This lengthy post covers different ways in which mortgage servicers can get ahead.
The consent order is now up on the DBO’s website (PDF). The original issue seemed to be that the DBO requested information on 10 + 1200 + 120 loan files and did not feel that Ocwen fully complied with its request. The consent order now dictates that an auditor will look into many aspects of Ocwen’s business including “the adequacy of Ocwen’s staffing levels” and “staff training”. It seems to me that the DBO has decided to change the rules on Ocwen.
- BlueMountain owns HLSS debt. It argues that the debt should get a 3% interest rate increase because there has been Events of Default under the terms of the debt. Here is their press release. Currently it has sent a letter to the trustee. Presumably a lawsuit may follow unless the trustee address their claims.
- RMBS investors are unhappy with Ocwen and the RMBS trustees because they don’t think Ocwen is doing a good job as the servicer. (Press release.)
I’m not sure what the issue with the California DBO was. The DBO needed information from Ocwen to figure out whether or not Ocwen was following California mortgage laws (California has mortgage laws that are very pro-consumer). Ocwen seems to have attempted to provide all of the information requested. They were late in doing so and the DBO was unsatisfied with the completeness of the information given to them. It is unclear to me whether or not there are issues with Ocwen’s IT systems (or the implementation thereof) that is causing problems.
With the $2.5M settlement announced today, Ocwen has agreed to yet another monitor (PDF press release). Presumably, this monitor will be able to figure out whether or not Ocwen is compliant with California mortgage laws. I guess we’ll have to stay tuned for the results.
Originally, my thesis for Altisource was that regulation wouldn’t be so bad because they would create long-term barriers to entry. I was wrong. I did not forsee:
- The NY DFS blocking Ocwen from buying MSRs.
- Bill Erbey being forced out of all of his companies.
- The California DBO threatening to suspend Ocwen’s mortgage license.
You can listen to the call and download the presentation slides from the IR website. The whole Erbey complex is rallying presumably because investors realize that the sky isn’t falling down. Highlights:
- Altisource guided down earnings for 2015. Adjusted earnings may drop around 16%. EDIT(1/21/2015): Adjusted earnings may drop around 26.5% without share repurchases.
- Altisource purchased very few shares in Q4.
- Whether or not the profits from the lender-placed insurance brokerage business was recurring is unclear to me.
- Management sees the chance of the DBO revoking Ocwen’s license (and forcing MSR sales) to be very low.
- The company does not see Altisource’s services being repriced lower due to the NY DFS. It believes that its services are at fair market rates.
- There was some drama. Lee Cooperman of Omega Advisors hopped on the call to express his displeasure at the company buying back shares at high prices and not buying back shares at low prices.
- Altisource has fired some of its employees and seems to have exited some areas which are not currently generating revenue.
California’s DBO (Department of Business Oversight) is going after Ocwen and threatening to take away its license to operate in the state. Since October 2013, the DBO has requested information and documentation from Ocwen. Ocwen has been late in supplying the requested information and did not fully comply with the DBO’s request.
- California seeks to suspend Ocwen’s mortgage license (Reuters article) – “Like any enforcement action, settlement is always a possibility, but at this point we are focused on suspension”
- DBO webpage on Ocwen with links to the DBO’s accusation and orders of forfeiture
- Ocwen press release regarding today’s news
Here’s what I would looking at shorting among mining stocks. Currently, the two stocks I am most interested in shorting are UUUU ($105M market cap) and NG ($1.08B market cap).