Perhaps the shaky ground on which Ocwen Financial (OCN) has subsisted on for the last few months is finally beginning to stabilize, because, for the second time this month, Moody’s Investors Service issued a positive report on the beleaguered nonbank.
Earlier this month, Moody’s upgraded several of Ocwen’s ratings and wrote that Ocwen’s recent sales of mortgage servicing rights can go a long way to preserving the future of the company.
On Monday, Moody’s published a report, confirming several of its servicer quality assessments for Ocwen Loan Servicing and stating that those ratings are no longer on review for a possible downgrade.
In its report, Moody’s confirmed its servicer quality assessments for Ocwen Loan Servicing as a primary servicer of subprime residential mortgage loans and as a special servicer of residential mortgage loans at a rating of ‘SQ3-’.
Moody’s also assigned new servicer quality assessments for Ocwen’s capability as a primary servicer of prime residential mortgage loans and as a primary servicer of second lien loans. Both of those ratings are also SQ3-’.
According to Moody’s, its servicer quality assessments represent the ratings agency’s view of a servicer's ability to prevent or mitigate asset pool losses across changing markets.
The assessment scale ranges from SQ1 (strong) to SQ5 (weak). According to Moody’s, a "+" or "- " modifier can be added to the rating to indicate a servicer's relative servicing quality within a particular category.
Moody’s said that Ocwen’s recent efforts place the company on firmer footing.
“Ocwen's servicer quality assessments as a primary servicer of subprime loans and as a special servicer of residential mortgage loans have been confirmed and are no longer on review for downgrade due to the progress the company has made resolving its regulatory issues, integrating previously acquired servicing portfolios and platforms, and enhancing oversight of its servicing operations,” Moody’s said in its report.
Earlier this year, Moody’s downgraded both Ocwen’s subprime and special servicer ratings from ‘SQ3’ to ‘SQ3-’ due to the negative impact on Ocwen's servicing stability caused by heightened regulatory scrutiny and legal developments. Both assessments remained on review for possible downgrade.
But that possibility is now removed, for the time being at least.
Moody’s notes that Ocwen has taken steps to improve the oversight of its servicing operations in recent months, including separating the roles of internal audit and risk management, restructuring the internal audit organization and internal review group, introducing control directors in business units, and expanding the compliance department including hiring a new chief compliance officer in 2015.
“Despite the regulatory and legal challenges that Ocwen has faced, the company has continued to demonstrate decent metrics across its operational areas including collections, loss mitigation and timeline management,” Moody’s said.
Moody’s did note that Ocwen’s regulatory concerns may not be over yet.
“The prospects of additional regulatory scrutiny and fines while reduced still remain, including ongoing inquiries by the Securities and Exchange Commission and continued oversight by multiple regulatory monitors,” Moody’s said. “While some critical issues remain open, the reduced regulatory risk will allow the company's management to better focus on operations.”
