Wells Fargo's sale of mortgage servicing rights (MSRs) on loans with about $39 billion in principal balance to Ocwen Financial has reportedly been halted by the New York Department of Financial Services (NY DFS) over concerns that Ocwen won't be able to handle the load of about 184,000 loans.
The department has a monitor at Ocwen who apparently feels the company doesn't have the resources in place in order to properly service the loans, Bloomberg News reports.
Ocwen, which is licensed in New York State, has agreed to put an indefinite hold on the deal until the monitor's concerns are allayed, according to the report.
Ocwen is one of many non-bank servicers that have been growing rapidly in recent years as they snap up business from larger banks, which are divesting themselves of their MSRs in reaction to the new Basel III rules, which require lenders to hold around 5% of the value of the loans they service in reserves. What's more, many large banks are getting rid of their servicing portfolios because servicing has been a shrinking part of their business and thus is no longer as profitable.
Last month, Moody's Investors Service cited Ocwen's growth in affirming the company's credit rating at four levels below investment grade.
‘Ocwen will continue to work closely with the NY DFS to resolve its concerns about Ocwen's servicing portfolio growth,’ Ocwen says in the statement.