OCWEN Could Be In Serious Trouble If Other States Jump On NYDFS Investigation Bandwagon
The investigation that began by Benjamin Lawsky’s New York Department of Financial Services claims that the backdated letters denying homeowners a chance to rework their troubled loans were going out as early as 2010 could very well bring down Ocwen.
Ocwen announced last week that it recorded a $100 million charge for a potential settlement with New York regulators but the real question is, will it be enough?
During and after the financial crisis, a regulatory matter of this scale tends to create a cascade effect with other states’ regulatory bodies and with federal regulators jumping on the ban wagon. This means Ocwen could be facing fines and penalties from other states and potentially fines from the Department of Justice and the CFPB. If this does happen the fine could be as high as $2.8 Billion.
Ocwen only generated revenue of $513.7 million with income from operations at $58.7 million for the third quarter of 2014.
This NYDFS investigation creates a problem for Ocwen if other states that were hit by the financial crisis decide to launch their own investigations in hope of getting a fat check from Ocwen. After all, the DocX scandal and the investigation into robo-signing that led to the National Mortgage Settlement all started with a state investigation similar to Lawsky’s and we know how those ended up. The only problem is Ocwen doesn’t have the resources to pay a potential $2.8 billion settlement.