By Peter Rudegeair and Neha Dimri
(Reuters) - Ocwen Financial Corp agreed to replace its chairman as part of a $150 million settlement with New York's financial regulator after the mortgage collection company admitted to violations, including improper foreclosures.
Ocwen's shares fell 23 percent to $16.83 in trading on Monday morning. Up to Friday's closing, Ocwen's shares had lost about 61 percent this year.
The settlement addresses a string of concerns that Benjamin Lawsky, New York's Superintendent of Financial Services, has raised about Ocwen, which collects mortgage payments, over the past year.
Companies like Ocwen have grown exponentially since the financial crisis by buying up the rights to service mortgages after new capital regulations made the business too costly for banks to maintain. But at many mortgage servicing companies, investments in systems and procedures did not keep pace with their expansion, causing headaches for many homeowners.
Lawsky has cited concerns from the backdating of thousands of letters to borrowers about loan modifications to ties between Ocwen executives and affiliated companies that might give them an incentive to push borrowers into foreclosure.
To fix other operational issues that the regulator identified, Ocwen agreed to install a new independent monitor for up to three years and to appoint two new independent directors to its board.
Executive chairman William Erbey, an Ocwen founder and its chief executive until 2010, will resign on January 16. He will be replaced by Barry Wish, a current director of Ocwen who will become non-executive chairman.
In addition to Erbey's resignation, the company agreed to pay New York state $100 million for housing, foreclosure relief and community development programs. The company also agreed to pay 5,000 Ocwen homeowners who lost their home to foreclosure $10,000 each. Ocwen, which had set aside $100 million for a potential settlement in the third quarter, said it would record a $50 million charge in the fourth quarter to cover the remaining costs.
The company acknowledged that it did not properly deal with distressed homeowners, may have saddled them with excessive charges and failed to maintain adequate systems for servicing billions of dollars in mortgages.
Ocwen chief executive Ronald Faris said in a statement that Monday's settlement "will allow Ocwen to continue to focus on what we do best -- helping homeowners."
Additionally, Ocwen will be prevented from making acquisitions and expanding until it satisfies the state that it has reformed its systems to protect the rights of New York borrowers, the company said.
(Reporting by Luke Koshi and Neha Dimri in Bengaluru; Editing by Gopakumar Warrier; Editing by Christian Plumb)