This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Home Loan Servicing's Erbey Says No to Taxes After Saying Yes to TARP

Updated to clarify Ocwen's participation in the TARP program. An earlier version of this article stated Ocwen had yet to "pay back" TARP funds, but the type of funds the company received were incentive payments related to mortgage modifications that do not require repayment.

NEW YORK (TheStreet -- William Erbey had no problem taking taxpayer money when it came to TARP funds for Ocwen Financial (OCN), but he's going out of his way to avoid paying taxes with a new venture, Home Loan Servicing Solutions Ltd., which is looking to go public next week.

Erbey remains the executive chairman of Ocwen, which received $123 million in TARP funds in form of incentive payments related mortgage modifications. Home Loan Servicing, which Erbey has since founded, is looking to raise $200 million in its initial public offering, proposing to sell 13.3 million shares at $14-$16 each, and it plans to use the proceeds to do a little bailing out of its own by purchasing Ocwen's mortgage servicing business.

The problem for taxpayers is that Home Loan Servicing is based in the Cayman Islands in a rather transparent move to minimize the company's tax liabilities.

Erbey served as CEO of Ocwen from January 1988 through October 2010 so it seems more than a bit disingenuous for him to set up a new entity that will look to skip paying taxes after taking TARP money while at Ocwen. On top of that, he wants the public to fund this new venture through the IPO.

The S-1 filing also raises some interesting questions about prospects for the company's business.

Home Loan Servicing is presenting itself to prospective shareholders by suggesting it will pay out 90% of its income in dividends. However, in the very first paragraph of the risk factors section of its filing, the company states, "Our business model is untested and we may not be able to execute our business strategy as planned, which may negatively impact our financial performance and our ability to pay dividends in the future."

Untested? How challenging is it to take a mortgage payment and apply it to a mortgage.

Home Loan Servicing won't just be taking on Ocwen's mortgage servicing business; it also gets Litton Loan Servicing and Saxon Mortgage. Ocwen bought Litton from Goldman Sachs (GS) for $264 million in June 2011.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,979.13 +59.54 0.35%
S&P 500 1,986.51 +4.91 0.25%
NASDAQ 4,526.4820 -1.0320 -0.02%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs