Ocwen Financial targeted in mortgage fee probe

New York Financial Services Superintendent Benjamin Lawsky, shown

New York Financial Services Superintendent Benjamin Lawsky, shown on Nov. 29, 2011, said he has told Ocwen Financial Corp. that he is looking into whether the Florida-based company is engaged in "self-dealing" and charging "inflated fees." Photo Credit: Newsday / Audrey C. Tiernan

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The state Department of Financial Services has accused one of the nation's largest mortgage servicers of profiting improperly from mortgage investors and distressed homeowners.

In a letter sent to Ocwen Financial Corp. Monday, the agency's superintendent, Benjamin Lawsky, said he is looking into whether the Florida-based company is engaged in "self-dealing" and charging "inflated fees."

The letter cited Ocwen's relationship with Hubzu, an online auction site that Lawsky said charges a 4.5 percent auction fee for Ocwen properties, up to three times the fee charged to other clients.

Hubzu is owned by Altisource Portfolio Solutions S.A., which was spun off from Ocwen in 2009. Ocwen's executive chairman, William Erbey, is Altisource's chairman and owns stakes in both Ocwen and Altisource.

The higher fees, Lawsky wrote, "ultimately get passed on to the investors and struggling borrowers who are typically trying to mitigate their losses."

Ocwen said in a statement that it would "fully address" the agency's questions by April 28.

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Hubzu is the principal auction site for Ocwen's short sales and for properties that have gone through foreclosure, Lawsky wrote. In a short sale, a home is sold for less than the amount owed on its mortgage, with the lender's approval.

In addition to the auction fee, Lawsky wrote, Hubzu charges a 3 percent seller's fee, a 3 percent buyer's fee and a $299 technology fee.

Such fees typically would be paid by the investors who own mortgage-backed securities, said Craig Robins, a Woodbury-based attorney who represents Long Islanders facing foreclosure.

The fees also would hit homeowners who lose their homes to foreclosure, if their banks pursue them for the gap between the home's sale price and the amount owed on the mortgage, Robins said.

"Eventually this could come back to hurt the homeowner if the lender is successful in going after the homeowner," Robins said.

Lawsky has demanded more information about fees charged by Hubzu, including whether Ocwen's sellers are required to use the site.

The financial regulator has been scrutinizing the activities of non-bank mortgage servicers, which handle day-to-day functions such as collecting and recording borrowers' monthly mortgage payments.

With banks facing more stringent capital requirements, more "lightly regulated" non-bank servicers are taking over many mortgage loans, Lawsky said in a speech in February. Those non-bank servicers, he said, are "getting too big, too fast."

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Ocwen services about 126,000 loans in New York, the agency said.

Nationwide, Ocwen serviced nearly $435 billion in mortgages in the third quarter of 2013, up from $128 billion a year earlier, according to a January regulatory filing by the company.

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