Check out the excerpt below regarding William Erbey, a mortgage servicer who owns OCWEN, among other companies, and why his business is being called into questions. It's rather unsettling that there are minimal, if not incredibly limited, regulations on what is happening here. The full article is available at the bottom of the page.
Mortgage servicers collect money from homeowners and distribute those
payments to lenders. It’s a fairly boring business, but not to William
C. Erbey.The 64-year-old billionaire has built a servicing empire of mind-aching
complexity that plays a huge role in the nation’s housing market. Mr.
Erbey’s flagship company,
Ocwen Financial, now services about one of every four subprime mortgages in the United States.
Now, Mr. Erbey’s smarts — and his collection of companies are being
tested. State and federal regulators are concerned that Ocwen is
mishandling some of the mortgages it now services, citing examples of
shoddy paperwork and faulty technology.
Regulators and investors, which actually own
most of the loans Ocwen services, are also questioning the unusual
arrangements between Ocwen — “new co” backward — and four other publicly
traded companies where Mr. Erbey is chairman. The companies do things
from buying up delinquent loans to renting out foreclosed houses.
In effect, Mr. Erbey’s enterprise has become a
complex financial services group, but without the regulatory scrutiny
that a bank must face.
But in the view of critics, these businesses
are rife with potential conflicts because some aren’t entirely separate
from each other.
For example, Ocwen and a spinoff, Altisource
Portfolio Solutions, were employing the same chief risk officer, who was
reporting directly to Mr. Erbey in both capacities, according to New
York’s top banking regulator. Ocwen also contracts with some of Mr. Erbey’s other companies. And some of the other companies hire Ocwen.
In the case of one of Mr. Erbey’s companies,
Home Loan Servicing Solutions, it now works only with Ocwen. Home Loan
Servicing Solutions was created to purchase mortgage servicing rights
from the banks. Ocwen actually services the loans.
By providing financing for Ocwen’s servicing
business, Home Loan Servicing helps bolster Ocwen’s returns. And Mr.
Erbey owns about 13 percent of Ocwen, but a much smaller stake in Home
Loan Servicing, which means that, in theory, he has more of a stake in
Ocwen’s success.
Investors have seemed willing to overlook any
potential pitfalls in the unusual corporate structure. Helped by a
flood of new servicing business, Ocwen’s shares more than tripled in
value from the end of 2011 to the end of last year.
But its stock price has recently tumbled in
the wake of fresh scrutiny of Ocwen from Benjamin M. Lawsky, New York’s
superintendent of financial services, who sent a letter to Ocwen earlier
this week demanding more details about the relationships between the
companies.
While some state and federal regulators and
housing advocates have criticized the servicing companies broadly for
frustrating homeowners with sloppy paperwork, erroneous fees and
inadequate customer support, others say that Ocwen does a good job in
granting mortgage modifications to troubled borrowers.
“We get more principal reductions out of
Ocwen than we do out of anyone else,” said Bruce Marks, who heads the
Neighborhood Assistance Corporation of America, a nonprofit housing
advocacy group.
Still, the question hovering over Mr. Erbey’s
empire is whether the increased regulatory scrutiny will slow the
growth of Ocwen’s servicing pipeline.
