Allegations that Ocwen Financial Corp. backdated letters to distressed borrowers has prompted a downgrade to its servicing subsidiary’s rating.
The allegations were made in a letter Tuesday addressed to the company’s general counsel, Timothy Hayes, from New York Department of Financial Services Superintendent Benjamin M. Lawsky.
“In the course of the department’s review of Ocwen’s mortgage servicing practices, we have uncovered serious issues with Ocwen’s systems and processes, including Ocwen’s backdating of potentially hundreds of thousands of letters to borrowers, likely causing them significant harm,” Lawsky wrote.
On Wednesday, Moody’s Investors Service announced it downgraded the subprime primary servicer rating of Ocwen Loan Servicing LLC to SQ3 from SQ3+.
Ratings from the New York-based ratings agency range from the best possible rating of SQ1+ to the worst rating of SQ5-.
The subprime special servicer was also cut to SQ3 from SQ3+.
Both ratings were previously downgraded in August to SQ3+ from SQ2-.
Moody’s said it was influenced by uncertainty about the impact of the regulatory scrutiny and possible regulatory action on Ocwen’s servicing stability.
“The assessment actions follow the New York Department of Financial Services’ allegations, set forth in a letter to Ocwen, disclosing serious issues with Ocwen’s servicing systems and processes,” Moody’s said. “In addition to concerns about Ocwen’s servicing ability, these allegations also raise the risk of actions that restrict Ocwen’s activities, the levying of monetary fines against Ocwen, or additional actions that negatively affect Ocwen’s servicing stability.”
Concerns about integrating acquired servicing platforms has Moody’s considering further downgrades.
Ocwen previously reported a total primary servicing portfolio of $381 billion as of June 30.