NY Regulator Halts Ocwen-Wells Fargo Mortgage-Servicing Deal -- 2nd Update

By Shayndi Raice 

A New York state regulator has halted indefinitely a $2.7 billion deal by Ocwen Financial Corp. to purchase mortgage-servicing rights from Wells Fargo & Co., the mortgage servicer said Thursday.

The office of Benjamin Lawsky, the superintendent of New York's Department of Financial Services, has concerns over the mortgage servicer's ability to handle more loans, said a person familiar with the decision.

The deal, which was announced last month, would have given Ocwen the right to service approximately $39 billion worth of loans.

Ocwen released a statement saying it has agreed to put the deal on hold at the request of DFS. "Ocwen will continue to work closely with the NY DFS to resolve its concerns about Ocwen's servicing portfolio," the company said in a statement.

DFS regulates Atlanta-based Ocwen, which is chartered as a New York state bank. The regulator last year installed an independent monitor to oversee Ocwen's servicing practices as part of an agreement reached over allegations of abusive behavior toward homeowners.

A Wells Fargo spokesman had no immediate comment.

Mortgage servicers collect payments from homeowners and distribute the payments to investors who own the loans through mortgage securities.

In December, Ocwen reached a $2.1 billion settlement with the Consumer Financial Protection Bureau and 49 states to resolve allegations it mistreated homeowners facing foreclosure and had far-ranging problems with its loan-processing operations.

The company had been accused of committing a litany of errors and other problems, including charging unauthorized fees, failing to credit borrowers' mortgage payments in a timely fashion, improperly imposing expensive insurance policies and filing foreclosure documents in court without verifying the information in them.

Ocwen has quickly grown in recent years by acquiring servicing businesses from Goldman Sachs Group Inc., Bank of America Corp., Ally Financial Inc.'s Residential Capital LLC subsidiary and other banks.

The company focuses on delinquent loans and those made to buyers with poor credit histories. It collects payments on nearly $435 billion in loans, making it the fourth-largest U.S. mortgage servicer and the largest that isn't also a retail bank.

For Wells Fargo, the deal to sell mortgage-servicing rights is in line with moves by other banks to comply with new international rules that require banks to hold extra capital against mortgage-servicing rights. The deal would have included 184,000 loans, representing about 2% of Wells Fargo's total residential-servicing portfolio as of the end of the fourth quarter.

Write to Shayndi Raice at [e-mail]

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