Ocwen Financial Corp. plunged as much as 31% after agreeing to a settlement that prevents it from acquiring mortgage-servicing rights until the company makes improvements to satisfy New York regulators.
Executive Chairman William Erbey will step down from his roles at Ocwen and related companies under the accord announced Monday by New York's Department of Financial Services. Ocwen also agreed to provide $150 million in relief for borrowers and hire a monitor.
Atlanta-based Ocwen closed down $5.89, almost 27%, at $16.01 after dropping as low as $15.04, the biggest intraday decline since its September 1996 initial public offering. The settlement is the culmination of a yearlong probe that came to light in February, when Ocwen said it was putting its bid to acquire $39 billion in mortgage servicing rights from Wells Fargo & Co. on "indefinite hold" at the request of Benjamin Lawsky, superintendent of the Department of Financial Services.
Since then, Lawsky's office has disclosed various problems at Ocwen, the largest non-bank servicer of subprime loans in the U.S., starting with what it calls conflicts of interest involving Erbey, who owns stakes in affiliated companies.
Lawsky's office has criticized Ocwen for funneling a share of its foreclosure-related business to the affiliated entities. He has cited examples in which the company backdated letters to borrowers, making it more difficult for the homeowners to modify their mortgages.
In addition to the $150-million payment for homeowner relief in New York, Ocwen will add two independent directors to its board who will not own shares in any related entity.
In the last five years, Ocwen has emerged as one of the country's largest mortgage servicing providers, acquiring rights to hundreds of billions of dollars of unpaid balances on residential loans from companies including Litton Loan Servicing, Saxon Mortgage Services Inc. and Homeward Residential Holdings Inc.