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New York regulator suspects Ocwen Financial of possible 'self-dealing'

Ocwen uses Hubzu, an Altisource Portfolio subsidiary, to auction off borrower homes facing foreclosure and foreclosed investor-owned properties.
Adam Jeffery | CNBC
Ocwen uses Hubzu, an Altisource Portfolio subsidiary, to auction off borrower homes facing foreclosure and foreclosed investor-owned properties.

New York's banking regulator is probing Ocwen Financial, which collects mortgage payments, for potentially overcharging borrowers and investors to auction off foreclosed properties it services.

Benjamin Lawsky, superintendent of New York's Department of Financial Services, sent a letter to Ocwen saying he was concerned the company and an affiliate, Altisource Portfolio Solutions, were engaged in so-called self dealing through an online auction site called Hubzu.

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Self dealing is when a company represents its own interests in a transaction, rather than those of a client.

Ocwen uses Hubzu, an Altisource Portfolio subsidiary, to auction off borrower homes facing foreclosure and foreclosed investor-owned properties. When Ocwen selects Hubzu to host foreclosure or short sale auctions, the letter said, the Hubzu auction fee is 4.5 percent; when Hubzu is competing for business on the open market, its fee is a slow as 1.5 percent.

"The relationship between Ocwen, Altisource Portfolio and Hubzu raises significant concerns regarding self-dealing,'' the letter said, adding that it raises questions about whether the companies are charging inflated fees through conflicted business relationships that may hurt homeowners and investors.

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Ocwen did not immediately respond to a request seeking comment.

Monday's letter follows another that Lawsky's office sent to the company in February raising concerns about conflicts of interest between Ocwen and four of its affiliates, including Altisource Portfolio, that may encourage them to push borrowers into foreclosure.

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Ocwen was the fourth largest mortgage servicer in the United States in 2013, collecting payments on nearly one out of every twenty home loans.

—By Reuters

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