The Consumer Financial Protection Bureau last month announced a $2.1 billion settlement agreement with Ocwen Financial Corporation, the fourth-largest U.S. mortgage servicer and the largest that is not a bank. Ocwen is a mortgage servicer specializing in dealing with delinquent loans and loans made to buyers with poor credit histories. The agreement is still subject to court approval. The CFPB published this Q&A on the settlement.
Under the agreement, the company will be required to provide $2 billion in loan modification relief to its customers and $125 million in refunds to consumers whose homes were foreclosed. The settlement stems from what the CFPB describes as “years of systemic misconduct in mortgage servicing.”
CFPB alleges that Ocwen took advantage of consumers with servicing shortcuts and unauthorized fees, misled consumers about alternatives to foreclosures, provided false or misleading information to consumers about the status of their accounts, denied loan modifications for eligible homeowners and sent documents through the courts after they were robo-signed during the foreclosure process.The company “violated federal consumer financial laws at every stage of the mortgage servicing process,” said CFPB Director Richard Cordray. “Ocwen made troubled borrowers even more vulnerable to foreclosure.”
The CFPB, along with 49 states, signed the 173-page order filed in U.S. District Court for the District of Columbia alleging a litany of errors and other problems. It accused Ocwen of charging unauthorized fees, improperly imposing insurance policies, failing to credit mortgage payments in a timely fashion, and filing foreclosure documents in state courts without verifying the information in them.
Ocwen has grown quickly in recent years, despite a 2002 class action lawsuit settlement, by acquiring servicing businesses from Goldman Sachs Group Inc., Bank of America Corp., Ally Financial Inc.’s Residential Capital LLC subsidiary and other banks. Ocwen now collects payments on nearly $435 billion in loans annually and has modified more than 200,000 troubled mortgages since the mortgage crisis of 2002. The company enjoyed a $186.2 million IPO in February of 2012.
The settlement requires Ocwen to comply with the same servicing standards imposed on five large banks as part of a $25 billion foreclosure settlement reached in 2012. In addition, Ocwen will agree to service loans in accordance with specified servicing guidelines and to be subject to oversight by an independent national monitor for three years. Also, a payment of $127.3 million, which includes a fixed amount for administrative expenses, will be made to a consumer relief fund to be disbursed to eligible borrowers by an independent administrator. Finally, Ocwen will give a commitment to continue its principal forgiveness modification programs to delinquent and underwater borrowers, including underwater borrowers at imminent risk of default.