Ocwen Financial (NYSE:OCN) shares dropped for a second day after the Superintendent of New York Department of Financial Services Benjamin Lawsky sent a letter to the mortgage loan service firm. The company’s shares fell this second time at 8%, with a day before on Tuesday as well dropping to 18%. This was all due to the letter sent by Lawsky concerning the improper backdating of letters to its borrowers.
The letter suggested that borrowers were under risk due to the little amount of time they had for foreclosure decisions and loan modifications. Ocwen (NYSE:OCN) tried to correct itself by saying in a press release on Tuesday that around 283 of its borrowers in New York had received letters which had incorrect dates. The company had to release anther statement after this one stating that it is aware of these borrowers but isn’t sure at the moment about the amount of letters.
The company was built by William Erbey who has created many companies that make up a huge empire of mortgage services. He became a billionaire when his companies became high valued in the stock market. Lawsky has been looking into Ocwen (NYSE:OCN) for a while now. It previously came between the purchases of Wells Fargo’s (NYSE:WFC) loan portfolio which amounted to $39 billion this February. Lawsky has been working hard and trying to look for Ocwen’s (NYSE:OCN) shortcomings.
It tried to focus on the conflicting interests of Ocwen (NYSE:OCN) and its entities for example Altisource Portfolio Solutions (NASDAQ:ASPS). Michael Kaye, who is an analyst at Citigroup (NYSE:C), stated that the letter shows serious issues regarding deficiencies in Ocwen’s (NYSE:OCN) operations. Even Bank of America (NYSE:BAC) and Evercore (NYSE:EVR) were downgrading the company’s shares by saying that it’s better for them not to come in the middle of things.
Overall, this had a huge impact on the shares of the Ocwen (NYSE:OCN) and the credit ratings of Ocwen (NYSE:OCN) going from B1 to B2 didn’t help much either. Moody’s Investor Service not only downgraded Ocwen but also downgraded affiliate companies like Home Loan Servicing Solutions. Moody’s stated that the new allegations reported by the New York Department of Financial Services raised issues regarding the processes and systems at Ocwen (NYSE:OCN).
These allegations were reported to raise the amount of risk that in turn will restrict the activities of Ocwen (NYSE:OCN). This will cause damages to the overall franchise. The other enterprises were downgraded by Moody’s on account of the reliance they have on Ocwen (NYSE:OCN). This shows how big of an impact one firm has on all the others.
It wasn’t just Moody who downgraded Ocwen (NYSE:OCN). Standard & Poor was also one to lower the credit ratings of long term issues due to the negative outlook. On the other hand, the shares of the enterprise Altisource Portfolio Solutions (NASDAQ:ASPS) dropped by nearly 8% on trading this Wednesday morning while shares of Ocwen (NYSE:OCN) also dropped this year with an overall 64%. The company has to take serious action to rectify its mistakes or otherwise other enterprises will suffer.