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From Banking and Finance Law Daily, April 20, 2017

Ocwen ‘failed borrowers’ throughout mortgage servicing process

By Katalina M. Bianco, J.D.

The Consumer Financial Protection Bureau has filed suit in federal district court for the Southern District of Florida against Ocwen Financial Corporation, one of the nation’s largest nonbank mortgage servicers, and its subsidiaries, for "failing borrowers at every stage of the mortgage servicing process." According to the CFPB, Ocwen "botched" servicing basics such as sending accurate monthly statements, made widespread errors, took shortcuts, and used runarounds that cost borrowers money and sometimes their homes. The bureau has charged the servicer with violating the Consumer Financial Protection Act UDAAP provisions, Fair Debt Collection Practices Act, Real Estate Settlement Procedures Act, Truth in Lending Act, Homeowners Protection Act, and related implementing regulations.

According to the CFPB, as of Dec. 31, 2016, Ocwen, headquartered in West Palm Beach, Fla., serviced almost 1.4 million loans with an aggregate unpaid principal balance of $209 billion. The company services loans for borrowers in all 50 states and the District of Columbia. Ocwen specializes in servicing subprime or delinquent loans.

Complaint. The bureau’s complaint alleges that the servicer:

  • used "error-riddled" information when servicing its loans;
  • illegally foreclosed on homeowners, providing no foreclosure protections to borrowers;
  • failed to appropriately credit payments made by borrowers;
  • "botched" basic escrow management tasks;
  • failed to make timely hazard insurance payments;
  • did not cancel borrowers’ private mortgage insurance in a timely manner;
  • enrolled some consumers in add-on products through deceptive solicitations and without their consent;
  • failed to adequately investigate and respond to borrowers’ complaints; and
  • failed to provide complete and accurate loan information to new servicers.

Further, the CFPB alleges that Ocwen did not remediate borrowers for the harm it caused, including problems the servicer created for struggling borrowers in default on their loans or in bankruptcy.

Relief sought. The bureau is seeking a court order requiring Ocwen to follow mortgage servicing law, provide relief for consumers, and pay civil money penalties and other relief as appropriate.

Cordray remarks. In prepared remarks, CFPB Director Richard Cordray stated that, "Ocwen has long touted its ability to help struggling borrowers avoid foreclosure." However, the CFPB’s complaint alleges that Ocwen failed to give borrowers accurate information and foreclosure protections as required by law and illegally initiated foreclosure proceedings and wrongfully conducted foreclosure sales. According to Cordray, by bringing this lawsuit, the CFPB is "seeking to enforce the law and make sure all mortgage servicers recognize that they must treat consumers fairly and with the respect and dignity they deserve."

Florida action. Florida Attorney General Pam Bondi and Florida Office of Financial Regulation Commissioner Drew J. Breakspear have also filed a federal civil consumer protection lawsuit against Ocwen and its subsidiaries, Ocwen Loan Servicing, LLC, and Ocwen Mortgage Servicing, Inc., for mortgage servicing misconduct. According to the complaint, Ocwen harmed Floridians by filing illegal foreclosures, mishandling loan modifications, misapplying mortgage payments, failing to pay insurance premiums from escrow, and collecting excessive fees. The complaint alleges violations of the Real Estate Settlement Procedures Act, the Florida Deceptive and Unfair Trade Practices Act, and Chapter 494, Florida Statutes. According to the complaint, Ocwen failed to adequately perform basic mortgage servicing functions that resulted in widespread errors and financial harm to borrowers. The complaint seeks financial and other relief for harmed borrowers and an order preventing Ocwen from servicing loans in violation of Florida and federal law.

North Carolina action. In addition to the CFPB’s suit, the North Carolina Commissioner of Banks filed a cease and desist order against Ocwen subsidiary Ocwen Loan Servicing, LLC. Ocwen is licensed by the Commissioner as a mortgage loan servicer under the North Carolina Secure and Fair Enforcement Mortgage Licensing Act. After an examination by the Multi-State Mortgage Committee, the Commission found that Ocwen has engaged in acts or practices that demonstrate the company is not operating honestly, fairly, soundly, and efficiently in the public interest and is in violation of federal and state laws.

The cease and desist order prohibits Ocwen from acquiring new mortgage servicing rights or originating new residential mortgages serviced by Ocwen until the company can demonstrate it is "a going concern" by providing a financial analysis that includes all of the liabilities currently maintained by Ocwen.

Companies: Ocwen Financial Corporation; Ocwen Loan Servicing, LLC; Ocwen Mortgage Servicing, Inc.

MainStory: TopStory CFPB DebtCollection FloridaNews Loans Mortgages NorthCarolinaNews RESPA TruthInLending UDAAP

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