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Ocwen now one giant step closer to acquiring MSRs again after new NYDFS agreement

Reaches agreement with NYDFS to remove monitor

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For more than two years, Ocwen Financial has been prohibited from acquiring new mortgage servicing rights in bulk, thanks to the company’s $150 million settlement with the New York Department of Financial Services.

The news got a little better earlier this year when the California Department of Business Oversight removed the state's mortgage servicing restrictions on Ocwen, but the NYDFS settlement still precluded Ocwen from buying new MSRs.

Now, it appears that Ocwen could be on the brink of returning to the MSR market full force, after the nonbank announced Monday that it reached a new agreement with the NYDFS, which paves the way for the complete removal of the MSR restrictions.

According to an Ocwen filing with the Securities and Exchange Commission, the company agreed on Monday to a new consent order with the NYDFS, which removes the third-party monitor stationed inside of Ocwen’s operations which was part of the original settlement with the regulator.

The new agreement doesn’t lift Ocwen’s MSR restrictions, but it does move the company one big step closer to coming in out of the MSR cold.

According to the SEC filing, the consent order also “provides for a determination on whether the restrictions on acquisitions of mortgage servicing rights contained in the 2014 Consent Order should be eased following completion of a scheduled servicing examination.”

So, if Ocwen passes an upcoming servicing exam, the company could be back in the MSR acquisition business again.

In a statement provided to HousingWire, NYDFS Superintendent Maria Vullo said that the new order shows that Ocwen has improved, but is not out the woods yet.

“The consent order represents a continuation of DFS’s enhanced oversight of Ocwen as the company continues to redress the operational issues that led to the execution of two prior consent orders with DFS,” Vullo said.

“Ocwen has made progress, but still has work to complete. Under the March 27, 2017, consent order, the base two-year term of the operations monitor concludes,” Vullo continued. 

“In this consent order, DFS is requiring that the operations monitor will issue a final report identifying the outstanding corrective measures that Ocwen must implement to address identified weaknesses and deficiencies in Ocwen’s operations,” Vullo added. 

“DFS will actively supervise Ocwen’s progress in addressing the required corrective measures and, after a year, conduct an in-depth examination of Ocwen’s remediation,” Vullo concluded. “DFS reserves the right to install a consultant for an additional year if, after this examination, DFS finds that Ocwen has failed to effectively address the corrective measures. DFS also reserves the right to examine Ocwen at any time.”

As part of the original settlement, the NYDFS forced Ocwen founder William Erbey to resign from his position as chairman of the board of directors of Ocwen, and each of its four related companies: Altisource Portfolio Solutions, Altisource Residential CorporationAltisource Asset Management Corporation, and Home Loan Servicing Solutions, over allegations into Ocwen’s servicing practices and its relationships with its affiliated companies.

Among the charges levied at Ocwen by the NYDFS was that Ocwen’s servicing platform and loss mitigation structure had significant deficiencies, including robo-signing, inaccurate affidavits and failure to properly validate document execution processes, missing documentation, wrongful foreclosure, failure to properly maintain books and records, and initiation of foreclosure actions without proper legal standing.

But now, Ocwen is one step closer to putting that settlement in its past.

Ocwen’s SEC filing also states that once the monitor is no longer in place, Ocwen will have “certain reporting and other obligations, including in connection with matters identified in a final report by the operations monitor.”

Additionally, the company states that if the NYDFS determines that Ocwen has “materially failed to comply with these obligations or otherwise finds that Ocwen’s servicing operations are materially deficient, the NYDFS may require Ocwen to retain an independent consultant that is acceptable to the NYDFS to review and issue recommendations on Ocwen’s servicing operations.”

As Ocwen previously noted, the cost of paying for the monitoring required by the nonbank’s various regulatory settlements weighed on its business in the past.

In July 2016, Ocwen revealed that its mounting monitor costs totaled $147.5 million from Jan. 1, 2014, through June 30, 2016, from its various settlements with regulators.

Now, the California and New York monitors are going away.

In a statement, Ocwen said that the company is “pleased to report” that this new agreement does not include any findings of wrongdoing or violations of the settlement’s original terms. The new agreement also does not include a fine or additional penalty.

“Ocwen continues to work cooperatively with the NYDFS and believes that its entry into the 2017 consent order, which provides for the termination of the operations monitorship, is in the best interest of its shareholders, customers, servicing clients, employees and other stakeholders,” the company said in a statement.

“Overall, the company views this as a positive step towards developing an improved relationship with our licensing regulators and moves us closer to returning to normal business operations,” an Ocwen spokesperson said. “We look forward to working cooperatively with the DFS.”

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