"Oct. 21 (Bloomberg) -- Ocwen Financial Corp. dropped the most in six years after New York’s banking regulator accused it of improperly backdating potentially hundreds of thousands of loan modification letters to mortgage borrowers.
Ocwen fell as much as 23 percent on the news -- the biggest intraday drop since October 2008 -- at 12:38 p.m. in New York. Trading was halted.
Benjamin Lawsky, the superintendent of the Department of Financial Services, said he “intends to take whatever action is necessary” to ensure that borrowers are protected, according to a letter dated today from Lawsky to Ocwen.
The alleged backdating adds a new layer to Lawsky’s probe, which has focused on possible conflicts of interest at the Atlanta-based firm. Lawsky said Ocwen failed to investigate the backdating issue when an employee questioned the accuracy of the firm’s processes in November 2013.
In several cases, borrowers received a letter denying a mortgage-loan modification dated more than 30 days prior to the date that Ocwen mailed the letter, Lawsky said. That essentially eliminated the 30 days that the borrower would have to appeal the denial, according to Lawsky.
“In light of these serious issues and the likelihood that thousands of new, inaccurate records are created with each passing day, Ocwen has not approached this problem with the urgency it demands,” Lawsky said in the letter. “Ocwen must fix its systems without delay.”
“We believe that we have resolved the letter-dating issues that we have identified to date, and we continue our investigation as to whether there are additional letter-dating issues that need to be resolved,” said David Millar, a spokesman for Ocwen at Sard Verbinnen & Co.
In February, a few weeks after announcing its plan to acquire $39 billion in mortgage servicing rights from Wells Fargo & Co., Ocwen disclosed that it was putting the deal on “indefinite hold” at the request of Lawsky’s office.
Later that month, Lawsky asked Ocwen to provide information about its transactions with a variety of vendors owned or controlled by Ocwen’s Chairman and Chief Executive Officer William Erbey. Lawsky has since followed up with other letters on related issues.
New York Borrowers
In today’s letter, Lawsky said that Ocwen claimed to have uncovered the backdating problem on its own in April and fixed it the following month, a claim the firm later admitted was false.
“Given the issues with Ocwen’s systems, it may be impossible to determine the scope of Ocwen’s non-compliance,” Lawsky said.
Ocwen said it “deeply” regrets the improperly-dated correspondence that resulted from “errors” in its systems, Millar said in the statement.
Ocwen corrected an earlier statement about the number of borrowers that received letters with incorrect dates saying it didn’t know how many people in New York received the letters."