Ocwen’s mistakes cost borrowers their homes, lawsuits say

Mortgage servicer’s survival in question as 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, 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.”

“Ocwen strongly disputes the CFPB’s claim that Ocwen’s mortgage loan servicing practices have caused substantial consumer harm,” the company said in a written statement. “In fact, just the opposite is true. Ocwen believes its mortgage loan servicing practices have and continue to result in substantial benefits to consumers above and beyond other mortgage servicers.”