To say that Ocwen Financial (OCN) took a beating on Wall Street Tuesday would be the understatement of the century. After the embattled company was dealt another haymaker earlier Tuesday when the state of California announced that it was seeking to suspend Ocwen’s mortgage license because the company failed to turn over documentation showing that it complies with the state’s laws, the company’s stock was obliterated in Tuesday’s trading.
So how bad was it? Ocwen began the day with a market cap of $1.53 billion and ended the day with a market cap of $978.84 million, a loss of more than $550 million in value in one day.
Ocwen’s stock closed trading on Monday at $12.19, opened Tuesday at $10.64, and closed Tuesday at $7.78, a loss of more than 36% for the day. One year ago today, Ocwen’s stock was trading at $55.20.
Ocwen, for its part, says that it is “fully cooperating” with the California Department of Business Oversight. In a statement issued by the company after the market closed on Tuesday, Ocwen’s president and CEO, Ron Faris, said that the company believes it has provided all the appropriate documentation to the CDBO.
“We are cooperating fully with the Department of Business Oversight,” Faris said. “Since this notification, we have dedicated substantial resources towards satisfying the DBO's requests. We believe we have provided the requested information in the format requested. We expect that we will receive follow up requests or clarifications and that further document and information exchanges may take place.”
Ocwen was under fire for most of last year, especially from the New York Department of Financial Services, which reached a settlement with Ocwen last month for failures in its mortgage servicing practices.
As part of the settlement, the NYDFS forced 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 S.A. (ASPS), Altisource Residential Corporation (RESI), Altisource Asset Management Corporation (AAMC), and Home Loan Servicing Solutions, Ltd. (HLSS), over allegations into Ocwen’s servicing practices and its relationships with its affiliated companies.
Ocwen was also ordered to pay $150 million in “hard-dollar” assistance, including $50 million in direct, hard-dollar restitution payments to former and current Ocwen homeowners in New York for Ocwen’s handling of foreclosures.
But the news of this latest issue in California sent the stocks of Ocwen and its related companies through the floor, through the basement and into the dirt.
Altisource Portfolio Solutions fell from $26.94 to $16.49 in the day’s trading, a drop of nearly 39%.
Altisource Residential was spared from the worst of the carnage, falling only 6% from $17.84 to $16.76.
Altisource Asset Management lost a substantial amount in the day’s trading, falling from $321.81 at market close on Monday to $214.28 at market close on Tuesday.
And Home Loan Servicing Solutions fell nearly 20%, opening at $16.10 and closing at $12.95.
Despite the losses, Ocwen said that it believes it has effective controls in place to ensure compliance with the California Homeowners Bill of Rights and all single point of contact requirements under federal and state laws.
"Ocwen has a strong track record in California in helping struggling homeowners, and we are committed to working cooperatively with the DBO to further our common goal of assisting struggling families,” Faris said.
“In 2014, Ocwen completed more than 13,000 loan modifications and over 3,500 short sales in California. Over 35% of these loan modifications in California included some form of principal reduction relief for homeowners, totaling more than $460 million."
Ocwen’s chief risk officer, Marcelo Cruz, said that the company is committed to resolving the DBO’s concerns. “And we expect that we will be able to do so,” Cruz said. “In addition to working with leading non-profit organizations to further improve our ability to help homeowners, we continue to build a world class risk and compliance management system at Ocwen.”
Faris said that the company’s expectation is that its ongoing cooperation will result in a satisfactory outcome for all parties.
“We did not originate the loans we service, but we have taken a leading role in helping to stabilize communities most affected by the financial crisis,” Faris said. “We intend to continue to play a leading role in helping homeowners."