Ocwen Financial Insurance Practices Put To Question By New York Department Of Financial Services

New York State Department of Financial Services launched a much deeper probe into

, regarding how it handles its mortgage servicing portfolio, and what it contracts outs as a process of managing a mortgage servicing right portfolio. The letter states that Ocwen Financial is giving preferential treatment to a force-placed-insurance provider –- SWBC -- over other alternatives that could be more cost efficient for the mortgages that it currently services. Shares of Ocwen Financial were down 3.1 percent recently. According to the letter: “Prior to 2014, Ocwen was paying ten cents per loan per month to Assurant for monitoring. In this new arrangement, however, Ocwen agrees to pay double the prior amount – twenty cents per loan per month now paid to SWBC, for each of the approximately 2.8 million borrowers serviced by Ocwen. SWBC, in turn, agrees to pass on fifteen out of that twenty cents to Altisource, or an estimated $5 million per year. Altisource provides only one service in exchange for this fee: granting SWBC access to Ocwen's loan files.” While SWBC will do the work of negotiating premiums, preparing policies and handling renewals, the problem comes from the excessive charge for insurance placement services, which is a service that's provided by Altisource, and it's that extra $0.10 in incremental pricing increase that is considered to be both excessive and it's at a conflict of interest. According to Ocwen Financials Form 10-Q released on May 2, 2014: “As of March 31, 2014, Mr. Erbey owned or controlled approximately 13% of the common stock of Ocwen, approximately 27% of the common stock of Altisource.” The incremental $5 million in revenue will go towards a company that William Erbey, Executive Chairman of the Board of Directors for Ocwen Financial, owns a 27 percent interest in. Furthermore, according to the New York State Department of Financial Services, “Ocwen formalized this new force-placed arrangement, without further consideration by any board member other than Mr. Erbey.”