Ocwen Financial disclosed late Monday that it had been threatened with a possible delisting by the New York Stock Exchange for non-compliance with continued listing standards.
Reacting to the late Monday disclosure, Ocwen’s shares plunged 10% in premarket trade Tuesday, but recovered a bit, and is now only down 2.16% in early trading.
Ocwen seeks more time
In its disclosure late Monday, Ocwen Financial indicated that it failed to file its 2014 annual financial statement on time. Providing a rationale for its delay in missing the deadline, Ocwen indicated that it needed more time “to analyze and review” an affiliated company that finances the purchase of mortgage-servicing rights from Ocwen.
Ocwen said that it is looking into whether the company, Home Loan Servicing Solutions Ltd, has the “ability to continue to meet its obligations to fund new servicing advances”.
Apart from financing the purchase of mortgage-servicing rights that Ocwen then services, HLSS also finances advances that Ocwen has to make from time to time on defaulted mortgages that it handles.
Ocwen didn’t explain if the affiliate HLSS was facing financial or liquidity constraints. However, it said “a failure by HLSS to fund new servicing advances could have a material negative impact on the Company’s financial condition”.
HLSS delayed filing twice
Ocwen spun off HLSS in 2010 and HLSS raised $186.2 million in its IPO in 2012. Nasdaq Listing Rule 5250 (c) (1) mandates timely filing of all required periodic financial reports with the SEC. However, HLSS has delayed filing twice, saying it needs more time to prepare its Form 10-K filing “related to its ability to operate as a going concern and to provide such information to the auditors for the purpose of their audit of the company’s financial statements”.
HLSS said it will either file its Form 10-K or submit a compliance plan to Nasdaq by May 18, which is the deadline for HLSS to regain compliance. In the event of Nasdaq accepting HLSS’s plan, it will give the company an additional 180 days from the Form 10-K’s due date, or until September 14, to return to compliance.
Ocwen has had to deal with several challenges recently.
As reported by ValueWalk, last month Ocwen announced it’s selling $9.8 billion in residential mortgage servicing rights to Nationstar Mortgage. However, some analysts worry that this could be the sign of a major shift that leaves Ocwen out in the cold.
In January, BlueMountain Capital Management sent a letter claiming that Ocwen’s legal troubles, which have been extensive, effectively put the mortgage servicer into default. Ocwen is also facing similar allegations from hedge funds represented by Gibbs & Bruns, who claim that Ocwen is in default.
On Monday, the mortgage servicer rejected allegations of poor mortgage servicing practices by sending a letter to trustees of 119 mortgage pools arguing that it should not be removed as a servicer.
Earlier, Ocwen reached an agreement with the New York Department of Financial Services in December to pay $150 million in penalties related to improper disclosures. As part of the settlement, founder and former chief executive William Erbey stepped down as executive chairman.