(Adds background on Lawsky's actions against Ocwen, previous
comments from Ocwen executives)
By Karen Freifeld and Peter Rudegeair
April 21 New York's banking regulator is probing
Ocwen Financial Corp, which collects mortgage payments,
for possibly over-charging borrowers and investors to auction
off foreclosed properties.
Benjamin Lawsky, superintendent of New York's Department of
Financial Services, said in a letter to Ocwen on Monday there
were "significant concerns" the company and an affiliate,
Altisource Portfolio Solutions SA, were engaged in
so-called "self-dealing" through an online auction site called
Self-dealing is when a company represents its own interests
in a transaction, sometimes to the detriment of its clients'
Ocwen, the fourth largest mortgage servicer in the United
States in 2013, uses Hubzu, an Altisource Portfolio subsidiary,
to auction off borrower homes facing foreclosure and foreclosed
Hubzu charges an auction fee of 4.5 percent when chosen by
Ocwen to host foreclosure or short sale auctions, compared to a
fee as low as 1.5 percent when it competes for business on the
open market, according to Lawsky's letter.
The relationships raise "concerns regarding self-dealing,"
and create "questions about whether those companies are charging
inflated fees through conflicted business relationships, and
thereby negatively impacting homeowners and mortgage investors,"
the letter said.
In early February, Lawsky stopped Ocwen from buying
servicing rights on 184,000 home loans with a total principal
balance of $39 billion from Wells Fargo & Co.
Later that month, the agency requested information about
potential conflicts of interest between Ocwen and four
affiliates, including Altisource Portfolio, that the regulator
said might encourage them to push borrowers into foreclosure.
Ocwen did not immediately respond to a request for comment.
Lawsky is among regulators probing mortgage payment
collectors like Ocwen, whose explosive growth since the
2007-2009 financial crisis has raised questions about their
handling of home loans. The specialty companies have taken over
much of the mortgage servicing business from traditional banks.
William Erbey, Ocwen's executive chairman, said on an April
17 earnings conference call that Ocwen will not seek to acquire
any new portfolios of servicing rights until it resolves matters
with New York's Department of Financial Services.
Lawsky's letter asks Ocwen to provide more information on
the fees Hubzu charges on auctioning properties serviced by
Ocwen and those not serviced by Ocwen.
The Department of Financial Services also sent a letter to
mortgage servicer Nationstar Mortgage LLC in March
requesting information about its servicing practices after
receiving hundreds of consumer complaints.
(Reporting by Karen Freifeld and Peter Rudegeair; Editing by
Andrew Hay and Paul Simao)