Ocwen Shares Plunge After New York’s Lawsky Bars New RightsGreg Farrell
Ocwen Financial Corp. plunged as much as 31 percent, the most ever, after agreeing to a settlement that prevents it from acquiring mortgage-servicing rights until the company makes improvements to satisfy New York regulators.
Executive Chairman William Erbey will step down from his roles at Ocwen and related companies under the accord announced today by New York’s Department of Financial Services. Ocwen also agreed to provide $150 million in relief for borrowers and hire a monitor.
Ocwen fell 26 percent to $16.26 at 2:55 p.m. in New York and earlier dropped as low as $15.04, the biggest intraday decline since its September 1996 initial public offering. The settlement is the culmination of a yearlong probe that came to light in February, when Ocwen said it was putting its bid to acquire $39 billion in mortgage servicing rights from Wells Fargo & Co. on “indefinite hold” at the request of DFS Superintendent Benjamin Lawsky.
Since then, Lawsky’s office has disclosed various problems at Ocwen, the largest non-bank servicer of subprime loans in the U.S., starting with what it calls conflicts of interest involving Erbey, who owns stakes in affiliated companies.
Lawsky’s office has criticized Ocwen for funneling a share of its foreclosure-related business to the affiliated entities. He has cited examples where the company backdated letters to borrowers, making it more difficult for the homeowners to modify their mortgages.
In addition to the $150 million payment for homeowner relief in New York, Ocwen will add two independent directors to its board who will not own shares in any related entity.
In the last five years, Ocwen has emerged as one of the country’s largest mortgage servicing providers, acquiring rights to hundreds of billions of dollars of unpaid balances on residential loans from companies including Litton Loan Servicing LP, Saxon Mortgage Services Inc. and Homeward Residential Holdings Inc.
The settlement is the latest in which Lawsky has pressed for removal of a high-ranking executive. Earlier this year, as part of a multi-agency settlement with the BNP Paribas SA over sanctions violations, Lawsky insisted that 13 people, including the group chief operating officer, leave the French bank.