NEW YORK — Shares of home loan servicing company Ocwen extended their slump Wednesday after Moody’s Investors Service downgraded its credit.
The firm lowered its rating on Ocwen’s credit to ‘B2’ from ‘B1′ and said the rating could be cut further based on regulatory action against Ocwen or news that hurts its business and reputation. Moody’s rating on Ocwen’s credit is five notches below investment grade.
Atlanta-based Ocwen Financial Corp. is one of the largest home loan servicing companies in the U.S.
Its shares fell $1.69, or 7.9 percent, to $19.78 in midday trading. The stock sank 18 percent on Tuesday.
On Tuesday the New York State Department of Financial Services said Ocwen inappropriately backdated foreclosure warnings and letters that rejected mortgage loan modifications, making it nearly impossible for struggling borrowers to appeal decisions made by Ocwen. The Financial Services Department said many borrowers did not receive warning letters until long after the deadline for avoiding foreclosure had passed. It said the company may have sent hundreds of thousands of backdated letters.
Ocwen Financial Corp. said software errors in its correspondence system caused the problem. In 2013, Ocwen agreed to reduce struggling borrowers’ loan balances by $2 billion as part of a settlement with federal regulators and 49 states over foreclosures abuses.
Moody’s said the allegations are serious and could lead to restrictions on Ocwen’s business, fines against the company, or other actions that affect the company’s credit as well as its franchise position.
The credit rating company also downgraded two related companies, lowering its rating on Altisource Portfolio Solutions SA to ‘B2’ from ‘B1’ and the rating on Home Loan Servicing Solutions Ltd. by two notches, from ‘B2’ from ‘Ba3’. Moody’s said both companies rely heavily on Ocwen.
HLSS acquires mortgage servicing assets and gets most of its income from loans that Ocwen services. Altisource is a former unit of Ocwen.
William Erbey is chairman of all three companies.