Ocwen Financial Corp.’s shares plunged as much as 27 percent on Thursday after the mortgage payment collector posted a first-quarter loss and a government monitor blocked the company from foreclosing on some of its loans.
The company said after the market close on Wednesday that it lost $111.2 million in the first quarter, hurt by the declining value of assets and expenses associated with its being monitored by government entities.
Separately, a monitor overseeing a series of legal settlements among mortgage companies, the U.S. government and 49 states said Ocwen failed to fix some shortcomings in its foreclosure process and said the company could not repossess homes in a group of loans. That group has about 17,500 loans, NMS spokeswoman Hannah Harrill said by e-mail.
The mortgage servicer failed to properly notify a group of borrowers about why their requests to modify their loans were rejected, a notification that must include factors such as the evidence considered, the reason for the denial, and how to appeal, said Joseph A. Smith Jr., monitor for the National Mortgage Settlement.
Many of these loans are not in the process of foreclosure and never will be, said John Lovallo, a spokesman for Ocwen. The company has taken corrective action and expects this matter to be resolved in future reports from the monitor, he added.
The company exceeded its requirements for modifying mortgages and made progress in fixing other problems in its loan resolution processes, Smith said.
Ocwen’s shares had fallen 20 percent to $2.27 as of 3:22 p.m. in New York on Thursday, after trading as low as $2.08 earlier in the day.
Henry Coffey, an analyst at Sterne Agee & Leach Inc., suspended earnings estimates for the company, as there have been "too many crosswinds" over the last three to five quarters to accurately model reported results, he said in a note.
The watchdog for the U.S. Treasury Department’s bailout fund was also critical this week of servicers including Ocwen.
The Special Inspector General for the Troubled Asset Relief Program on Wednesday called on policy makers to increase oversight of the industry. It cited a track record of "disturbing violations" of rules in a federal program designed to help struggling home borrowers.
Ocwen spokesman Lovallo said, "Our track record confirms that we are more effective at helping struggling families than many of the large bank servicers." The company has invested heavily in its systems for modifying loans "to help homeowners and because we care," he said. The company has provided over $2 billion of principal reduction to borrowers in the last few years, he said.