A New York State regulator has dealt a serious blow to Ocwen Financial by halting the transfer of about $39 billion in servicing rights to the company from Wells Fargo.
The office of Benjamin M. Lawsky, the superintendent of New York State’s Department of Financial Services, has halted indefinitely Wells’ transfer of the mortgage servicing rights to Ocwen, according to a person briefed on the action.
This person said that Mr. Lawsky’s office had halted the transfer because of concerns about the company’s ability to handle the additional volume or mortgage from Wells.
Shares of Ocwen were down more than 7 percent in midday trading.
Specialty servicers like Ocwen have been purchasing tens of billions of dollars of mortgage servicing rights from large global banks and vowing to improve service for borrowers. But as these companies grow, regulators and investors have become concerned with their capacity to handle the flood of new mortgages, especially troubled loans that require additional attention.
It is not the first time the company has run into trouble with regulators. In December, Ocwen agreed in a consent order with the Consumer Financial Protection Bureau, various state attorneys general and other regulators to provide $2 billion in mortgage principal reductions to underwater borrowers and refund $125 million to borrowers who had already been foreclosed on. The federal agency said, “Ocwen took advantage of borrowers at every stage of the process.â€
The company said in a statement at the time that that the agreement “is in alignment with the same ultimate goals that we share with the regulators â€" to prevent foreclosures and help struggling families keep their homes.â€
Mr. Lawsky’s office has had a monitor installed at the company since last year, the person familiar with the matter said. The New York State Department of Financial Services regulates Ocwen, which has headquarters in Atlanta, because the company operates as a bank in New York.
A move to delay the Wells transaction, which was announced two weeks ago, or future transactions, could pose a big problem for Ocwen’s strategy of growing its revenue by acquiring more and more servicing rights from the big banks.
The deal represents about 2 percent of all the mortgages that Wells Fargo services.
A Wells Fargo spokesman declined to comment.
Mr. Lawsky’s move to halt the transfer was reported earlier by The Wall Street Journal.
