State Regulator Halts Deal Between Wells Fargo and Loan Servicer

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Benjamin M. Lawsky, New York State’s superintendent of financial services.Credit Eric Thayer/Reuters


Updated, 4:12 p.m. | A New York State regulator has dealt a blow to Ocwen Financial by halting the transfer of about $39 billion in servicing rights to the company from Wells Fargo.

The office of Benjamin M. Lawsky, the superintendent of New York State’s Department of Financial Services, has halted indefinitely Wells Fargo’s transfer of the mortgage servicing rights to Ocwen, according to a person briefed on the action.

This person said that Mr. Lawsky’s office had halted the transfer because of concerns about the company’s ability to handle the additional volume or mortgages from Wells Fargo.

In a statement released Thursday afternoon, Ocwen confirmed that the Wells Fargo deal was halted, and said it would “work closely” with the New York regulator “to resolve its concerns about Ocwen’s servicing portfolio growth.”

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Shares of Ocwen closed down more than 4 percent on Thursday.

Specialty servicers like Ocwen have been purchasing tens of billions of dollars of mortgage servicing rights from large global banks and vowing to improve service for borrowers. But as these companies grow, regulators and investors have become concerned with their capacity to handle the flood of new mortgages, especially troubled loans that require additional attention.

It is not the first time the company has run into trouble with regulators. In December, Ocwen agreed in a consent order with the Consumer Financial Protection Bureau, various state attorneys general and other regulators to provide $2 billion in mortgage principal reductions to underwater borrowers and refund $125 million to borrowers who had already been foreclosed on. The consumer protection agency said, “Ocwen took advantage of borrowers at every stage of the process.”

The company said in a statement at the time that the agreement “is in alignment with the same ultimate goals that we share with the regulators — to prevent foreclosures and help struggling families keep their homes.”

Mr. Lawsky’s office installed a compliance monitor at the company last year, according to a consent order that the company and regulator signed in late 2012. The New York State Department of Financial Services regulates Ocwen, which has headquarters in Atlanta, because the company operates as a bank in New York.

A move to delay the Wells Fargo transaction, which was announced two weeks ago, or future transactions could complicate Ocwen’s strategy of increasing its revenue by acquiring more servicing rights from the big banks.

The deal represents about 2 percent of all the mortgages that Wells Fargo services.

A Wells Fargo spokesman declined to comment.

Mr. Lawsky’s move to halt the transfer was reported earlier by The Wall Street Journal.