A deal reached last month for Ocwen Financial Corp. to acquire mortgage servicing rights on nearly $40 billion in loans from Wells Fargo & Co.’s banking unit has been held up by a state regulator.
Atlanta-based Ocwen announced on Jan. 22 that its mortgage servicing arm had struck a deal with Wells Fargo Bank, N.A., to acquire MSRs on 184,000 loans for $39 billion.
Wells said that the loans, which are serviced under the name America’s Servicing Co., accounted for around 2 percent of its total residential servicing portfolio as of the end of last year.
But on Thursday, Ocwen disclosed that the New York Department of Financial Services requested that it put an “indefinite hold” on the transaction.
So Ocwen said that it has agreed to the hold.
The DFS is concerned about Ocwen’s growth. The rapidly growing company has expanded its mortgage servicing portfolio from only $55 billion in mid-2010 to $518 billion as of last month.
“Ocwen will continue to work closely with the NY DFS to resolve its concerns about Ocwen’s servicing portfolio growth,” the Ocwen announcement said.
Jeff Lewis, senior portfolio manager at TIG Securitized Asset Fund, noted that Ocwen is becoming “very large” and considerably less financially robust than the banks that are selling the MSRs, like Wells Fargo.
“One can understand a regulator wanting to get their arms around that risk,” Lewis said.
He says regulations are prompting banks like Wells Fargo to unload mortgage assets.
But if regulators like New York’s “continue to shoot down these deals, the banks are going to be that much more resistant to expand their mortgage lending capabilities, significantly slowing down the housing market.”
