Mortgage servicer Home Loan Servicing Solutions, a spinoff of Ocwen Financial Corp., has fallen out of compliance with NASDAQ’s rules for continued listing on the stock exchange after twice delaying the filing of its 2014 annual report with the U.S. Securities and Exchange Commission.
Nasdaq Listing Rule 5250(c)(1) requires timely filing of all required periodic financial reports with the SEC, but HLSS has delayed filing twice, saying it needs more time to prepare its Form 10-K filing “related to its ability to operate as a going concern and to provide such information to the auditors for the purposes of their audit of the company’s financial statements.”
HLSS has until May 18 to submit a plan to regain compliance. The company said it will either file its Form 10-K or submit a compliance plan to NASDAQ by that date. If NASDAQ accepts HLSS’ plan, it may give the company an additional 180 days from the Form 10-K’s due date, or until Sept. 14, to regain compliance. But if NASDAQ rejects the plan, HLSS has the opportunity to appeal that decision to NASDAQ’s Hearings Panel.
Ocwen spun off HLSS in 2010 to acquire mortgage servicing assets including servicing rights, rights to fees and other income from servicing loans. After announcing its plan for an initial public offering in 2011, HLSS raised $186.2 million in its IPO in 2012.
But things haven’t gone well for either Ocwen or HLSS since the spinoff. After Ocwen suffered a series of legal and regulatory troubles and downgrades from ratings agencies, some of HLSS’ shareholders demanded the company terminate its business relationship with Ocwen.
The companies’ problematic relationship also caused Ocwen to delay the release of its annual report.
In February, HLSS agreed to sell the company to New Residential Investment Corp. for $1.3 billion, or $18.25 per share, in an all-cash deal. HLSS CEO John Van Vlack said the deal, which is expected to close by the end of the second quarter, would address the “uncertainty associated with our future financing obligations.”
But whether the sale will help the struggling Ocwen is a matter of debate. Moody’s Investors Service said it will help stabilize the firm’s servicing operations, while Compass Point Research and Trading said its relationship with HLSS will have an adverse impact on its servicing margins.
Ocwen, meanwhile, sold $9.8 billion in servicing rights to Nationstar Mortgage Holdings Inc. in February as part of an overall overhaul of its business. On March 18, it announced an agreement to sell $9.6 billion in Freddie Mac loan servicing rights to Green Tree Loan Servicing LLC.
HLSS’ principal executive offices are located in the Cayman Islands. The company also maintains offices in Atlanta, Georgia, and West Palm Beach, Florida.