The New York regulator who put a hold on Ocwen’s latest mortgage servicing rights (MSR) deal with Wells Fargo expressed on Wednesday his concerns about the rapid growth of non-bank servicers in the industry—and his belief that regulators should step in when necessary.
Benjamin Lawsky, superintendent of financial services for New York, outlined his worries before an audience at the New York Bankers Association Annual Meeting and Economic Forum.
“In 2011, all of the ten largest mortgage servicers were traditional banks. Today, four of the top ten are non-banks,” Lawsky said. “And those four non-bank firms alone service more than a trillion dollars of loans—10 percent of the residential mortgage market, and climbing.”
With much of this growth coming from distressed loans unloaded from large banks burdened by greater regulatory pressure, Lawsky said his concerns lie with the homeowners struggling on those mortgages.
“There are real people at the other ends of these loans, and the ability to work with those homeowners is not something that these non-bank firms can build up overnight,” he remarked.
The regulator also said watchdogs should maintain a healthy dose of skepticism when these companies tout their abilities to operate at a lower cost, saying such boasts merit a closer examination.
“[W]hen we take that closer look at the non-bank mortgage servicing industry, we see corners being cut. And, as a result of those cut corners, we are seeing far too many struggling homeowners getting caught in a vortex of lost paperwork, unexplained fees, and avoidable foreclosures,” he said.
Lawsky’s remarks cast a little more light on his move to slow portfolio growth at Ocwen, which has expanded dramatically in the last year. He referenced the company—albeit without naming it—in his speech, pointing to the $300 billion growth in its servicing portfolio from 2012 to November 2013.
In the next two to three years, Ocwen sees more than $1 trillion in growth opportunities in bank divestiture and servicer acquisitions, according to a filing with the Securities and Exchange Commission.
Ocwen did not immediately respond to a request for comment on Lawsky’s remarks, though the company said in a release in early February that it intends to work closely with New York’s Department of Financial Services “to resolve its concerns about Ocwen’s servicing portfolio growth.”