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On Tuesday, Ocwen Financial Corp. (OCN - Analyst Report) repurchased 100,000 shares or 61.7% of its outstanding shares of Series A Perpetual Convertible Preferred Stock from WL Ross & Co. for approximately $158.7 million. These shares were converted into common stock before the buyback and were cancelled soon after.

Though the redemption was approved in Aug 2013, it took more than a month to be executed. The deal got delayed since it was subject to the bank’s credit facility, which was undergoing changes at the time.

In Dec 2012, Ocwen acquired Homeward Residential Holdings, Inc. from WL Ross. According to the agreement, Ocwen paid WL Ross $604 million in cash and 162,000 shares of the aforementioned preferred stock worth $162 million.

The preferred stock carried an annual dividend of 3.75%. Therefore, redemption of these shares relieves Ocwen of the obligatory dividend burden and releases fund that can be used in other profitable ventures. However, about 62,000 stocks are yet to be redeemed.

Along with the share buyback, Ocwen announced changes in its Senior Secured Term Loan Facility Agreement. As per the amendment, the company can now repurchase all of its outstanding preferred stock and up to $1.5 million worth common stock. The preferred stock may be converted into common stock before the buyback.

Moreover, the modified agreement removed the sealing on the company’s Junior Indebtedness as specified in the prior agreement and changed the calculation process of the company’s loan collateral value. Further, Ocwen revised the predetermined levels of corporate leverage ratio, consolidated total debt to consolidated tangible net worth ratio, and loan-to-value ratio.

Efficient capital deployment through acquisitions and share buybacks reflects Ocwen’s earnings power. After considering certain non-recurring items, Ocwen’s second-quarter 2013 net income was $76.7 million or 53 cents per share, well above $44.8 million or 32 cents per share in the prior-year quarter.

Currently, Ocwen carries a Zacks Ranks #3 (Hold). Some better-performing financial institutions include Nationstar Mortgage Holdings Inc. (NSM - Snapshot Report), Federal National Mortgage Association (FNMA) and Home Loan Servicing Solutions, Ltd. (HLSS - Snapshot Report). While Nationstar Mortgage Holdings carries a Zacks Rank #1 (Strong Buy), both Federal National Mortgage Association and Home Loan Servicing Solutions have a Zacks Rank #2 (Buy).

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