Ocwen Tumbles on Backdated Foreclosure Letter Accusation
Shares of Ocwen Financial Corp. (OCN) hit a 52-week low after a letter from the New York Department of Financial Services (:DFS) superintendent Benjamin Lawsky accused it of backdating the foreclosure correspondences of borrowers. The stock closed at $21.48, down more than 18% from the previous day’s closing price.
Lawsky alleged that Ocwen have harmed thousands of borrowers by denying them a chance to save their homes from being foreclosed. The borrowers received letters informing them to improve their defaults in order to avoid foreclosure, with a date that was already past at the time of receipt.
Additionally, the company is accused of sending loan modification letters to eligible borrowers who received those after the 30 days cut-off time, thereby violating state and federal laws. The correspondence from Lawsky also stated that Ocwen, in spite of being informed of the malpractice by an employee an year ago, had failed to probe into the same.
Nonetheless, after the details of the DFS letter become public, Ocwen initially issued a statement declaring that the backdated letters sent to 283 borrowers in New York had been system-generated. Also, although the company believed that the issue has been resolved, it is cooperating with investigators to discern such problem regarding any other cases.
Notably, after the market closed, Ocwen came out with another statement wherein it accepted the presence of additional borrowers in New York who had received backdated letters, though the exact number was not known. Hence, this may add to the concern, leading to a further downward revision of share price in the days ahead.
Although Lawsky has not yet announced any enforcement action against Ocwen, chances of seeking a settlement or a consent order, requiring the company to provide remedial measures to all borrowers who received backdated letters are there. The company could also be asked to fix its system, along with changes in leadership, to ensure the non-recurrence of any such problems.
Further, Moody’s Investors Service – a rating arm of Moody’s Corp. (MCO) – has downgraded Ocwen’s rating owing to the afore-mentioned issue. Additionally, the rating agency has lowered ratings for Altisource Solutions S.a.r.l. and Home Loan Servicing Solutions, Ltd. (HLSS) as well, due to their reliance on Ocwen for their businesses.
Ocwen’s run-in with regulators has been going on for almost a year now. Staring from the $2 billion foreclosure settlement deal in Dec 2013 to the allegations of overcharging distressed homeowners on force-placed insurance products in Aug 2014, the company’s stock has been suffering a steady downward movement. Since December, Ocwen’s share price is down more than 60%.
Currently, Ocwen carries a Zacks Rank #4 (Sell). A better-ranked stock in the same sector is Ellington Financial LLC (EFC), with a Zacks Rank #2 (Buy).
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