Things just keep getting worse for Ocwen Financial (OCN). In the last two days, Ocwen has been the subject of a letter from New York Department of Financial Services Superintendent Benjamin Lawsky, which alleged that the company had been backdating potentially hundreds of thousands of letters to borrowers “likely causing them significant harm.”

The letter caused a nosedive for Ocwen’s stock and the stock of its affiliated companies, Altisource Residential (RESI), Altisource Asset Management Corp (AAMC), Altisource Portfolio (ASPS), and Home Loan Servicing Solutions (HLSS).

In the wake of Lawsky’s letter, Moody's Investors Service, Bank of America (BAC) and Evercore Partners have all issued downgrades to Ocwen’s ratings.

Also this week, Sen. Elizabeth Warren, D-Ma., and Rep. Elijah Cummings, D-Md., sent a letter to the U.S. Government Accountability Office, requesting a study of the risks posed to consumers by the “unprecedented” growth in nonbank mortgage servicing.

“We are writing to request a study of the vulnerability of nonbank mortgage servicers to economic downturns given the lack of capital requirements applicable to these servicers and of the risks posed to consumers by continued growth in nonbank specialty mortgage servicing,” Warren and Cummings state in the letter.

While the letter does not specifically target Ocwen, the company does get a callout by name in the letter, with Warren and Cummings citing the $2 billion settlement between Ocwen and the Consumer Financial Protection Bureau over “widespread misconduct in the management of its servicing process.”

In a new note to clients, Barclays joins the chorus of those issuing warnings about Ocwen’s future.

Barclays tells clients that while it may take time to determine the true extent of the practices Lawsky alleges the company to have partaken in, investors in non-agency residential mortgage-backed securitizations “should be more wary of a worst-case scenario,” when it comes to Ocwen.

“The best case for RMBS investors would be that this issue is fairly contained, it leads to only a small fine on Ocwen, and the practices are resolved fairly quickly,” Barclays tells clients.

“If the alleged practices are widespread and other state/federal regulatory agencies get involved, this could lead to a much larger fine on Ocwen or pressure on the Federal Housing Finance Agency to move GSE servicing away from Ocwen, which may affect Ocwen’s ability to service the rest of its loans. A settlement from regulators is also possible, which, as shown by previous instances, can impose forgiveness-related costs directly onto non-agency investors.”

Barclays warns that, in an extreme situation, sanctions could lead to a “forced transfer of servicing rights out of Ocwen, in which case investors might have to bear an additional cost from increased servicing fees.”

Barclays also warned that, although it looks unlikely, Ocwen could eventually be disapproved as a GSE servicer.

“Given Ocwen’s role in servicing the mortgage loans and recouping the servicing advances, an insolvency of the servicer or a determination by Fannie Mae or Freddie Mac that Ocwen is no longer an approved servicer would, under the indenture, constitute both a facility early amortization event and an event of default,” Barclays’ note said.

“Additionally, if a significant number of servicing rights are pulled from Ocwen because of regulatory concerns, the associated advance receivables would become ineligible receivables, potentially leading to an under-collateralization of the notes and an event of default.”

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