November 18, 2014

Kass thinks Ocwen shares will go higher

I expect Ocwen and New York State's DFS to come to a conclusion and settle Lawsky's complaints in the reasonably near future.

As previously written, there are signposts that indicate that a settlement could be near. These include a $100 million estimated settlement charge in reported third quarter (which I suspect will be raised slightly in the final agreement) and the possibility that Lawsky will enter the private sector in early 2015.

Equally important, I expect the final settlement to allow Ocwen to grow through additional service platform acquisitions -- albeit at a more restrained pace than in the past.

If I am correct in my view, Ocwen will then be more than a melting ice cube that has only run off value. Some growth opportunities will open back up, and that should be coupled with large expected cost savings by the second half of the year.

Should Ocwen's shares get punished on this news, which was not entirely unexpected, I plan to be a buyer. After all, a deal with Wells was never included in my numbers, nor those of others. 

Doug Kass was long Ocwen at time of writing.