While it is difficult to discern the financing terms Barclays gave Ocwen Financial Corp. last Friday to buy Barclays’s HomEq Servicing unit, it appears as though the deal was a home run for Barclays.
Barclays is selling HomEq for $1.3 billion. The British investment bank bought HomEq for $469 million in June 2006. I tried to make a calculation for the internal rate of return to Barclays from HomEq and I came up with 5.84% for the four years the investment bank owned Ocwen. Now, I can’t imagine my calculation is accurate — there are too many variables about HomEq that I don’t know — but suffice it to say Barclays did well. Servicing, in general, is hot right now.
Meanwhile, this is a big coup for Ocwen. That it survived the credit crisis at all considering its subprime exposure is remarkable. And now to bolster its servicing business with a $1.3 billion deal puts Ocwen into a new echelon of mortgage company. I believe this is what they call a “win win.”