N.Y. Regulator Probing Ocwen's Relationships With Affiliated Businesses

By Andrew R. Johnson 

New York's top financial regulator is probing mortgage-servicing firm Ocwen Financial Corp.'s relationships with several business affiliates, raising concerns that borrowers may be harmed because of the companies' close ties.

Benjamin Lawsky, the state's superintendent of financial services, sent a letter Wednesday to Ocwen seeking information about the company's financial interests in affiliated firms, services that the other firms provide Ocwen and agreements between the firms and other details.

The agency's "ongoing review of Ocwen's mortgage servicing practices has uncovered a number of potential conflicts of interest between Ocwen and other public companies with which Ocwen is closely affiliated," Mr. Lawsky said in the letter, adding that "this tangled web of conflicts could create incentives that harm borrowers and push homeowners unduly into foreclosure."

Ocwen's shares were down 2% at $38.70 in recent trading Wednesday.

The companies cited in the letter, a copy of which was reviewed by The Wall Street Journal, include Altisource Portfolio Solutions SA, which provides various technology services to Ocwen, and Home Loan Servicing Solutions Ltd., which has acquired mortgage-servicing rights from Ocwen. Representatives of Ocwen, Altisource and Home Loan Servicing Solutions weren't available for immediate comment.

Ocwen's executive chairman, William Erbey, is also chairman of Altisource, Home Loan Servicing and other related firms, and is the largest shareholder of each company, according to Mr. Lawsky's letter. A recent regulatory filing from Altisource said that Ocwen was its largest customer, accounting for 65% of its revenue in 2013.

Mr. Lawsky has been scrutinizing Ocwen's business amid concerns that the company isn't equipped to handle the growth of its servicing portfolio. Earlier this month the regulator halted a deal in which Ocwen agreed to buy the rights to service $39 billion of mortgages from Wells Fargo & Co.

Ocwen more than doubled the size of its servicing portfolio last year, making it the fourth-largest servicer of mortgage loans, according to industry publication Inside Mortgage Finance.

"Ocwen will continue to work closely with the NY DFS to resolve its concerns about Ocwen's servicing portfolio," the company said earlier this month.

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