The country's top servicer of high-risk, subprime mortgage loans was accused on Tuesday of "serious issues" that could have hurt "hundreds of thousands" of borrowers.
Ocwen Financial (OCN) was sent a scathing letter from Benjamin M. Lawsky, New York state's superintendent of financial services, following an investigation that found the company had backdated letters that rejected mortgage modification requests. The letters were dated more than 30 days prior to being sent, negating the 30-day window borrowers had to appeal a rejection, the letter said.
In addition, Lawsky said Ocwen also sent foreclosure letters that were backdated. Those were sent to borrowers with a date by which they needed to take certain actions to halt foreclosure but had already passed before they were sent.
"Even worse, Ocwen did nothing to investigate or address the backdating issue when an employee questioned the accuracy of Ocwen's letter dating process and alerted the company's vice president of compliance," Lawsky wrote.
Accurate record-keeping and correspondence are vital to being fair to consumers, and Ocwen did not appear to take seriously the urgency of problem, he said. "The stakes for borrowers and investors are enormous," Lawsky added.
In response, Ocwen issued a statement that blamed a software error and noted it affect a few hundred borrowers.
"Ocwen regrets that, due to software errors in our correspondence systems, we inadvertently sent improperly dated letters to some borrowers," the company said. "As always, our goal is to avoid foreclosure. In the case of the 283 borrowers in New York who received letters with incorrect dates, 281 are currently borrowers with us. We are continuing to review the rest of the cases. "
Ocwen maintains that the problem has been fixed.
"We believe that we have resolved the letter dating issues that have been identified to date," the company said, "and we continue our investigation as to whether there are additional letter dating issues that need to be resolved."
Investors sold Ocwen shares on the news. The stock closed down Tuesday by more than 18 percent in regular trading, or $4.78, to close at $21.48. They continued falling after hours by an additional 3 percent, to $20.80.