Ocwen Financial Corp.
) has recently been embroiled in a legal mess. The New York's
Department of Financial Services (DFS) has charged it for
ambiguously directing $65 million in fees to one of its affiliates
- Altisource Portfolio Solutions SA. Ocwen has allegedly paid
questionable fees to the company for purchase of force-placed
insurance from Southwest Business Corp, the San Antonio, TX-based
diversified financial services company.
Notably, force-placed insurance originates in case a mortgage
borrower is unable to pay home insurance premiums. Then, the
mortgage lender or the mortgage-servicing company comes to the fore
and raises the mortgage payments so as to pass the premium amount
on to the borrowers, often overcharging them in the process.
Also, Ocwen, which was responsible for collecting home loan
payments, is accused of overcharging the borrowers who were already
struggling to make regular mortgage payments. Per the charges, the
extra fees charged will generate unethical revenues for Altisource.
In fact, Ocwen has been under regulatory scrutiny since 2012 when
the DFS sanctioned a monitor within the company. In Feb 2014,
Ocwen's intended purchase of $2.7 billion mortgage-servicing rights
from Wells Fargo & Co. (
) was revoked indefinitely by the DFS. Few months prior, the
Consumer Financial Protection Bureau (CFPB) indicted Ocwen for
administrative errors, which included mistakenly forcing borrowers
Presently, Ocwen faces challenges that go beyond litigations. It
will require substantial efforts by the company to repair the
damage and it may call for a complete overhaul of its businesses.
Currently, Ocwen carries a Zacks Rank #5 (Strong Sell). Two
better-ranked mortgage-investment firms include Federal Home Loan
Mortgage Corp. (
) and Home Loan Servicing Solutions, Ltd. (
). Both these firms hold a Zacks Rank #2 (Buy).
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