Federal investigators plan to subpoena records from Ocwen Financial Corp. after the Atlanta-based firm said last week that it will re-state its earnings for last year and for the first quarter of this year.
It’s the latest line of inquiry faced by Ocwen, one of the nation’s largest servicers of subprime mortgages.
Ocwen’s stock price has plunged as the growing pile of regulatory inquiries rattled investors, and homeowners have complained about non-bank mortgage servicers. Ocwen’s shares have lost over half their value since November.
Ocwen disclosed this week that the Securities and Exchange Commission told the company it will seek records related to the earnings restatement. Last week, the firm said it may have “material weakness” in how it booked the sale of loan servicing rights to Home Loan Servicing Solutions Ltd., skewing its financial results in 2013 and the first quarter of this year.
Ocwen also disclosed that it had received a subpoena from the SEC in June seeking documents on its business dealings with a number of firms, including Home Loan Servicing Solutions, and what ownership interests Ocwen’s directors and top executives hold in those firms.
In May, Ocwen also disclosed that the SEC is looking into how its chairman, William Erbey, handled his April 22 surrender of some options to buy stock, plus details on the earlier stock option grant, which was part of his compensation package.
Earlier this month, Bloomberg News reported that New York's top banking regulator was also looking into whether Ocwen's insurance agreements with another of its affiliated firms, Altisource Portfolio Solutions, was designed to funnel fees to the firm, partly owned by Ocwen insiders including Erbey.
Ocwen and other mortgage servicing firms have been under scrutiny for their use of so-called “force-placed” home insurance, which protects the lender when the homeowner’s insurance has lapsed. Homeowners must pay or face potential foreclosure.
Critics say some mortgage servicers have placed overpriced insurance policies with affiliates they partially owned or with third-party companies in deals that appeared to steer some profits back to the mortgage servicer.
According to Bloomberg, Erbey is the chairman and largest shareholder in several of the affiliates the mortgage servicer does business with, including Altisource. He also owns a small stake in Home Loan Servicing Solutions, according to company filings.
Last year the New York Department of Financial Services fined another Ocwen insurance affiliates, Assurant, $14 million and ordered it to cut premiums and refund homeowners, according to Bloomberg.
Ocwen said in the filing it is cooperating with the various investigations.
