky.  This investigation ended with OCN paying a hefty fine and Erbey leaving the company.  Kingstown's 13F filing that details their 2014 year-end portfolio indicated they sold entirely out of their OCN stake.  Then, in a new 13D filing in February, it shows that they started buying OCN again after shares had dropped 50%.

This is worth highlighting due to the fact that both HLSS and OCN have Bill Erbey in common; both are part of the halo of companies he assembled in the mortgage servicing space as HLSS was spun-off from Ocwen a few years ago.  As such, Kingstown's previous work on OCN likely came into play on their HLSS position given the close ties between the companies.

Per Google Finance, HLSS is "a development-stage company. The Company was formed to acquire mortgage servicing assets consisting of mortgage servicing rights, rights to fees and other income from servicing mortgage loans, and associated servicing advances. The Company operates its business as a single reportable segment. HLSS primary source of income is interest income on the Notes receivable – Rights to MSRs. HLSS do not originate mortgage loans, and as a result are not subject to the risk of loss related to the origination of mortgage loans. The Company engaged Ocwen, a residential mortgage loan servicer, to service the mortgage loans underlying HLSS Mortgage Servicing Assets .The Company has not and do not intend to develop its own mortgage servicing platform but instead will rely on high quality third-party residential mortgage loan servicers."

Lee Cooperman's Omega Advisors Starts Stake in Home Loan Servicing Solutions (HLSS)

Lee Cooperman's hedge fund firm Omega Advisors has started a brand new position in Home Loan Servicing Solutions (HLSS) as the company completed its initial public offering on February 29th.

Omega filed a 13G with the SEC disclosing their 9.9% ownership stake in Home Loan Servicing Solutions with 1,388,000 shares.

The company cut the planned size of its IPO down to 13.3 million shares after initially targeting 18.3 million shares. HLSS currently trades around $13.50.

You can view the rest of Omega Advisors' portfolio in a free excerpt of our new newsletter.

Per Yahoo Finance, Home Loan Servicing Solutions "a development stage company, focuses on acquiring mortgage servicing assets, primarily subprime and Alt-A mortgage servicing rights and associated servicing advances."