SEC reportedly investigating nonbanks for sending loans to collections too quickly
Bloomberg: Ocwen and Nationstar could be targets
The Securities and Exchange Commission is reportedly investigating several nonbank mortgage servicers for potentially sending borrowers into debt collection too quickly, according to a report from Bloomberg.
The Bloomberg report, from Matt Scully, states that the SEC is probing nonbanks, including Ocwen Financial, for “prematurely unleashing debt collectors on delinquent borrowers.”
When loans go bad, the firms can write them off and send them to outside collectors. One of the questions the SEC is probing is whether borrowers are getting enough time to make good on their home equity loans once they fall behind, the person said. A servicer may be entitled to a receive a percentage of whatever outside collectors recover, which may be higher than the usual fees it would receive, the person said. Sending loans to collectors prematurely may also cut a servicer’s costs.
Late last month, Ocwen revealed that it was the subject of an SEC investigation into the “fees and expenses charged in connection with liquidated loans and REO properties held in non-agency RMBS trusts.”
Ocwen said that the SEC’s letter requested that the company voluntarily produce documents and information about these fees and expenses, and Ocwen said that it is cooperating with the SEC on this matter.
But that’s not the only SEC letter that Ocwen received.
Again from Bloomberg:
Ocwen said last year that the SEC sent it a letter saying it was investigating the use of collection agents by mortgage loan servicers. The company said it believes the letter was sent to others in the industry.