Ocwen Financial Corporation (OCN) is simply not able to steer clear of troubles. This time, a federal monitor for the Office of Mortgage Settlement Oversight (“OMSO”) has accused the company of providing unreliable information about its business practices in the first half of 2014.
Joseph Smith, the overseer for banks' and mortgage servicers' compliance with the $25 billion settlement over foreclosure abuses, has stated in his latest report that Ocwen’s internal review group (IRG) process had serious deficiencies, questioning the independence and integrity of IRG’s operations. The probe into the company’s review process started after an Ocwen employee informed the OMSO of the shortcomings in May 2014.
Consequently, Smith hired an independent accounting firm, McGladrey, to retest Ocwen’s performance on a number of metrics. Further, a letter from the New York Department of Financial Services (“DFS”) superintendent, Benjamin Lawsky, accusing Ocwen of backdating the foreclosure correspondences of borrowers added fuel to the fire.
After the OMSO report revealed all these concerns, Ocwen issued a press release stating that it is extending full cooperation regarding the two identified issues. The company further stated that many changes have been implemented in its IRG process to make it more independent. Also, a new management team has been put in place that would directly report to the Compliance Committee of the Board of Directors.
Ocwen became the part of the national mortgage settlement in Dec 2013, following its acquisition of Residential Capital LLC’s servicing business. Residential Capital is a unit of Ally Financial Inc., which was the original company involved in the settlement deal. Apart from Ally, four other banks included in the national deal are JPMorgan Chase & Co. (JPM), Bank of America Corporation (BAC), Wells Fargo & Co. (WFC) and Citigroup Inc.
Ocwen’s run-in with regulators has been going on for more than a year now. Staring from the $2 billion foreclosure settlement deal in Dec 2013 to allegations of backdating foreclosure letters to distressed borrowers in Oct 2014, the company’s stock has experienced a steady downward movement. Since Dec 2013, Ocwen’s share price is down nearly 63%.
Currently, Ocwen carries a Zacks Rank #5 (Strong Sell).
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