While a consent order reduces the threat of losing its California license, Ocwen Financial Corp. still has several hurdles to overcome.
The California Department of Business Oversight had sought to suspend Ocwen’s mortgage licenses because it wasn’t complying with requests for documentation.
The move threatened the Ocwen’s ability to service
$94 billion in loans backed by properties located in the state — potentially causing losses to investors and disrupting investor cash flows.
But the state said Friday it would withdraw its request to suspend Ocwen’s license as part of a consent order against the Atlanta-based firm.
Moody’s Investors Service Tuesday issued a report indicating that although the consent order greatly reduces the likelihood that Ocwen will need to transfer the California servicing portfolio, it doesn’t eliminate the threat.
According to the ratings agency, Ocwen is exposed to future negative actions because an independent third-party auditor review is required by the order.
Another factor is that Ocwen can’t buy mortgage servicing rights on California loans until the California regulator
determines that Ocwen can respond to requests for information and documentation.
“This provision, which will improve Ocwen’s servicing activity by forcing it to focus on its existing servicing portfolio, mirrors a similar requirement from a monitor the New York Department of Financial Services appointed to develop benchmarks for Ocwen to meet in its onboarding and servicing processes before it can acquire additional MSRs,” Moody’s stated.
Moody’s predicted that Ocwen’s foreclosure timelines will remain lengthened in the Golden State while the Department of
Business Oversight assesses the servicer’s compliance with state laws and requirements.
The longer timelines
will reduce recoveries on liquidated loans due to additional costs that accrue during the foreclosure process.
Ocwen Monday issued a response to a letter from
certain hedge funds and other RMBS investors to trustees and master servicers accusing Ocwen of having failed to properly collect payments on $82 billion in loans it acquired MSRs on from OneWest .
Ocwen said that the “inflammatory” letter only rehashes “baseless” allegations of contractual breaches previously asserted. Ocwen called the content “misleading.”
“As you know, those claims were thoroughly reviewed by an independent expert firm retained by the trustees, and after reviewing that expert report, the trustees cleared the transfer to Ocwen,” the statement said. “The allegations are as groundless now as they were then.”
Ocwen said that the letter only masked investors’ real industry-wide objective, which is it stop loan modifications and quickly foreclose on and evict distressed borrowers.
Ocwen explained its obligations are to the trusts as a whole.
It noted that its modifications are designed to improve net present value.
