UPDATE 2-Ocwen to sell mortgage servicing rights

* To sell MSRs to newly-created HLSS

* HLSS files for $316.3 mln IPO

* HLSS expects IPO to be priced at $15/shr

* Ocwen Q4 lags Wall Street on higher expenses (Adds details about servicing rights sale, HLSS IPO)

Feb 24 (Reuters) - Ocwen Financial Corp , which services residential and commercial mortgage loans, said it will sell a part of its mortgage servicing rights to a newly formed company, in a move aimed at cutting expenses.

Ocwen said it would sell the mortgage servicing rights to Home Loan Servicing Solutions Ltd (HLSS), which was founded by Ocwen’s Chairman William Erbey.

Upon completion of the sale, Ocwen’s chief financial officer will move to HLSS and Ocwen will appoint John Britti, executive vice president of Finance, as the new CFO.

Ocwen, which bought the mortgage servicing rights from Barclays Bank Plc last year, said it expects the impact from to sale to be partly offset by increased sub-servicing fee revenue.

The company said it may use the cash from the sale to pay down debt, repurchase stock or purchase additional MSRs.

To raise funds for the purchase, HLSS plans to raise up to $316.3 million through an initial public offering. HLSS said Erbey will buy $10 million of ordinary shares at a price equal to the initial public offering price, expected to be at $15 per share.

The company intends to list on the Nasdaq under “HLSS” symbol and Wells Fargo and Barclays Capital will be underwriting the IPO, HLSS said.


Ocwen also reported a quarterly profit below Wall Street expectations, hurt by higher expenses.

Net income for the fourth quarter was $9.9 million, or 9 cents a share, compared with $9.4 million, or 9 cents a share, in the year-ago period.

Analysts expected the company to earn 16 cents a share, according to Thomson Reuters I/B/E/S.

Operating expenses jumped to $63.3 million from $36.5 million.

Shares of West Palm Beach, Florida-based Ocwen closed at $10.70 on Wednesday on the New York Stock Exchange. (Reporting by Sweta Singh in Bangalore; Editing by Don Sebastian and Saumyadeb Chakrabarty)