New York’s top financial regulator said Monday he will investigate whether the nation’s largest overseer of subprime mortgages, Ocwen Financial Corp., overcharged struggling homeowners on insurance.
In a letter Monday, New York Financial Superintendent Benjamin Lawsky said Ocwen created complex business arrangements apparently to funnel as much as $65 million to Altisource Portfolio Solutions S.A., a company led by former Ocwen executives and partially owned by Ocwen’s executive chairman, William Erbey.
Mortgage servicers sometime forced struggling homeowners to buy costly “force-placed” insurance policies. Lawsky said the extra expense of some policies “can push already struggling families over the foreclosure cliff.”
The Associated Press reported last week that some mortgage companies appeared to be selling or had sold nearly nonexistent insurance subsidiaries to skirt new federal rules banning commission payments from their own subsidiary insurance firms.
AP reported previously that Ocwen last year sold Beltline Road Insurance Agency Inc. as part of an $86 million deal with Altisource, where Erbey is chairman and its largest shareholder. That was the same month the Federal Housing Finance Agency formally proposed banning direct insurance commissions from subsidiaries.
Ocwen did not immediately respond Monday to phone calls and emails from the AP. Last week in a statement to the AP, Ocwen noted that it had owned Beltline for only a short period after acquiring it along with the assets of a smaller mortgage servicer. Ocwen said it no longer collects any commissions from Beltline and sold the agency to Altisource solely because the agency didn’t fit in with Ocwen’s business model.
Lawsky said the sale and subsequent business arrangements “will generate significant revenue from Ocwen’s new force-placed arrangement while apparently doing very little work,” and said Altisource’s intent was to “use this opportunity to steer profits to itself.”
The letter said New York also was investigating whether Erbey improperly approved transactions between Ocwen and Altisource despite promises in securities filings that he had recused himself from such decisions.
The state acknowledged Monday it had already intervened in recent weeks to stop another major mortgage company from selling a subsidiary insurance company. It did not provide details, but AP reported last week that, after the AP raised questions about the deal, the Department of Financial Services raised objections about the $100 million by Nationstar Mortgage Holdings Inc. of its insurance agency, Harwood Service Co., which has no website, no independent offices and only a single registered agent.
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