Ocwen Financial Corp., the nation's largest non-bank, non-government mortgage servicer, is losing the mortgage servicing rights in two bond deals, according to a report from Bloomberg on Thursday.
The trustee for the deals, Wells Fargo, sent notices to bondholders informing them that Ocwen was being terminated, according to the report. Wells Fargo had solicited instructions from investors on how to proceed when downgrades of Ocwen's ratings triggered defaults in the bonds. The San Francisco-based megabank said most investors had instructed it to terminate Ocwen from the transaction, according to the report.
Wells Fargo said in the notices to stakeholders that the bank intended to transfer the servicing rights on the bonds to a unit of Credit Suisse Group AG, and Nomura analysts reported that ratings firms would need to approve Wells Fargo's choices, the report said.
"We regret the decision made by this particular group of investors who have been critical of Ocwen's superior loan modification results, but are pleased that in the majority of the affected securities investors are keeping Ocwen as their servicer," said Ron Faris, President and CEO of Ocwen, in a prepared statement . "We were also gratified to see reports earlier this week by Morgan Stanley and reported by Bloomberg confirming Ocwen has been more effective at keeping borrowers in their homes, and it is unlikely that investors will replace Ocwen in the small percentage of cases where the servicer ratings have fallen below the minimum criteria set forth in certain PSAs."
A spokesperson from Wells Fargo declined to comment.
Ocwen's regulatory troubles over its servicing practices have been well-chronicled in the last two years. Alleged servicing violations have resulted in Ocwen settling for $150 million with the New York Department of Financial Services in December and $2.5 million with the California Department of Business Oversight in January.
Early in 2014, Wells Fargo agreed to sell $39 billion worth of mortgage servicing rights to Ocwen. In February 2014, that transaction was put on hold indefinitely by the head of the New York DFS, Benjamin Lawsky. Nine months later, in November 2014, Wells Fargo and Ocwen mutually agreed to call off the deal. Also in November, Lawsky's office reported that a two-year investigation of Ocwen found that the Atlanta-based servicer had sent backdated foreclosure notices to about 7,000 borrowers after it was too late for them to obtain a loan modification. Lawsky's investigation led to the $150 million settlement, an agreement which also included the departure of Ocwen chairman Bill Erbey, who founded the firm in the mid-1980s.
Earlier this week, Ocwen announced it was selling an MSR portfolio worth about $9.8 billion to Dallas-based Nationstar.