Fitch Ratings downgraded Ocwen Financial Corporation’s bond rating from B to B- with a negative outlook after the sudden departure of the company’s chairman following a settlement with the New York Department of Financial Services.
Ocwen settled with the regulatory department for $150 million in relation to foreclosure improprieties in the wake of the housing crisis. The company had already set aside $100 million for in anticipation of a civil penalty but not the $50 million in restitution it has agreed to pay to those affected by backdated foreclosure notices the company sent out between 2009 and 2014.
The company’s chairman, William Erbey, also was forced to resign as a result of the settlement.
The penalties and restitution sum gave Ocwen a debt-to-tangible-equity ratio consistent with Fitch’s B- rating category, the company said in a release.
The ratings service also said in its release that it believes that beyond the settlement penalties and payments the company has a negative outlook because of heightened compliance standards will incur higher operational costs.
The service Morningstar Credit Ratings, LLC also placed four operational risk assessment rankings for Ocwen Financial Corporation on alert as a result of the settlement. Sterne Agee, an investment analysis firm, believes that due to its troubles Ocwen may be bought by another mortgage company. Ocwen’s stock has dropped substantially since announcement of the settlement and Erbey’s departure.