Ocwen, Dubbed "Next Generation Subprime Lender" By Moodys, Is Focus Of NY State Regulator

Tyler Durden's picture

Ocwen Financial, dubbed by Moody's as poised to become the "next generation" of subprime lenders, has come under considerably pressure this morning amid news that NY State regulators are investigating the firm for "conflicts of interest"...


It is the Mortgage Servicing Rights (MSRs) that has Moody's the most-concerned as the volumes required may force Ocwen (and others) to shift their business model to ever lower quality loans.



As The FT reports,

Non-bank mortgage servicers are poised to become the “next generation” of subprime lenders as the companies seek to diversify their rapidly expanding businesses in the face of mounting regulatory scrutiny, Moody’s says.


The warning from the credit rating agency comes as specialised mortgage servicers, particularly Ocwen Financial, face increasing criticism from regulators, who argue that the companies have grown too quickly in recent years.




Mortgage servicers such as Ocwen, Nationstar and Walter Investment have been buying hundreds of billions of dollars worth of “mortgage servicing rights” from big banks including JPMorgan Chase and Bank of America.


Under these MSRs, the companies collect payments on US mortgages in exchange for a small portion of the income. Banks have sold the rights in the face of a wave of troublesome post-financial crisis foreclosures as well as regulatory pressure to offload the assets. The amount of outstanding mortgages serviced by Ocwen, the biggest non-bank mortgage servicer in the US, has risen from $43bn in 2005 to more than $500bn now.


Ocwen estimates that banks still have $1tn worth of MSRs to sell, but servicing mortgages has a finite shelf life and originations of the subprime loans in which the company has historically specialised are unlikely to recover to pre-crisis levels.


That could spur Ocwen to expand its nascent prime lending business to include making subprime loans, which have historically been the domain of banks.

And then they get hit with today's news...


As Bloomberg reports,

“Presently, Ocwen’s management owns stock or stock options in the affiliated companies,” Lawsky said in the letter.


This raises the possibility that management has the opportunity and incentive to make decisions concerning Ocwen that are intended to benefit the share price of affiliated companies, resulting in harm to borrowers, mortgage investors, or Ocwen shareholders as a result.

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Boris Alatovkrap's picture

OCWEN is not locate in NY, but is FLA scam operation, so why is NY conducting of probe...? Because all Pool Service Agreement is written for NY law, and is jurisdiction of NY. This is craziness! Why is water quality and function of swimming recreation of Florida citizenry is subject of NY Law...!?

Boris is read many thing on internet.

LawsofPhysics's picture

Interesting take Boris, perhaps the good people of florida will have an "argentinian response" and sieze all the assets of any new yorker living in florida.  Be optimistic and think of the possibilities...

TeamDepends's picture

Because many New Yorkers retire/vacation in Florida?

Stuck on Zero's picture

Financial services === criminal organization.

Colonel Klink's picture



A conglomerate of a whole host of scumbag players in the mortgage and servicing industry.  The vast amount of their employees are in INDIA.


And this douche is part of this whole scam of a company:


And this is why the FL connection:

In July 2002, Kweku Hanson, a Connecticut attorney, initiated a class-action suit against Ocwen Federal FSB of West Palm Beach, Florida, and he was represented in this by fellow attorney Paul Ngobeni. The 123-page lawsuit in Hanson v. Ocwen Federal Bank outlines a six-year running battle over late charges and fees.[22] He was joined in the suit by 57 individuals who claimed to have been injured by Ocwen. The lawsuit sought $1.5 billion in punitive and exemplary damages but was settled out of court for an undisclosed sum.

On Dec 19, 2013, the California Attorney General Kamala D. Harris Announced a $2.1 Billion Mortgage Settlement with Ocwen Financial Corporation and Ocwen Loan Servicing, LLC (Ocwen) over alleged mortgage servicing misconduct. California homeowners eligible to receive an estimated $268 million in first lien principal reductions and nearly $23 million in cash payments.[23]

This agreement is with a total of 49 states with $2 billion used to cover loan modifications and principle reductions for the people who lost their homes between Jan. 1, 2009 and Dec. 21, 2012, and those people whose loans were serviced by OCWEN. "OCWEN took advantage of borrowers at every stage of the process", said Richard Cordray, Director of the California Consumer Financial Protection Bureau.[24]

A copy of the 67-page California Complaint can be found here:[25]

A copy of the 173-page California Consent Order can be found here:[26]

Richard Cordray is the director of the Consumer Financial Protection Bureau, a federal agency - not California.

Panafrican Funktron Robot's picture

It's interesting, the focus on servicing companies.  Sounds like the banks/.gov are looking for a patsy.  Loan servicing is pretty boring/vanilla, the interesting part is the banks using these entities to get the subprime book rolling again without having their hands dirty in the origination process.  They get to snap up/repackage the subprime loans at a good price in exchange for their servicing book rights.  When those loans inevitably blow up, "It was OCWEN's fault!!!  They're a predatory lender!!!  We didn't know they were selling us bad loans!!!"

RebelDevil's picture

OT:"PrintAid" - The most rediculous charity idea I've ever heard!

TruthInSunshine's picture

I've been short equities for nearly a week and have seen so many parallels to 2007 that it's positively uncanny.

I had to stay short for a while in late '07 & part of '08 before my deep OTM puts stemmed the bleeding, but once that happened, it rained nothing but confetti, bitchez, and never let up. That was my biggest kill (out of 2 big kills) by far. I was actually ITM on puts I had purchased that were 60% downward moves in some cases 3 months before options expiration dates.

Bernanke bailed before he had to choose whether to lower the boom on bonds or "stawks," which is a luxury I think Yellen will not enjoy.

LawsofPhysics's picture

"Bernanke bailed before he had to choose whether to lower the boom on bonds or "stawks," which is a luxury I think Yellen will not enjoy." -  Exactly what I said about Greenspan/Bernanke...

and yet, here we are.

TruthInSunshine's picture

Yet looked at what happened on Bernanke's watch (08-09), as WELL AS Greenspan's ('99-2001).

It's all being held together with chewing gum & toothpicks - and a FOMC that has a 24/7 Reactionary Talking Points "Strike Crew" to jawbone when necessary (to keep the ramshackle hobbled together).

LawsofPhysics's picture

Yes, that's my point, the "full faith and credit" will be pushed, right up until the supply line break in earnest.  At that point, shit gets real, not before.

I woke up's picture

Can you send me the metric you said you use that worked for you last time?  I recall you said it's something rudimentary and that you didn't want to post in the open.  Thanks

ebworthen's picture

Ivy Zelman, female real estate analyst, was on CNBC this morning saying that lenders are lowering the credit score requirements for borrowers to keep things moving since rates went up.

Said some lenders starting to give loans to sub 600 FICA score borrowers.

Sound familiar?


RebelDevil's picture

The so called "economists" at the Fed and [TBTF] banks don't know what to do other than more of the same! (... which was the problem in the first place.)

spankfish's picture

Wow, FT to the rescue... warning of lending and mortgage fraud.  Is this the same FT that squashed the gold story?  Or is there another FT? ... sarc/off.

Why am I not surpised at a new double dipping Florida/NY paper chase lending scam... but I thought TPTB fixed all this stuff?  I guess I was wrong.

Dollarmedes's picture

Free housing for everyone!

waterhorse's picture

Temporarily, of course, but permanent wealth-extraction for bailed out banksters.

nakki's picture

Everyone should be careful what they wish for (myself included). When this thing blows its going to be awful. There is no way out. Sooner than later I would imagine. Commercial real estate is at a tipping point residential has already peaked, and if all they have left is cash buyers and subprime look out below. The whole idea that real estate should be a major part of ones wealth is ass backwards. The only way to cash out of real estate is to downsize. Who are all these people that are going to buy from all those baby boomers? 

Let The Wurlitzer Play's picture

OCWEN "Next Generation Subprime Lender"

In the sense of fairness it is inappropriate not to mention Wells Fargo.


waterhorse's picture

or CUNTRYWIDE, only the players (minus Agent Orange Mozilo) have moved on to "PennyMac"

vincent's picture

No rest for the weary.

Competition to be crushed.


swmnguy's picture

OCWEN is a bunch of crooks.  I bought my house from a flipper in 2009.  Paid for the top-shelf title search and insurance.  A guy paid way too much for it in 2004, then lost it to foreclosure in 2007.  It went through a couple hands before the flipper bought it, fixed it up and sold it to me (at my price, not his) in 2009.

So, the guy who lost it in 2007 walked from a 1st and a 2nd mortgage.  This guy, continuing his string of bad luck, walked into a pawnshop in 2009 while it was being robbed and the robbers killed him. He's as dead as a doornail, and a Google search of his name pulls up nothing but stories about his murder and the trial that ensued.

OCWEN apparently bought the right to collect on his 2nd mortgage.  Oops.  They write, they call, etc.  They know by now that he's dead because I've sent them printouts of the story of his murder.  I haven't officially responded to them under my name, mind you.  So of course OCWEN knows, but they're not telling anyone they know the guy is dead and the 2nd mortgage isn't even toilet paper.  No doubt, they've got it in their portfolio as a super-groovy money-good asset.  And somebody has bonds backed by this worthless non-asset in their portfolio, thinking it's worth...anything.

LawsofPhysics's picture

That is how "mark to fantasy" accounting works dude.  Claiming value in dead assets and dead people...

swmnguy's picture

Yes indeed.  Just that in the rest of my humble experience, it's something of an abstract concept to me.  Here I have a very understandable example.  Cut and dried.  No fudging around about vagueries of the market or different models or any of that BS.  This guy/parrot is dead.  He is an ex-borrower.  He's not "pining for the fjords."

Tinky's picture

So today's (predictable) gold "smash" will probably end up being $5-10/oz. More convincing evidence that tail is experiencing increased difficulty in wagging the dog.