NEW YORK (TheStreet) -- As if the punishing 20% nosedive in its shares wasn't enough, Ocwen Financial (OCN - Get Report) may have exacerbated the issue with an incautious response to a New York regulator who accuses the mortgage debt collector of "a troubling corporate culture" in a scathing letter to the company Tuesday.
The regulator, New York Financial Services Superintendent Benjamin Lawsky, accused Ocwen of several misrepresentations regarding letters it sent to homeowners denying them mortgage modifications.
The first response, according to a source familiar with the investigation, proved to be incautious. By limiting the response to New Yorkers, Ocwen might be seen as implying Lawsky is concerning himself with borrowers outside his jurisdiction.
Ocwen shares fell more than 18% to $21.48 Tuesday. They are down more than 61% for the year to date after rising more than sixfold from 2010 to late 2013.
According to the regulator, in many instances letters were dated more than 30 days prior to when the letters were actually sent. The backdating meant the 30-day window borrowers had to appeal the denial had already elapsed by the time they got the letter.
"If the Department concludes that it cannot trust Ocwen's systems and processes, then it cannot trust Ocwen is complying with the law," the letter states.
Lawsky's letter said Ocwen stated the problem was limited to about 6,100 backdated letters, but Lawsky's letter argues it affects "potentially hundreds of thousands of letters to borrowers."
In its correction, Ocwen said it "is aware of additional borrowers in New York who received letters with incorrect dates but does not yet know how many such letters there were. Ocwen is continuing its investigation into these matters. We are working with and fully cooperating with [New York's Department of Financial Services] and the Monitor to address their concerns."
Matt Anderson, a spokesman for Lawsky, declined to comment, as did Margaret Popper, a spokeswoman with outside PR firm Sard Verbinnen. Sard, hired recently by Ocwen, is by far the best-known PR firm the company has used -- a sign it is serious in beefing up its crisis response effort.
Kevin Barker, an analyst with Compass Point Research and Trading, doesn't think Ocwen was implying Lawsky was going out of his jurisdiction.
"I think Ocwen was just specifically addressing their New York borrowers as opposed to the national population that would have gotten the wrong letters," Barker said.
Ocwen, along with other non-bank servicers NationStar Mortgage Holdings (NSM) and Walter Investment Management Corp. (WAC) , has grown enormously in the wake of the mortgage crisis as banks, including Bank of America (BAC - Get Report) and Wells Fargo (WFC - Get Report) , have scaled back their involvement in mortgage servicing. Mortgage servicers such as Ocwen are companies to which some borrowers pay their mortgage loan payments and which perform other services in connection with mortgages and mortgage-backed securities.
As part of Lawsky's inquiry into Ocwen, ongoing for much of this year, the regulator has held up Ocwen's planned purchase of a large mortgage servicing portfolio from Wells Fargo.