Federal investigators plan to subpoena records from Ocwen Financial Corp. after the Atlanta-based firm said last week that it would have to re-state its earnings for last year and for the first quarter of this year.
It is yet another line of inquiry by federal and state investigators now faced by Ocwen, one of the nation’s largest servicers of subprime mortgages.
In a regulatory filing this week, Ocwen disclosed that the U.S. Securities and Exchange Commission’s staff alerted the company that it will be seeking records in connection with the restated earnings. Last week, the firm disclosed that it may have “material weakness” in how it booked the sale of loan servicing rights to Home Loan Servicing Solutions Ltd.
Ocwen also disclosed that it had received an earlier 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 SA, was designed to funnel profitable 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.
Critics say some mortgage servicers have placed overpriced insurance policies with affiliates they partially owned or with third-party companies in high-cost arrangements that appeared to steer some of the 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, where he owns 27 percent of the company. 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 of Ocwen’s insurance affiliates, Assurant, $14 million and ordered it to cut insurance premiums and send refunds to homeowners, according to Bloomberg.
Ocwen said in the filing that it is cooperating with the various investigations.
Last month, Ocwen disclosed that a private-equity firm owned by Invesco, a large money manager based in Atlanta, had reduced its stake in Ocwen by selling $72.3 million worth of Ocwen stock to the mortgage servicer. An Invesco spokesman said the unit, W.L. Ross, no longer owns a stake in Ocwen. W.L. Ross’ founder, billionaire Wilbur Ross, is on Ocwen’s board of directors.
Ocwen’s shares have lost over half their value since November.
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