Ocwen Agrees to $225 Million Consent Order for “Letter-Dating” Problem

April 13, 2017 by Alexa P. Stephenson, Esq.

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