Moody’s drops Ocwen, Altisource, Home Loan Servicing

Moody's Investors Service said it downgraded the following ratings; all ratings remain on review for possible downgrade:

• Ocwen Financial Corp.: Corporate family rating to B2 from B1, senior secured bank credit facility to B2 from B1 and senior unsecured debt to B3 from B2;

• Altisource Solutions Sarl: Corporate family rating to B2 from B1 and senior secured bank credit facility to B2 from B1; and

• Home Loan Servicing Solutions Ltd.: Corporate family rating to B2 from Ba3 and senior secured bank credit facility to B2 from Ba3.

Moody’s said the actions follow the New York Department of Financial Services' allegations, set forth in a letter to Ocwen, raising serious issues with Ocwen's servicing systems and processes. These allegations raise the risk of actions that restrict Ocwen's activities, the levying of monetary fines against Ocwen, or additional actions that negatively affect Ocwen's credit strength. In addition, the continued regulatory scrutiny further damages Ocwen's franchise position.

Home Loan Servicing’s and Altisource's ratings are driven in large part by their reliance on Ocwen whereby any changes to Ocwen's ratings would likely result in changes to their ratings.

The two-notch downgrade of Home Loan Servicing rating to the same level as Ocwen is due to the expectation that Home Loan Servicing will accelerate its diversification into other asset classes beyond non-prime servicing assets such as non-performing loans which have a higher risk profile along with the increased possibility that the servicing contracts could be terminated without compensation. While Home Loan Servicing has contractual protections in its agreements with Ocwen, there is no guarantee that it will be able to successfully assert its rights, including its right to full indemnification, thereunder, the agency said.

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