Borrowers lost homes to Ocwen, suits say
Mortgage servicer’s problems put survival of company in question; stock plunges 54%
The survival of one of the nation’s largest non-bank mortgage servicing companies was thrown into question Thursday as the company was hit with federal and state lawsuits for allegedly failing borrowers with mistakes, shortcuts and other problems that cost some people their homes.
Ocwen Financial Corporation allegedly botched basic functions such as sending accurate monthly mortgage statements, properly crediting borrowers’ payments and handling taxes and insurance, according to a lawsuit filed in a Florida federal court by the Consumer Financial Protection Bureau.
The CFPB also accused the company, based in West Palm Beach, Fla., of improperly foreclosing on struggling borrowers, ignoring complaints and selling servicing rights to mortgage loans without fully disclosing mistakes the company and its subsidiaries made in borrowers’ records.
In all, Ocwen improperly started foreclosure proceedings on at least 1,000 people and has “wrongfully held foreclosure sales,” the CFPB charged. The firm’s alleged failures also led to lapsed homeowners’ insurance coverage for more than 10,000 borrowers, the regulator said.
The Florida Attorney General’s office filed a similar state action. And mortgage regulators representing more than 20 states issued separate orders that bar an Ocwen subsidiary from acquiring new mortgage servicing rights and originating additional home loans until the division shows it can properly manage escrow accounts. Those actions could jeopardize the company’s financial operations. Shares of Ocwen Financial nosedived Thursday, closing nearly 54% lower at $2.49.
“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.
The company characterized the CFPB allegations as “inaccurate and unfounded.”
However, Florida Attorney General Pam Bondi and the state’s financial regulatory agency separately accused Ocwen of filing illegal foreclosures, failing to pay insurance premiums from escrow accounts and collecting excessive fees. The company failed to make good on pledges to improve its mortgage-servicing performance since agreeing to a multistate settlement in 2014, said Bondi, who added, “enough is enough.”
The order issued by North Carolina banking commissioner Ray Grace said mortgage regulators in multiple states identified problems with Ocwen’s handling of escrow accounts and other
“Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process.” CFPB Director Richard Cordray
violations of federal and state laws in 2015. Based on the findings, Ocwen approved an agreement that required the company to fund an independent audit of the accounts by Jan. 13, 2017.
Instead, the company responded in January that reconciliation of the accounts in question “would cost $1.5 billion and be well beyond Ocwen’s financial capacity to fund,” according to the North Carolina order. “We cannot allow this to continue,” Grace said in a formal statement.
Ocwen said it would respond to the state mortgage regulators after reviewing their orders.
Founded in 1988, Ocwen has more than 9,000 employees and services mortgage loans in all 50 states and the District of Columbia. The company has specialized in subprime home loans over the years. As of Dec. 31, Ocwen serviced nearly 1.4 million loans with an aggregate unpaid principal balance of $209 billion, the CFPB said.
Mortgage servicers process paperwork and repayments, deal with loan modification requests and perform other tasks involving borrowers — who have no say in selecting the servicing companies and typically cannot switch to other firms.
The frustrating and expensive experience of one consumer illustrates the problems some borrowers faced with Ocwen. Shaun Mee says he almost faced foreclosure last year in trying to win a mortgage modification approval from the company.
Trying to lower his monthly mortgage payments, the Colorado Springs homeowner said in a phone interview Thursday he applied to have his loan modified with a lower interest rate. Mee said Ocwen sent him an approval letter in August 2016. And he began making lower payments based on the new schedule.
Shortly afterward, Ocwen called to say the modification ap- plication process had to be started all over again because “something wasn’t entered right,” Mee said.
“We sent in all the paperwork,” said Mee, who works in sales at Clark Roofing. “Then they said we had to do it all over again. And whenever you called them, you never spoke to the same person. I kept calling them over and over. They kept saying ‘the computer went down.’ ”
Meanwhile, he began receiving non-payment warnings from Ocwen. Because Mee wasn’t making the full payment that was due before the approval of the loan modification, Ocwen reported to credit agencies that he was late in paying. That hurt his credit “bad,” Mee said.
Meanwhile, real estate agents and investors began visiting the house and calling him to inquire about a sale. Mee says he was told by several real estate agents that he was on “a foreclosure list.”
He called his congressional representative and then posted a February alert on Facebook that said, “Warning to anyone thinking or already using Ocwen!!!! Run away as fast as you can!”
A day after he wrote the post, Mee said Ocwen notified him that his modification request had finally won approval, he said. Phone calls from agents and investors have stopped.
“I think it’s strong-arm tactics they use,” Mee said.
Ocwen did not immediately respond to an email seeking comment on Mee’s statements.
The federal lawsuit asks the federal court to order Ocwen to comply with mortgage servicing laws, provide compensation to borrowers who were harmed by the company’s actions and pay unspecified penalties.
A USA TODAY review found Ocwen had the third-highest total of mortgage-related complaints filed with the CFPB between December 2011 and October 2014. Only Bank of America and Wells Fargo had more.
Ocwen has “wrongfully held foreclosure sales,” the CFPB says.