Regulators sue Ocwen Financial, say it mishandled mortgages
- Author: Todd Kelly Apr 22, 2017,
Apr 22, 2017, 0:31
On this news, Ocwen's share price fell $2.91, or 53.89%, to close at $2.49 on April 20, 2017. The company had to, at the time, refund $125 million to roughly 185,000 borrowers and provide $2 billion in principal reduction to homeowners who were underwater in their mortgages.
The actions by the federal and state governments are the latest black eye for Ocwen, which grew to become one of the nation's largest nonbank mortgage servicing firms after the housing crash but has been swamped by regulatory problems and consumer complaints. Ocwen's major growth spurt was tied in part to the implosion of Taylor, Bean & Whitaker. Mortgage servicers don't own the mortgage, but are in charge of collecting payments and making sure the accounts are credited correctly.
Ocwen Financial Corporation is a financial services holding company.
The Michigan Department of Insurance and Financial Services issued a cease and desist order to Ocwen on Thursday and said that Ocwen has had difficulty keeping accurate records and with properly crediting borrowers' payments.
The state Department of Financial Institutions found Ocwen had been doing so as far back as Aug. 1, 2010, and particularly between June 2013 and August 2015, according to a DFI news release a year ago.
This is Ocwen's second major run-in with the consumer bureau.
At the time, the company pledged to reform, but instead it has "continued to fall down on the job for borrowers", said Cara Petersen, a lawyer at the consumer bureau. Some of the company's "systemic and significant" mistakes cost its customers their homes, Richard Cordray, the bureau's director, said in a news conference. "Ocwen strongly disputes the CFPB's claim that Ocwen's mortgage loan servicing practices have caused substantial consumer harm".
"In fact, just the opposite is true", the company's statement read.
"As regulators, we encourage and advise companies to remain compliant with state and federal laws".
The mortgage servicing giant Ocwen was alleged for wrong practices and a legal action was taken by the Consumer Financial Protection Bureau (CFPB) and 20 state regulators yesterday. The servicer is then supposed to make those payments on the customer's behalf.
The Department of Banking and Finance is available to assist consumers who now make mortgage payments to Ocwen, in the event those consumers experience problems with payments or other account issues.
Ocwen said it received the orders from state regulators and "are in the process of reviewing them in detail".
Grace said in a statement that the company's negligence had gone on too long.
We may be years removed from the robo-signing, foreclosure free-for-all that ensued following the collapse of the housing market, but mortgage servicers continue to screw things up.
The order also states that the examining states were unable to gather "comprehensive documentation of the extent of unlicensed activity because Ocwen's management failed to respond to requests for information in a timely manner". OCN , tanked during Thursday trading after the Consumer Financial Protection Bureau (CFPB) made a decision to sue Ocwen.
"I know there's no shot in hell, but if I could change systems tomorrow I would", added the employee, who was not identified by name in the lawsuit.
Numerous errors, the CFPB says, came about through Ocwen's flawed proprietary servicing system known as REALServicing, which the company's servicing head once referred to as a "train wreck". Big banks were eager to shed business known as subprime mortgage servicing, both because of the relatively high levels of capital required to finance it and the investments in staff and systems that would likely be required.
The orders are the culmination of several years of examinations and monitoring that revealed the company is mismanaging consumer mortgage escrow accounts.
Mortgage servicers process paperwork and repayments, deal with loan modification requests and perform other tasks involving borrowers - who have no say in selecting the servicing companies and typically can not switch to other firms.
For borrowers, Ocwen's missteps sometimes had grave consequences. Florida's Attorney General filed a similar suit.
Ocwen Financial Corporation has come under fire from federal and state agencies for disreputable mortgage collection practices, resulting in widespread errors and illegal foreclosures.
The story of Ocwen, founded in 1988, is one of rapid growth.
The lawsuits and state enforcement orders are blows for a company that grew fast after the financial crisis.
The lawsuits call for Ocwen to pay penalties as well as undisclosed financial relief to borrowers. In an extraordinary move, William C. Erbey, the company's founder, stepped down as chairman as part of the deal.
Licensing - Ocwen has worked diligently to correct perceived licensing concerns and has entered into recent settlements with three states, without admitting or denying wrongdoing. Dimensional Fund Advisors LP boosted its stake in shares of Ocwen Financial Corp by 8.8% in the fourth quarter. Keefe Bruyette & Woods Maintains Ocwen Financial Corp.