Ocwen Financial (OCN) Plummets on Backdating Allegations
Shares of Atlanta, Georgia, based Ocwen Financial Corp. (OCN) fell sharply on Tuesday, bucking the strong rise in stocks across the board. Ocwen's stock closed down 18.20%, falling $4.78 per share to close at $21.48 per share on volume of 23,268,561 shares. A New York state regulator is alleging that the company backdated thousands of letters to borrowers that prevented them from being able to correct loan problems in a timely fashion.
Founded in 1988, Ocwen Financial Corp. is a financial services holding company, which through its subsidiaries engages in the servicing and origination of mortgage loans. It is one of the largest mortgage servicing organizations in the US, and also one of the largest servicers of sub-prime mortgages. During 2013, the company had net income of $310.42 million on total revenues of $2.00 billion. The company employs more than 10,000 people, most located in India, and its stock trades on the New York Stock Exchange.
On Tuesday a New York state regulator accused Ocwen of backdating thousands of letters to borrowers. The letters were to inform borrowers of various loan problems, but were sent too late for borrowers to correct those problems. Benjamin Lawsky, New York Superintendent of Financial Services, reported that Ocwen ignored the problem for months, even after an Ocwen employee uncovered and reported the backdating. Lawsky noted that the problem still hasn't been corrected by Ocwen, almost a year after it was found.
Said Lawsky in a letter, "Ocwen's indifference to such a serious matter demonstrates a troubling corporate culture that disregards the needs of struggling borrowers."
Shares of Ocwen stock were halted at 1:30 pm EDT.
Ocwen addressed the allegations through a press release published on its website, referring questions to its strategic communications advisor, New York City based Sard Verbinnen & Company.
"Ocwen regrets that, due to software errors in our correspondence systems, we inadvertently sent improperly dated letters to some borrowers," the website response read. "As always, our goal is to avoid foreclosure. In the case of the 283 borrowers in New York who received letters with incorrect dates, 281 are currently borrowers with us. We are continuing to review the rest of the cases. We believe that we have resolved the letter dating issues that have been identified to date, and we continue our investigation as to whether there are additional letter dating issues that need to be resolved. We are working with and fully cooperating with DFS and the Monitor to address their concerns."
Shortly after issuing that press release, the company printed a correction, acknowledging that the actual number of customers involved in New York is higher than 283, but that it "does not yet know how much such letters there were." The company is conducting its own internal investigation, and is "fully cooperating" with the Department of Financial Services.
Tuesday's action by the State of New York isn't Ocwen's first confrontation with regulators. In December of 2013 the company reached a $2.1 billion settlement with State of California over alleged mortgage servicing misconduct. The settlement covers borrowers in 49 states to cover loan modifications and principal reductions for borrowers who lost their homes between 2009 and 2012.
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