(Reuters) - Ocwen Financial Corp (OCN.N) strengthened its hold on the residential mortgage servicing market with a $750 million deal to buy Residential Holdings Inc from private equity firm WL Ross & Co.
Ocwen shares, which have doubled in value this year, surged as much as 21 percent to a life high of $34.98 on Wednesday on the New York Stock Exchange.
The company has been snapping up assets from banks that are eager to offload their mortgage servicing units as questionable foreclosure practices attract regulatory scrutiny.
"Mortgage banking is a business of scope and scale, and we believe that the combined company will fill the void created by the ongoing departures of many banks from the overall industry," WL Ross & Co Chief Executive Wilbur Ross said in a statement.
It also bought mortgage loan servicing rights for about 53,100 loans from Bank of America National Association earlier this year.
Mortgage servicers such as Ocwen collect mortgage payments from borrowers and foreclose on properties. They also make advances to mortgage owners to cover principal and interest payments when a loan goes bad.
Homeward Residential was formed by WL Ross in 2007 by combining American Home Mortgage Servicing, Option One Mortgage Co and a servicing portfolio from Citi Residential Lending.
Ocwen will pay $588 million in cash and offer $162 million of convertible stock to buy Homeward Residential, which services 422,000 mortgage loans, the company said in a statement.
Ocwen will not need to raise any additional equity capital to close the transaction, the company said.
The deal, scheduled to close by the end of the year, is expected to immediately add to Ocwen's earnings after accounting for transaction-related expenses.
Barclays Capital and Citi Global Markets were financial advisers to Ocwen for the deal.
Reporting by Aman Shah in Bangalore; Editing by Don Sebastian and Supriya Kurane