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After firing several shots from the front, it appears the latest allegations from the New York State Department of Financial Services (NYDFS) may in fact torpedo the top-flight flagship of the Ocwen family of companies. .
Ocwen Financial Corp. is one of the largest providers of non-performing loan (NPL) services in the United States. These are pools of delinquent residential mortgage loans for which Ocwen has purchased the management rights, often from large central banks such as Wells Fargo & Company, Citigroup Inc., Bank of America Corp and JPMorgan Chase & Co..
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The most recent letter
Serious allegations regarding Ocwen’s systems and processes detailed in the October 21 NYDFS letter to Ocwen included:
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Backdated letters denying a mortgage modification – making it impossible for a homeowner to comply within the 30 day period required to appeal the letter.
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Ocwen’s vice president of compliance ignored an employee’s concerns about the backdating issue for five months.
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Ocwen never properly investigated these allegations, resulting in unresolved issues to date.
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Ocwen is not in compliance with its obligations under New York and Federal law regarding accurate record keeping and timely communications with borrowers.
Basically, this seems to be an example of ignoring lessons that should have been learned in the kindergarten sandbox – if it’s not enjoyable, don’t. In this case, the question becomes: if it is not legal and you get caught, will the consequences be so severe that the main business is in danger of going bankrupt?
Money Center banks were able to settle
On March 18, 2014, Joseph A. Smith, Comptroller of the National Mortgage Settlement, reported that all four central banks had fulfilled their financial obligations under the 2012 Settlement Agreement. Based on the settlement formula, each bank has met its required share of over $ 20 billion in homeowner debt cancellation and refinancing assistance.
This consumer relief was primarily due to the resolution of claims regarding the practice of automatic signing and other faulty foreclosure documents. In total, banks have provided more than $ 50 billion in aid to more than 600,000 households.
Ocwen struck a similar deal with the same monitor in December 2013 to provide $ 2.1 billion in assistance to homeowners. This settlement was approved by the court on February 26, 2014.
New York keeps Ocwen in its sights
The NYDFS has launched several investigations into Ocwen’s maintenance practices and business structure. The NYDFS also prompted Ocwen to strike a deal to acquire the MSRs on 184,000 Wells Fargo loans – with $ 39 billion in outstanding principal balance – in “indefinite hold” in February 2014.
To help put this into perspective, Ocwen was managing mortgages with approximately $ 473 billion in outstanding principle balances at the start of 2014.
Financial benefits for Ocwen shareholders
In light of the losses reflected in the graph above, it should be noted that the entities related to Ocwen Altisource Residential Corp. (NYSE: RESI) now pays a dividend of approximately 9%, and Home Loan Services Solutions Ltd. (NASDAQ: HLSS) pays close to 10% dividend yield to its shareholders. These are the only two entities linked to Ocwen that pay a dividend.
The incredible stock market performance of an Ocwen entity
According to the company’s website, Altisource asset management company (NYSE: AAMC) is an asset management company that provides portfolio management and corporate governance services to investment vehicles that own real estate-related assets.
Its initial client is Altisource Residential Corporation, a real estate investment trust (REIT) formed to acquire and own single family rental assets through the purchase of underperforming and nonperforming mortgages as well as single family homes upon sale. foreclosure or after it. .
This company is already involved in an existing NYDFS investigation.
On August 18, 2014, a Reuters article detailed that Ocwen had received a subpoena from the SEC regarding “business transactions” between some of its affiliates. “Ocwen said the investigation was related to its relationships with Home Loan Servicing Solutions, Altisource Asset Management Corp and Altisource Residential Corp, and the interests of its executives in those companies.”
The NYDFS has also conducted an investigation into trade deals between the various entities controlled by Bill Erby – particularly in relation to “arm’s length” transactions and shareholder rights.
Final result
“The product that we service is a very difficult product to maintain overall.” – Ocwen Executive Chairman Bill Erbey
The NPL service business operates within a complex minefield of state and federal regulations – from which even the largest and most sophisticated lending services have not been able to escape unscathed.
Regulatory hurdles have been both a blessing and a curse for Ocwen and her related entities, as they have helped create a wide rift – effectively limiting competition. However, this now begs the question whether Ocwen Financial will be able to recover from the severe damage inflicted by the latest NYDFS malfeasance allegations?
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