Business

NY’s top regulator halts Ocwen-Wells Fargo deal

New York’s top financial regulator has dumped cold water on the mortgage-servicing industry’s consolidation fever.

Benjamin Lawsky’s Department of Financial Services on Thursday stopped Ocwen Financial from completing its acquisition of $39 billion of residential-mortgage servicing rights from Wells Fargo.

Atlanta-based Ocwen presently processes payments on more than 40,000 residential home loans in New York, held mainly by distressed borrowers.

The deal was halted because of DFS concerns the rapidly growing Ocwen couldn’t handle the added servicing load and that it has mishandled some accounts, sources said.

Ocwen, which services mortgages worth $435 billion. on Thursday said it “will continue to work closely with [Lawsky] to resolve its concerns about Ocwen’s servicing portfolio growth.”

By nixing the Wells Fargo deal, Lawsky has sent shock waves through the mortgage-servicing sector.

“It’s like the bell ringing for the first round of a 15-round boxing match,” said O. Max Gardner III, a foreclosure defense lawyer. “This could turn into a major problem, not just for Ocwen, [but] many non-bank servicers.”

Many of Ocwen’s representatives are off-shore and allegedly non-responsive.

Shares of Ocwen closed at $41.38, down 4 percent. The Wall Street Journal first reported on Lawsky’s action.

Additional reporting by Catherine Curan