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Ocwen chair must resign in settlement with New York; stock dives

A year ago, a New York regulator delivered a wrist slap to Ocwen Financial Corp., one that caused the mortgage company’s stock to inch down a mere 2 percent.

On Monday, the same state regulator dealt a body blow to Ocwen, the nation’s largest collector of mortgage payments from homeowners with spotty credit — and this time, shares plummeted.

The New York Department of Financial Services ordered the resignation of Ocwen Chairman William C. Erbey, the largest individual shareholder of Ocwen and four related companies.

Shares of Ocwen (NYSE: OCN) plunged 27 percent Monday. Erbey, a former Palm Beach resident who was worth $3 billion a year ago, saw his stock wealth fall to $853 million when the market closed.

The settlement calls for Ocwen to pay a $100 million fine and also to pay $50 million in restitution to Ocwen customers in New York.

The deal, said Benjamin Lawsky of the New York Department of Financial Services, offers “a new path for the company to clean up its operations.”

Lawsky said Ocwen often gave borrowers inaccurate information and embarked on “wrongful foreclosures.” Ocwen’s customers were left bewildered, for example, by the company’s practice of backdating letters by 30 days.

“Borrowers were given 30 days from the date of the denial letter to appeal that denial, but those 30 days had already elapsed by the time they received the backdated letter,” Lawsky’s consent order said.

For years, Ocwen Financial Corp. brushed off consumer complaints about its hardball tactics. In December 2013, Lawsky announced a $2.1 billion settlement with Ocwen, saying the company had lied to and cheated homeowners. Ocwen said the true cost of last year’s deal would be only $67 million.

Monday’s regulatory order removes Erbey, the longtime head of Ocwen.

“Erbey has played a significant role in the direction of OCN and was the main architect of the corporate structure we see today,” analyst Kevin Barker of Compass Point Research & Trading wrote in a note to investors. “His resignation will surely cause some of the investor base to question whether they will continue to support the company.”

Ocwen, once based in West Palm Beach, is officially headquartered in Atlanta. The company has 420 employees in Palm Beach County.

In recent years, Erbey spun off four other companies: Altisource Portfolio Solutions (Nasdaq: ASPS) of Luxembourg; Home Loan Servicing Solutions (Nasdaq: HLSS) of the Cayman Islands; and Altisource Asset Management Corp. (Nasdaq: AAMC) and Altisource Residential Corp. (Nasdaq: RESI), both of the Virgin Islands. Erbey is the largest individual shareholder in those companies, and he also is resigning from his chairman role at those firms.

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