The New York Superintendent of Financial Services is blocking the closing of two mortgage servicing rights acquisitions announced by loan servicer Ocwen (OCN) due to concerns about the firm's servicing practices.
The financial services regulator confirmed that it is forcing Ocwen to select a monitor to oversee mortgage servicing practices for at least two years. The announcement came on the same day as an extensive artice in the Wall Street Journal. A spokesperson for the financial services department said an agreement to appoint a monitor at Ocwen has already been reached.
"It is not enough to have banks and mortgage servicers sign agreements promising to reform their businesses," Superintendent Lawsky said. "The best unrealized reforms won't protect homeowners. To protect homeowners facing the risk of losing their homes, we must ensure that the companies are actually living up to their promises. "Following complaints about Ocwen’s servicing practices, we conducted a targeted exam of Ocwen’s performance and discovered gaps in the company’s compliance. The Department is requiring the company to hire a monitor so that we can be sure that the reforms are implemented and homeowners have a real chance to avoid foreclosure."
The two deals held up by Ben Lawsky, superintendent of financial services in New York, involve the much-publicized deal in which Ocwen won a joint bid with Walter Management to acquire mortgage servicing rights from Residential Capital out of bankruptcy and an agreement to buy Homeward Residential.
Ocwen representatives could not be immediately reached for comment when HousingWire reached out Wednesday morning.
In recent months, Fitch Ratings released reports saying analysts are watching Ocwen's quick growth in the MSR space as well as their offshore servicing structure closely.
Fitch raised concerns about the agreements to acquire both ResCap's MSRs and the Homeward Residential platform.
Fitch wrote in October that "the additional time required for management involvement in planning and execution of the transfer while integrating the Homeward platform, and the aggregation of additional subprime loans on the Ocwen platform require immediate high-touch efforts."
Analysts with Compass Point Research & Trading have a different view. The firm's analysts wrote that "we have tracked the Department of Financial Services since its creation in early 2011 and view the agency – and Lawsky in particular – as willing to seek out the spotlight in instances where national attention can be garnered."
The same report added, "While any regulatory involvement in sales such as these must be closely tracked, we do not believe the DFS' involvement will represent a material speed bump in the process. Ultimately, if the stock is weak on this news, we see it as a buying opportunity."
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