California Regulator In Process Of Suspending
Ocwen Financial's Mortgage License
FORBES
Forbes Staff
1/13/2015 @ 12:20PM
http://www.forbes.com/sites/antoinegara/2015/01/13/california-regulator-in-process-of-suspending-ocwen-financials-mortgage-license/
California regulators are seeking to suspend the
mortgage license of Ocwen Financial, after the servicing giant did not
adequately respond to repeated information requests into its compliance with
the state’s Homeowner Bill of Rights. Suspension proceedings began in
October, Tom Dresslar, a spokesperson for the California Department of Business
Oversight told Forbes on Tuesday.
“Since the early part of last year, we have been
asking Ocwen to provide the information we need to determine their compliance
with the Homeowners Bill of Rights. They have repeatedly failed to comply with
those requests,” Dresslar said. “At this point, we are seeking a suspension of
their license. This matter is before an administrative law judge.”
After a series of complaints tied to Ocwen’s
servicing of mortgages in California, state regulators began investigating
the company to ensure its compliance with the California Homeowners Bill
of Rights, a set of laws to protect against abusive foreclosure practices, in
addition to the state’s Residential Mortgage Lending Act. According to a report from The Los Angeles Times,
California examiners asked Ocwen to provide information on 1,320
mortgage loans under investigation. However, Ocwen repeatedly failed to
respond.
In October, Jan Lynn Owen, Commissioner of
Business Oversight, filed a formal complaint against Ocwen. According to the L.A.
Times, an administrative law judge will preside over settlement conferences
in February. Nonetheless, a hearing on the suspension of Ocwen’s California
licence is scheduled for July.
About a mortgage license suspension, Dresslar
said, “the commissioner would give Ocwen a reasonable period of time to
transition their portfolio to other providers.” He also noted that the
regulator’s complaints were specific to Ocwen and not representative of
widespread non-compliance among mortgage servicers.
"This is a matter that is specific to Ocwen. This
is not a reflection on the entire non-bank servicer community,” Dresslar said.
Were Ocwen to lose its California license it
would impact 378,132 loans that the company services in the state, according
to Bose George, an analyst with Keefe, Bruyette & Woods. Those
loans currently carry a unpaid principal balance of $95 billion or roughly 23%
of Ocwen’s total UPB due.
Ocwen shares fell over 36% on Tuesday. Shares in
the company have fallen over 80% in the past 12-months. Publicly traded Ocwen
affiliates Altisource Portfolio Solutions and Altisource Asset Management fell 38%
and 33%. Home Loan Servicing Solutions fell nearly 20%, while Altisource Residential RESI -6.05% Corp.
fell over 6%.
“We are cooperating fully with the Department of
Business Oversight. Since this notification, we have dedicated substantial
resources towards satisfying the DBO’s requests,” Ocwen CEO Ron Faris said
in a statement Tuesday afternoon.
“We believe we have provided the requested information
in the format requested. We expect that we will receive follow up requests or
clarifications and that further document and information exchanges may take
place. We expect our ongoing cooperation will result in a satisfactory outcome
for all parties,” he added.
Ocwen added that the company believes it has
effective controls in place to ensure compliance with the California Homeowners
Bill of Rights, including a single point of contact for homeowners.
“We are committed to resolving the DBO’s concerns,
and we expect that we will be able to do so,” Marcelo Cruz, Ocwen’s recently
hired Chief Risk Officer said. “In addition to working with leading non-profit
organizations to further improve our ability to help homeowners, we continue to
build a world class risk and compliance management system at Ocwen,”
Cruz added.
William Erbey-founded Ocwen became a Wall
Street darling in the years after the financial crisis as the
company gobbled up mortgage servicing rights from banks exiting the business.
Over a handful of years, Ocwen grew tenfold to become the largest
servicer of subprime mortgages in the U.S. and the nation’s fourth largest
mortgage servicer overall, handling an unpaid principal balance of nearly a
half trillion dollars by the end of 2013.
However, shares in the company have been battered
over the past 12-months as regulators across the country accuse Ocwen of a
string of legal violations. In December, New York Department of Financial
Services head Benjamin Lawsky alleged that Ocwen
routinely incorrectly foreclosed on homes, and had significant
conflicts of interest among its related entities.
Ocwen settled those allegations, agreeing
to pay $150 million in hard dollar assistance to New York homeowners,
$50 million in direct restitution and $100 million for housing,
foreclosure relief and redevelopment programs. Ocwen also agreed that founder
and former billionaire Erbey would step down as
executive chairman of the company and its four publicly traded affiliates.
Hegde funds who bet on the Erbey’s rising fortune
have also been burned by Ocwen’s regulatory woes, Forbes reported in December.
The Deutsche Bank report follows the company’s
settlement with the New York Department of Financial Services last month, when
it agreed to $150 million in fines and restitution, the installment of a new
monitor and that founder Erbey would step down from Ocwen and four other
interrelated companies.
