NY regulator freezes Ocwen-Wells Fargo $2.7B MSR deal
Zealous regulators on a roll, but do they have the authority?
The DFS says it is concerned about Ocwen’s ability to handle Wells Fargo’s portfolio of mortgage servicing rights, a deal that was announced last month and which would have given Ocwen the right to service some $39 billion in mortgages.
Wells Fargo’s portfolio of residential mortgage servicing rights holds roughly 184,000 loans linked to the transaction. The portfolio represents approximately 2% of the banks total residential servicing portfolio.
While Ocwen is an Atlanta-based company, it is chartered as a New York bank. Analytics firm Sterne Agee reportedly counters that the DFS may be overstepping its jurisdiction in attempting to halt the deal.
Spokespersons from Wells Fargo said they could not confirm the story. Emails to DFS were not returned. Ocwen was reached and is working on a response.
Yesterday the DFS opened a probe into more than a dozen New York banks. In that report, DFS superintendent Benjamin Lawsky is described as having a reputation as a zealous regulator.
Update 2:25 p.m. ET: Ocwen has confirmed that NY DFS has put an indefinite hold on the deal.
Second Update 3:01 p.m. ET: Analyst Henry Coffee at Sterne Agee says this is short-term posturing by the DFS and is part of an ongoing conflict DFS has with WFC. Sterne Agee continues to rate OCN a "buy" because DFS has control over servicing tied to loans in NY; they do not control the whole pool. Further, the last time DFS stepped in to block a transaction involving OCN, there were issues over OCN's handling of foreclosures. At the time OCN had foreclosed on less than 100 homes and modified thousands of loans in the state of NY, and this will resolve itself over a relatively short period.
Third Update 4:52 p.m ET: Ocwen released a statement saying the company, “t the request of the New York Department of Financial Services, its mortgage servicing arm has agreed to put an indefinite hold on its previously announced purchase from Wells Fargo Bank, N.A. of mortgage servicing rights on a portfolio consisting of approximately 184,000 loans with a total principal balance of $39 billion.”
“Ocwen will continue to work closely with the NY DFS to resolve its concerns about Ocwen’s servicing portfolio growth,” the statement reads.