(Bloomberg) -- A group of state mortgage regulators blocked Ocwen Financial Corp. from acquiring new business and said the company’s financial condition is significantly deteriorating, the North Carolina bank regulator said on Thursday.
Mortgage regulators from more than 20 states examined Ocwen, a company that collects mortgage payments from borrowers, and found it had failed to make timely payments for taxes and insurance from consumers’ escrow accounts. They also alleged that Ocwen routinely sent companies inaccurate or misleading escrow statements. The shares fell 13 percent to $4.69 at 12:35 p.m. in New York.
A spokesman for Ocwen wasn’t able to immediately comment.
Ocwen told state regulators in January that reconciling the escrow accounts would cost $1.5 billion, and would be “well beyond Ocwen’s financial capacity to fund,” according to a North Carolina cease-and-desist order. Other states issued orders as well, effectively blocking Ocwen "until the company is able to prove it can appropriately manage its existing mortgage escrow accounts," according to the North Carolina statement.
Ocwen grew fast after the financial crisis. From 2009 through the end of 2013, its business jumped eight-fold, as measured by loans it was collecting on, according to a separate 2014 consent order from New York. Big banks were eager to shed their business known as subprime mortgage servicing, both because of the relatively high levels of capital required to finance it and the investments in staff and systems that would likely be required.
As Ocwen grew, it failed to properly integrate the systems of businesses it acquired, and improperly foreclosed on borrowers in some cases, New York regulators headed by Benjamin Lawsky said in their 2014 order. That order forced William Erbey, then executive chairman, to step down from his roles at Ocwen and related companies. Ocwen also agreed to provide $150 million in relief for borrowers.