Ocwen Plans to Restate Results, Citing Material Weakness
Ocwen Financial Corp., the largest nonbank mortgage servicer, said investors shouldn't rely on its financial statements for 2013 and the first quarter of this year as the firmís auditor reviews accounting controls.
"The company anticipates it will determine that a material weakness existed in the relevant time periods in the adequacy of our controls," Atlanta-based Ocwen said today in a regulatory filing.
The deficiency relates to how the company accounted for the sale of mortgage-servicing rights to Home Loan Servicing Solutions Ltd., according to the filing. Pretax income for 2013 will probably increase by $17 million and decline by the same amount in the first quarter, the firm said.
Benjamin Lawsky, New York Stateís superintendent of the Department of Financial Services, is reviewing the mortgage-servicing firm's arrangement with Altisource Portfolio Solutions, which he said may be designed to funnel fees to an affiliate for minimal work. The firm declined to comment on Lawsky's review earlier this month.
Ocwen created Home Loan Servicing Solutions, which it took public in 2012, to help finance investments in servicing contracts. Billionaire William Erbey serves as chairman of both firms, as well as several other related companies.
Ocwen had dropped by about half this year through yesterday in New York trading, compared with a 4.8% gain for the Standard & Poor's 500 Index. The shares declined 1.1% to $26.04 at 10 a.m.
The company said it doesn't anticipate any change to second-quarter results. Mortgage-servicing rights are contracts assigning the authority to collect home-loan payments from borrowers.