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Why Ocwen Financial Corp (OCN) Fell More Than 50%

Shares of Ocwen Financial Corp (NYSE:OCN) more than halved on Thursday after the CFPB sued the company for making serious errors such as failing to send accurate monthly statements. In addition, the state of North Carolina issued a cease and desist order preventing Ocwen Financial from originating new mortgages to be serviced or buying new MSRs until the company showed that its financial condition was strong enough, among other asks. Multiple other state mortgage regulators have also joined in. North Carolina Commissioner of Banks Ray Grace said, ‘As regulators, we encourage and advise companies to remain compliant with state and federal laws. However, Ocwen has consistently failed to correct deficient business practices that cause harm to borrowers. We cannot allow this to continue’. North Carolina regulators also noted that if Ocwen were to redress its operational deficiencies and pay its known and potential penalties, that ‘it would indicate that Ocwen continuing as a going concern would be in doubt’.

Ocwen defended itself by saying that the CFPB’s allegations were ‘inaccurate and unfounded’. The company hasn’t as of yet addressed the state issues.

What Does The Smart Money Sentiment Say?

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

Of the 742 elite funds we track, 19 funds owned $82.74 million of Ocwen Financial Corp (NYSE:OCN) and accounted for 12.40% of the float on December 31.That’s up from 17 and $62.99 million on September 30.

The Bottom Line

Ocwen Financial Corp (NYSE:OCN) shares have fallen due to a CFPB lawsuit, in addition to North Carolina regulators questioning whether the company can survive if the company paid known and potential penalties and fixed its required operations. For more reading, check out ‘11 Most Ridiculous Lawsuits Settlements and Victories of All Time‘.

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