UPDATE 1-Ocwen to buy Homeward Residential from WL Ross for $750 mln

* To pay $588 mln in cash, offer $162 mln in convertible stock

* Shares rise 16 pct to life-high

(Adds background, comments from statement)

Oct 3 (Reuters) - Loan servicer Ocwen Financial Corp will buy Homeward Residential Holdings Inc from private equity firm WL Ross & Co LLC for about $750 million to strengthen its hold on the residential mortgage servicing market.

The company's shares jumped as much as 16 percent to a life-high of $33.57 in early trading on the New York Stock Exchange on Wednesday.

Ocwen will pay $588 million in cash and offer $162 of million convertible stock to buy the company, which services 422,000 mortgage loans, it said in a statement.

Ocwen has benefited from large banks moving away from the servicing business to avoid regulatory scrutiny. Banks have had to agree to costly fixes to their foreclosure practices.

Ocwen bought Litton Loan Servicing from Goldman Sachs and Saxon Mortgage Services from Morgan Stanley this year.

"Mortgage banking is a business of scope and scale, and we believe that the combined company will fill the void created by the ongoing departures of many banks from the overall industry," WL Ross & Co Chief Executive Wilbur Ross said in a statement.

Mortgage servicers such as Ocwen collect mortgage payments from borrowers and foreclose on properties. They also make advances to mortgage owners to cover things like principal and interest payments when a loan goes bad.

The deal, scheduled to close by year-end, is expected to immediately add to Ocwen's earnings after accounting for transaction-related expenses.

(Reporting by Aman Shah in Bangalore; Editing by Don Sebastian)

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