March 18, 2015 / 5:11 PM / 5 years ago

UPDATE 1-Ocwen to sell $9.6 bln mortgage servicing rights to Walter unit

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March 18 (Reuters) - Ocwen Financial Corp said it was selling residential mortgage servicing rights worth $9.6 billion to a subsidiary of Walter Investment Management Corp .

The deal is the latest in a series of steps by Ocwen to slim down its operations amid regulatory scrutiny over its business practices.

Ocwen, which delayed filing its full-year results, also said it was reviewing the ability of its affiliate, Home Loan Servicing Solutions Ltd, to meet obligations to fund new servicing advances.

A failure by HLSS could hurt Ocwen’s financial condition, the company said in a filing.

Ocwen’s shares were down about 1.7 percent, while Walter Investment was up about 11 percent. Home Loan Servicing’s shares were down about 2 percent.

Ocwen has grown exponentially since the financial crisis by buying up the rights to service mortgages after new capital regulations made the business too costly for banks to maintain.

But investments in systems and procedures did not keep pace with the company’s expansion, causing headaches for many homeowners.

Ocwen had to pay $150 million in penalties in December related to improper foreclosures. As part of the settlement, the company’s founder and chief executive stepped down.

The mortgage servicing rights sold to Walter Investment’s Green Tree Loan Servicing LLC comprise about 55,500 loans owned by government-controlled mortgage finance firm Freddie Mac .

The financial terms of the deal were not disclosed.

The sale comes close on the heels of Ocwen’s deal to offload mortgage servicing rights on $45 billion of Fannie Mae loans. Bloomberg reported on Tuesday that the buyer was JPMorgan Chase & Co.

Ocwen also sold servicing rights on loans worth $9.8 billion to Nationstar Mortgage Holdings Inc in February.

The transaction with Green Tree is expected to close by April 30. (Reporting by Avik Das in Bengaluru; Editing by Don Sebastian and Saumyadeb Chakrabarty)

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