Tuesday, January 13, 2015

California Regulator In Process Of Suspending Ocwen Financial's Mortgage License

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.

For Erbey, known as a penny-pincher and a tireless worker, the pact was a dramatic reversal in fortune after he built a mortgage empire out of the aftermath of the housing bust. Erbey fell out of the billionaire ranks in December, according to to Forbes’s Real Time Wealth Rankings for billionaires. He was worth as much as $2.5 billion in March when we published our annual listing of the world’s wealthiest.

Hegde funds who bet on the Erbey’s rising fortune have also been burned by Ocwen’s regulatory woes, Forbes reported in December.


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