Wells Fargo Sale of Servicing Rights Halted by New YorkDakin Campbell
Wells Fargo & Co.’s planned sale of mortgage-servicing rights to Ocwen Financial Corp. was halted by New York’s top financial regulator. Ocwen shares fell more than 5 percent.
Ocwen, which is licensed in the state as a mortgage banker, agreed “to put an indefinite hold” on the deal tied to $39 billion of loans, the Atlanta-based company said in a statement. Benjamin M. Lawsky, head of New York’s Department of Financial Services, has a monitor at the firm and is concerned that it will struggle to properly service loans, a person briefed on the matter said earlier today.
Ocwen expanded in recent years by buying rights from banks retreating from an almost $10 trillion market, and Moody’s Investors Service cited that growth last month in affirming the company’s credit rating at four levels below investment grade. Ocwen agreed last month to buy servicing from Wells Fargo on about 184,000 loans, or roughly 2 percent of the lender’s residential-servicing portfolio, according to a statement.
“Ocwen will continue to work closely with the NY DFS to resolve its concerns about Ocwen’s servicing portfolio growth,” the company said in the statement.
In December, Ocwen agreed to settle regulators’ claims over abuses in its handling of borrowers’ loans. Under the agreement with the Consumer Financial Protection Bureau and 49 states, Ocwen agreed to provide $2.1 billion in relief for homeowners.
Ocwen fell 5.1 percent to $41 at 3:27 p.m. in New York after tumbling as much as 14 percent, the most intraday since October 2008. San Francisco-based Wells Fargo rose 1 percent.
Ocwen was the fourth-largest U.S. mortgage servicer as of Dec. 31, according to Inside Mortgage Finance. Wells Fargo was the biggest mortgage servicer and the largest U.S. home lender. Mortgage servicers handle billing and collections on behalf of investors who own the loans and supervise foreclosures if the borrowers don’t pay.
Last year, Lawsky temporarily delayed Sun Life Financial Inc.’s sale of its U.S. annuity business for $1.35 billion after the regulator opened a probe into ownership of insurers by private investors. A firm owned by Guggenheim Partners LLC shareholders completed the purchase in August after agreeing to set up a trust account with $200 million to replenish capital if it fell below required levels.
Sun Life previously had said the sale would be completed by the end of the second quarter.