Bor­row­ers lost homes to Ocwen, suits say

Mort­gage ser­vicer’s prob­lems put sur­vival of com­pany in ques­tion; stock plunges 54%

USA TODAY US Edition - - MONEY - Kevin McCoy and Roger Yu @km­c­coynyc, @ByRogerYu USA TO­DAY

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.

STEVEN SENNE, AP

Ocwen has “wrong­fully held fore­clo­sure sales,” the CFPB says.

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