Ocwen Loan Servicing LLC (“Ocwen”) came to an agreement to
pay a $225 million settlement to restore the company’s license to
service mortgages in California following allegations by the California
Department of Business Oversight (“DBO”) that it had backdated
loan payment notices.
The consent order requires Ocwen to pay $20 million in restitution to its
borrowers and another $5 million in civil penalties, attorney’s
fees, and costs of an administrator to oversee the completion of the restitution
payments. The deal also stipulates that Ocwen must forgive over $198 million
of mortgagers’ debt via loan modifications.
This is not the first consent order the loan servicing company has agreed
to in order to maintain its business operations. In 2013, Ocwen agreed
to a consent order with the Consumer Financial Protection Bureau (“CFPB”)
to settle a multi-state suit over its foreclosure practices. In that consent
order, Ocwen agreed to pay $127 million to mortgage customers who lost
their homes in foreclosure, and provide more than $2 billion in loan modification
relief to current homeowners.
A third-party audit of Ocwen’s servicing procedures revealed that
the company had violated hundreds of state and federal laws—including
the California Homeowner Bill of Rights—during the period of January
1, 2012 to June 30, 2015. During that time, Ocwen jeopardized some of
their over 531,000 customers’ ability to modify their mortgage agreements
by sending them time-sensitive notices several days after the letter should
have been received.
The audit was performed as a condition of a previous consent order Ocwen
entered into with the DBO in 2015, after Ocwen was found to have failed
to provide the DBO with the necessary loan information for the DBO to
complete a routine regulatory review.
Ocwen claims that it has already disbursed approximately $2 million in
restitution to 3,127 of its California customers affected by the letter-dating
issue. Those borrowers filed claims under a remediation program previously
initiated by the company, and the consent order provides for that $2 million
to be credited towards the current $225 million settlement.
Per the consent order, Ocwen must further evaluate another 19,295 borrowers,
who have claimed they have also been impacted by the company’s wrongful
business practices, and provide them with restitution if they are deemed
eligible. Additionally, for the borrowers who were sent time-sensitive
documents pertaining to loss mitigation five or more days after the letter’s
date, the settlement requires Ocwen to provide them information regarding
all loss mitigation options the company offers.
In an official statement released after the settlement was signed, DBO
Commissioner Jan Lynn Owen stated, “The terms will hold Ocwen accountable
for widespread violations of laws that harmed borrowers in our state.”
As with most consent orders, Ocwen did not formally admit to any wrongdoing.
Ron Faris, Ocwen’s Chief Executive, merely said that the company
was happy to have reached an agreement enabling it to concentrate on future business.
This consent order closely follows a separate $600,000 deal Ocwen settled
last month to resolve over 9,000 class action claims submitted by California
borrowers alleging that Ocwen failed to credit their accounts with payments
due to an alleged software malfunction.
In the aftermath of the housing crash and financial crisis, Ocwen became
one of the largest non-bank mortgage servicing entities in the country—granting
over 720,000 loan modifications since 2008—but has recently been
plagued with regulatory issues and allegations of shady business practices.
The subsequent difficulty in acquiring servicing rights led its portfolio
to suffer. At the close of 2014, Ocwen serviced roughly 2.5 million mortgages,
however, by the end of the third quarter of 2016, that total had shrunk
to 1.4 million. It is uncertain whether this downward trend will continue
or if Ocwen will be able to restore the company to its former financial glory.
For more information contact Alexa Stephenson by
visiting her page.