Los Angeles Times

U.S. agency sues mortgage firm

- By Andrew Khouri andrew.khouri @latimes.com Times staff writer James Rufus Koren contribute­d to this report.

Ocwen Financial, a mortgage services firm, is accused of “significan­t and systemic misconduct” that caused borrowers to lose their homes.

The Consumer Financial Protection Bureau sued Ocwen Financial Corp., one of the nation’s largest mortgage servicers, on Thursday, alleging that the company engaged in “significan­t and systemic misconduct” that caused borrowers to lose their homes.

In addition to the lawsuit filed in U.S. District Court in Florida, more than 20 state regulators took action against the company, limiting its operations in their states.

The dual actions caused the company’s stock to plunge more than 50%.

The federal consumer agency alleged that Ocwen conducted an error-plagued operation that failed to credit borrower payments, sent inaccurate statements and didn’t make insurance payments on time, leading to a lapse of coverage.

The West Palm Beach, Fla., company also was accused of illegally starting foreclosur­e on at least 1,000 consumers and relying on a system to service loans that even an Ocwen executive called “ridiculous” and a “train wreck,” the bureau said in a news release.

“Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” bureau Director Richard Cordray said in a statement.

Ocwen, in a statement, called the consumer agency’s allegation­s “inaccurate and unfounded” and promised to “vigorously defend” against the lawsuit.

“The CFPB suit is primarily based on the CFPB’s flawed review of data and its self-serving conclusion about isolated instances where Ocwen self-identified ways we can do better,” the company said.

The North Carolina Office of the Commission­er of Banks said the majority of the state actions stop the firm from acquiring additional mortgage-servicing rights or originatin­g loans until Ocwen can properly manage its existing escrow accounts.

In a cease-and-desist order, the North Carolina commission­er said that according to a business plan Ocwen submitted to the state regulators, the company might not be able to remain afloat if it fixed its problems, given the considerab­le costs to upgrade its systems and anticipate­d regulatory penalties.

Ocwen said it received the orders from state regulators and is “in the process of reviewing them in detail.”

The consumer bureau alleged that problems at Ocwen are wide ranging and include ignoring consumer complaints, deceptivel­y signing people up for add-on products and bungling the foreclosur­e process.

For example, Ocwen foreclosed on borrowers before reviewing their loss-mitigation applicatio­ns and even foreclosed on people who were accepted and fulfilling obligation­s under the program, the bureau alleged. In some cases, Ocwen asked borrowers for more informatio­n and gave them 30 days to submit it but foreclosed before that deadline.

In its lawsuit, the CFPB said Ocwen’s use of an internal system, known as REALServic­ing, exacerbate­d problems. The system frequently failed and generated errors, requiring workers to employ manual workaround­s that simply produced further inaccuraci­es, the agency said.

As of Dec. 31, Ocwen serviced nearly 1.4 million loans with an unpaid principal balance of $209 billion.

Ocwen reached a separate agreement with California regulators in February and agreed to pay $225 million in refunds and loan forgivenes­s to California­ns to settle allegation­s that sloppy practices led to violations of state and federal mortgage rules over the last several years.

The deal allowed Ocwen to add new California mortgages to its books, which it had been barred from doing since January 2015.

The actions by the federal and state government­s are the latest black eye for Ocwen, which grew to become one of the nation’s largest nonbank mortgagese­rvicing firms after the housing crash but has been swamped by regulatory problems and consumer complaints.

In 2013, it reached a $2.1billion national settlement with 49 states and the federal consumer bureau for the kinds of issues outlined in Thursday’s lawsuit.

Ocwen shares fell $2.91, or nearly 54%, to $2.49 on Thursday.

 ?? Alex Wong Getty Images ?? “OCWEN has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” said CFPB Director Richard Cordray, above.
Alex Wong Getty Images “OCWEN has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” said CFPB Director Richard Cordray, above.

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