Ocwen to Service $78B Worth of ex-IndyMac Mortgages (Update 2)

Ocwen Financial story updated to include statement from OneWest.

NEW YORK ( TheStreet) -- Ocwen Financial ( OCN), the nation's fourth-largest mortgage servicer, bought the rights to service $78 billion in mortgages from OneWest Bank, the former IndyMac Bancorp.

Joseph Otting, President and CEO of OneWest, said in an emailed statement from a spokesman the deal was made to "sharpen our focus on developing a leading regional banking franchise."

OneWest was created in 2009 when a group of hedge funds and private equity firms acquired the assets of the failed IndyMac from the Federal Deposit Insurance Corporation. It was the first of what was expected to be many such deals, though banking regulators soon after grew more skeptical of private equity buyers for banks.

Ocwen will pay $2.53 billion for the assets in a deal expected to close at the second half of this year. Piper Jaffray analyst Michael Grondahl estimates the deal will add 50 to 60 cents to 2014 earnings. Accordingly, Grondahl lifted his target price on Ocwen to $55 from $47, reflecting slightly less than 11 times his new 2014 earnings projections of $5.04 per share. Ocwen is one of his top picks.

Ocwen shares were up 0.61% to $46.02 in mid-morning trading Friday.

The deal means Ocwen has roughly $300 billion left in the pipeline of mortgage servicing acquisitions it has targeted, according to Grondahl's report.

Mortgage servicers like Ocwen, Nationstar Mortgage Holdings ( NSM) and Walter Investment Management ( WAC) have grown dramatically in recent years as Bank of America ( BAC) and others have reduced their presence in the business due to regulatory scrutiny and onerous new capital rules. Shares of all three companies have more than doubled in the past 12 months. -- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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