In March, 2017, President Trump’s administration put the leadership of the Consumer Financial Protection Bureau (CFPB) on notice by declaring that its structure is unconstitutional. Trump is not asking the Court to scrap the agency but rather wants to fire the CFPB director at will and the D.C. to uphold that authority.
In conversations with both Securities and Exchange Commission (SEC) officials and its shareholders, Ocwen stated it had reserved $25 million to rid itself of the CDBO restrictions which prevented the company from seeking further mortgage servicing rights for California-based loans. In fact, the company was under so much scrutiny, that it posted an internal auditor to monitor Ocwen’s internal operations to guarantee compliance with the order’s requirements.
Ocwen’s efforts finally paid off, as it announced on February 17th that it had agreed to a settlement deal with the CDBO to lift the state’s servicing prohibition on the company’s mortgage servicing rights. However, the cost required to complete the deal dwarfed the initial $25 million Ocwen had set aside, with the final settlement adding $198 million in loan debt forgiveness.
The excessive cost of the settlement is a result of the internal auditor’s findings that Ocwen had committed hundreds of violations of state and federal statutes over the course of 18 months—including numerous breaches of the California Homeowner Bill of Rights.
Per the CDBO, Ocwen broke federal law by:
- Accepting mortgagers’ insurance premium payments after borrowers were required to make them
- Failing to inform its customers of time-sensitive periods to accept or reject loan modification terms
- Distributing incorrect and late notices to borrowers who were over 45 days overdue on their payments, or periodically failing to send these notices at all
- Failing to timely communication updated data to credit reporting agencies regarding California mortgagers when Ocwen previously had submitted inaccurate data
According to the DBO, Ocwen additionally ran afoul of the federal Servicemembers Civil Relief Act by not promptly reducing the monthly interest rate to the required six-percent for California active duty military personnel. Furthermore, the DBO reported that the servicing company violated the California Homeowner Bill of Rights by:
- Not providing customers with the requisite loss mitigation denial notice information
- Misinforming borrowers in loss mitigation denial notices by incorrectly stating they’re payments were current
- Giving borrowers faulty data on default notices
The CDBO revealed the settlement entails Ocwen paying $25 million in cash—$20 million of which will be put towards restitution for the wronged borrowers and the remaining $5 million will be used to cover civil fines, lawyer’s fees, and the cost of a manager to supervise the distribution of the restitution funds. Additionally, they will be required to include $198 million in debt forgiveness by way of loan modifications to California borrowers over a three-year window.
California borrowers could be entitled to further compensation stemming from allegations that Ocwen backdated correspondence sent to delinquent borrowers. The company failed a 2016 compliance inspection conducted by an auditor affiliated with the National Mortgage Settlement due to similar customer letter issues. The CDBO noted that the agreement stipulates that Ocwen must pay restitution to California borrowers impacted by this letter-dating error.
According to the CDBO, Ocwen sent time-sensitive notices to borrowers after the date that appeared on the letter—which in some instances threatened the borrowers’ eligibility for obtaining loan modifications. Although Ocwen has already reimbursed 3,127 California borrowers in the amount of $2 million, the CDBO settlement requires the company to send another 19,295 potentially impacted borrowers letters informing them that they are entitled to restitution if their complaints are deemed valid.
Ocwen paid on average $639.59 per customer in restitution to the first 3,127 claimants as part of a previously existing remediation program. If all of the additional 19,295 applicants are also found eligible, Ocwen could be on the hook for additional $12 million.
The CDBO emphasized Ocwen may not reclaim its California mortgage servicing rights until the first $25 million settlement payment is disbursed. The department will choose a third-party manager to oversee the debt relief and restitution terms of the agreement. This manager will also audit Ocwen’s compliance with the consent order’s mandated action plan that requires the company to address problems in its servicing procedures.