Nonbank mortgage servicers are growing too fast and regulators need to protect homeowners by making sure these companies can handle the volume of business they are taking on, says Benjamin Lawsky, superintendent of the New York Department of Financial Services.
“It is appropriate for regulators, where warranted, to halt the explosive growth in the nonbank mortgage servicing industry before more homeowners get hurt,” Lawskey told the New York Bankers Association Annual Meeting and Economic Forum.
In the Ocwen case, Lawsky said he 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.
Of all nonbank mortgage servicers, Ocwen has grown into the largest in the nation, managing a $430 billion portfolio.
Being the biggest elephant means Ocwen is also the biggest target. Last year Ocwen agreed to a $2.1 billion settlement with the Consumer Finance Protection Bureau.
The Financial Times reports that investors including Pimco and BlackRock are considering filing lawsuits against Ocwen over servicing practices and mortgage modifications which allegedly hurt the performance of mortgage-backed securities they held.