Ocwen Financial's settlement with New York regulators could have a negative impact on the cash flows of mortgage bonds heavily exposed to loans serviced by Ocwen in that state, according to Moody's Investors Service.
Ocwen last week reached a $150 million settlement with the New York Department of Financial Services. In addition to the $100 million civil penalty to the DFS, Ocwen will pay $50 million to current and former New York borrowers whose loans it serviced.
The servicer may choose to halt or restart the foreclosure processes for some of the borrowers in the state, which could result in incidences of cash flow disruptions to bonds backed by those loans, according to Moody's. "Servicing costs will increase and transactions with a high New York State concentration will face longer foreclosure timelines, reducing recoveries on liquidated loans," the ratings agency stated a report.
Other transactions impacted by the settlement won't require additional modification activity and should not see cash flow disruptions increase.
Despite any disruptions in cash flows, the overall impact of the Ocwen settlement will be credit neutral for the mortgage bonds that it services, according to Moody's.