Ocwen Financial Corp.'s purchase of mortgage-servicing rights from Wells Fargo was indefinitely halted by New York's top financial regulator, according to a person briefed on the matter. Ocwen shares fell.
Benjamin M. Lawsky, head of the state’s Department of Financial Services, is concerned that Atlanta-based Ocwen will struggle to properly service the $39 billion of principal loan balances, said the person, who asked for anonymity because the decision isn’t public. Lawsky’s office has a monitor at Ocwen, which is regulated as a bank in the state, the person said.
Wells Fargo agreed last month to sell servicing on about 184,000 loans, or about 2% of the lender’s residential-servicing portfolio, according to a statement. Terms weren’t disclosed.
Ocwen, the biggest nonbank in the mortgage-servicing industry, tumbled 7% to $40.18 at 12:31 p.m. in New York after dropping as much as 14%, the most intraday since October 2008. San Francisco-based Wells Fargo rose 0.3% to $44.36.
Lawsky had no comment, according to Matthew Anderson, his spokesman. Katarina Wenk-Bodenmiller, a spokeswoman for Ocwen, and Wells Fargo’s Vickee Adams didn’t immediately respond to requests for comment.
Mortgage servicers handle billing and collections on behalf of investors who own the loans and supervise foreclosures if the borrowers don’t pay. Ocwen was the fourth-largest U.S. mortgage servicer as of Sept. 30, according to data compiled by Bloomberg. Wells Fargo was the biggest servicer and the largest U.S. home lender.