Wells Fargo’s Planned MSR Deal With Ocwen Canceled

Posted by Patrick Barnard on November 14, 2014 No Comments
Categories : Mortgage Servicing

Ocwen Financial Corp.'s planned acquisition of $39 billion of residential mortgage servicing rights (MSRs) from Wells Fargo has been canceled by mutual agreement between the two companies, Bloomberg News reports.

In early February, the New York Department of Financial Services (NYDFS) halted the transaction indefinitely over concerns that Ocwen didn't have the capacity to properly handle the approximately 184,000 loans included in the deal.

Later that same month, Benjamin Lawsky, superintendent of the NYDFS, said both state and federal regulators should play a more active role in deciding whether non-bank servicers have the capacity to handle such deals.

‘I think it is appropriate for regulators – where warranted – to halt the explosive growth in the non-bank mortgage servicing industry before more homeowners get hurt,’ Lawsky said in prepared remarks for the New York Bankers Association Meeting and Economic Forum.

‘We – both state regulators and the regulated servicers – need to make sure that these MSR transfers do not put homeowners at undue risk,’ Lawsky said. ‘We have a vital responsibility to protect consumers. There are real people at the other ends of these loans, and the ability to work with those homeowners is not something that these non-bank firms can build up overnight.’

In a separate but related action, Lawsky said in April that he was examining potential conflicts of interest between Ocwen and some of its vendors – specifically, why an auction services company that the firm was working with was charging customers nearly three times as much as it did non-Ocwen customers.

Then, in October, Lawsky said an investigation had revealed that Ocwen had backdated thousands of loan-modification denial notices starting in 2012.

‘The existence and pervasiveness of these issues raise critical questions about Ocwen's ability to perform its core function’ of loan servicing, Lawsky wrote in an October letter.

Earlier this week, the Wall Street Journal reported that Lawsky might soon be stepping down from his position as commissioner of the NYDFS. An unnamed source told the paper that Lawsky was considering a move into the private sector – however, many speculate he will more likely pursue a political career.

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