Ocwen Financial Corp., one of the biggest U.S. mortgage servicers, fell the most ever after a newspaper reported that California is seeking to suspend its license.
Ocwen plunged 36% to $7.78 in New York, the biggest drop since the firm went public in 1996. The Los Angeles Times reported yesterday that California’s Department of Business Oversight may suspend its license for a year, which would force Ocwen to sell its mortgage-servicing rights in the state.
Tom Dresslar, a spokesman for the agency, said Ocwen has ignored requests for information.
"We can't just sit around and let them do that to us," Dresslar said today in a telephone interview. "So we ultimately, after giving them plenty of opportunity to provide us the information, decided that we would go after their license."
The agency is seeking to find whether Ocwen is complying with a California law giving homeowners a bill of rights that took effect in 2013, he said. A hearing with a state administrative law judge is scheduled for July, Dresslar said.
Ocwen recently turned over the information requested, the Atlanta-based firm said today in a statement.
"We have dedicated substantial resources toward satisfying the DBO’s requests," Chief Executive Officer Ron Faris said in the statement. "We expect our ongoing cooperation will result in a satisfactory outcome for all parties."
Ocwen's shares have tumbled 85% in the past year amid a review by its auditor and investigations by the New York Department of Financial Services and the U.S. Consumer Financial Protection Bureau. William Erbey, 65, the firm's founder, agreed last month to step down from his positions at Ocwen and related companies in a settlement with New York regulators.
Home Loan Servicing Solutions, which buys mortgage-servicing rights from Ocwen then hires it to collect loan payments, fell 20% to $12.95. Nationstar Mortgage Holdings Inc. declined 7.1% to $24.22.
Other nonbank servicers may be at risk of similar investigations, Jaret Seiberg, a managing director at Guggenheim Securities LLC in Washington, wrote in a report.
Mortgage servicers handle billing and collections on behalf of lenders or investors who own the loans, and oversee foreclosures when borrowers default. Banks have been selling the rights to reduce their risks in line with new regulations.
