Regulators sue Ocwen Financial, say it mishandled mortgages

Gladys Abbott
April 21, 2017

The Consumer Financial Protection Bureau said the company specializing in subprime and delinquent loans had illegally foreclosed against at least 1,000 borrowers.

Those are just a few of the violations the CFPB alleged in its 93-page complaint.

According to the order issued by the North Carolina Commissioner of Banks, the West Palm Beach, Fla. -based Ocwen entered a memorandum of understanding with the states last December, which required the servicer to perform a complete reconciliation of its escrow accounts.

At year-end 2016, Ocwen serviced almost 1.4 million loans with a total unpaid balance of $209 billion, according to CFPB. Mortgage servicers don't own the mortgage, but are in charge of collecting payments and making sure the accounts are credited correctly.

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.

As Ocwen grew, it failed to properly integrate the systems of businesses it acquired, and improperly foreclosed on borrowers in some cases, NY regulators headed by Benjamin Lawsky said in their 2014 order.

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Ocwen submitted a plan to a group of more than 20 state regulators in January to fix the escrow accounts, and said that reconciling the accounts would cost $1.5 billion, and would be "well beyond Ocwen's financial capacity to fund", according to a North Carolina cease-and-desist order. The frustrating and expensive experience of one consumer cited in the CFPB lawsuit illustrated the problems some borrowers confronted when dealing with Ocwen.

"If I could change systems tomorrow I would", the Ocwen executive said.

"Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes", CFPB Director Richard Cordray said in a statement issued with the federal action.

Regulators said when consumers complained to Ocwen, the company routinely failed to acknowledge or investigate the grievances. Instead, the company accused the consumer watchdog of conducting a "flawed review of data" and reaching a "self-servicing conclusion about isolated instances where Ocwen self-identified ways we can do better".

Florida Attorney General Pam Bondi (R) on Thursday filed a separate federal suit against Ocwen before the same court.

The CFPB says the lawsuit filed Thursday is for violations since that 2013 action. Since April 2015, Ocwen received more than 580,000 complaints from over 300,000 different borrowers.

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