Irvine subprime lender New Century Financial Corp. said Thursday its mortgage unit has agreed to sell some of its servicing portfolio of up to $4.9 billion in loans to Ocwen Financial Corp. for up to $20.5 million.
New Century, which specializes in making loans to borrowers with poor or little credit, said in a news release that Ocwen also will buy an additional $3 billion in mortgage servicing rights through the end of 2002 at a price to be set later.
Servicing is the billing and collecting of mortgage payments. A fraction of the interest rate is used to pay for servicing.
New Century also said that Ocwen has agreed to provide up to $30 million in interim financing secured by future servicing income and rights.
New Century will retain ownership of about $1 billion in mortgage servicing rights on loans that have not yet been used as a basis to issue securities. These servicing rights may be sold to Ocwen in future periods.
New Century said the unsolicited offer from Ocwen was "extremely attractive," prompting the company to accept it over a proposed subservicing arrangement with Fairbanks Capital Corp.