NEW YORK (TheStreet) -- This time around, a regulatory order is good news.
KBW analyst Bose George on Thursday upgraded Ocwen Financial (OCN) to a "Buy" rating, with a $40 price target, after the shares declined 2.5% on Wednesday to close at $34.41.
Wednesday's decline followed a Wall Street Journal report saying that regulatory approval of Ocwen's pending acquisitions of mortgage servicer Homeward Residential Holdings and a majority stake in the mortgage servicing and origination assets of Residential Capital LLC -- held by Ally Financial -- could be delayed because New York superintendent of financial services Benjamin Lawsky was demanding that Ocwen appoint a monitor to oversee the company's mortgage servicing operations for two years.
Later on Wednesday, Ocwen's loan servicing unit did just that, entering into a consent order -- the euphemistic term for "cease and desist order" -- with the New York State Department of Financial Services, agreeing to appoint an independent monitor within 20 days "who will report directly to the Department to conduct a comprehensive review" of Ocwen's loan servicing operations in New York, representing about 40,000 loans, according to George.As a specialist in servicing distressed and subprime residential mortgage service loans, Ocwen has been in the sweet spot in the aftermath of the real estate collapse in 2008. The company has greatly expanded its operations over the past two years, with its acquisitions of Litton Loan Servicing LP in September 2011, along with the acquisition of SCI Services and the purchase of mortgage servicing rights from JPMorgan Chase (JPM) this year. The state regulators said in Wednesday's order that a June examination of Ocwen indicated "non-compliance by Ocwen" of a previous regulatory agreement, including the failure to send 90-day notices in "some instances" before commencing foreclosure actions, and commencing foreclosure actions without proper documentation, along with other violations. The compliance monitor will serve for 24 months, to "identify needed corrective measures to address identified weaknesses and deficiencies in Ocwen's servicing practices, make recommendations to the Superintendent, and oversee their implementation as approved by the Superintendent." George said "We do not expect the consent order to delay the closing of either acquisition," and that "while OCN is required to pay for costs associated with the monitor, we expect these costs to be moderate. Additionally, we do not expect this to prevent future [mortgage servicing rights] acquisitions."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV