(The following press release from the New York State Department of
Financial Services was received by e-mail and was reformatted. The sender
verified the statement.)
For Immediate Release: December 5
CUOMO ADMINISTRATION REQUIRES MAJOR MORTGAGE SERVICER TO INSTALL MONITOR TO
ENSURE PROMISED REFORMS ARE IMPLEMENTED
Exam Finds Indications that Problems Remain at Ocwen
Superintendent Benjamin M. Lawsky today announced that the Department of
Financial Services is requiring Ocwen Financial Corporation to hire a monitor
to ensure that the company complies with an agreement to reform its mortgage
servicing practices. The action was taken after an examination by the
Department found indications of Ocwen violating the agreement. The monitor will
be in place for two years.
Ocwen is one of the largest mortgage servicers and has been growing rapidly,
servicing more than 764,000 residential mortgages nationally as of August. In
New York, the company services more than 40,000 residential home loan accounts
held largely by distressed homeowners.
“It is not enough to have banks and mortgage servicers sign agreements
promising to reform their businesses. The best unrealized reforms won’t protect
homeowners. To protect homeowners facing the risk of losing their homes, we
must ensure that the companies are actually living up to their promises,”
Superintendent Lawsky said. “Following complaints about Ocwen’s servicing
practices, we conducted a targeted exam of Ocwen’s performance and discovered
gaps in the company’s compliance. The Department is requiring the company to
hire a monitor so that we can be sure that the reforms are implemented and
homeowners have a real chance to avoid foreclosure.”
In September 2011, Ocwen was the first mortgage servicer to agree to the
Department’s landmark new Mortgage Servicing Practices designed to correct
robo-signing and other troubling foreclosure and servicing practices that were
depriving homeowners of the opportunity to avoid foreclosure.
The Department’s examination of Ocwen’s mortgage servicing practices found
that, in some instances, the company failed to demonstrate that it had sent out
required 90-day notices before commencing foreclosure proceedings or even that
it had standing to do bring the foreclosure actions. The exam also revealed
gaps in Ocwen's Servicing Practices, including indications that in some
instances it failed to provide the single point of contact for borrowers;
pursued foreclosure against borrowers seeking a loan modification; failed to
conduct an independent review of denials of loan modifications; and failed to
ensure that borrower and loan information was accurate and up-to-date.
Under the new Consent Order, Ocwen has 20 days to find an independent monitor
acceptable to the Department. The monitor will review Ocwen’s operations and
identify and report on corrective actions within 90 days.
Ocwen, one of the biggest mortgage servicers, is expanding. In the past two
years, Ocwen has acquired several major servicers’ portfolios of distressed
home loans, including Litton Loan Servicing LP in 2011, Saxon Mortgage
Services, Inc. and EMC Mortgage Corporation in 2012 and has announced plans to
further expand its servicing operations through the acquisition of additional
mortgage servicing rights, including from Homeward Residential, Inc., formerly
known as American Home Mortgage Servicing, Inc. (“AHMSI”). Ocwen just won an
auction to acquire Residential Capital, LLC (“ResCAP”).
The Department’s Mortgage Servicing Practices are designed to redress
troublesome and unlawful practices that have plagued the mortgage servicing
industry as a whole. Those practices include:
· “Robo-signing,” where servicer staff signed affidavits stating they
reviewed loan documents when they had not actually done so.
· Weak internal controls and oversight that compromise the accuracy of
· Referring borrowers to foreclosure at the same time as those borrowers are
attempting to obtain modifications of their mortgages or other loss mitigation.
· Improper denials of loan modifications.
· Failing to provide borrowers with access to a single customer service
representative, resulting in delays or failure of the loss mitigation process.
· Imposition of improper fees by servicers.
The Practices, which have been agreed to by eight mortgage servicers, require
the following changes:
1. End robo-signing and impose staffing and training requirements that will
2. Require servicers to withdraw any pending foreclosure actions in which
filed affidavits were robo-signed or otherwise not accurate.
3. End “dual tracking”, i.e., referring a borrower to foreclosure while the
borrower is pursuing loan modification or loss mitigation, and prohibit
foreclosures from advancing while denial of a borrower’s loan modification is
under an independent review, which is also required by the agreements.
4. Provide a dedicated single point of contact representative for all
borrowers seeking loss mitigation or in foreclosure so borrowers are able to
speak to the same person who knows their file every time they call.
5. Require servicers to ensure that any force-placed insurance be reasonably
priced in relation to claims incurred, and prohibit force-placing insurance
with an affiliated insurer.
6. Impose more rigorous pleading requirements in foreclosure actions to
ensure that only parties and entities possessing the legal right to foreclose
can sue borrowers.
7. For borrowers found to have been wrongfully foreclosed, require servicers
to ensure that their equity in the property is returned, or, if the property
was sold, compensate the borrower.
8. Impose new standards on servicers for application of borrowers’ mortgage
payments to prevent layering of late fees and other servicer fees and use of
suspense accounts in ways that compounded borrower delinquencies and defaults.
9. Require servicers to strengthen oversight of foreclosure counsel and other
third party vendors, and impose new obligations on servicers to conduct regular
reviews of foreclosure documents prepared by counsel and to terminate
foreclosure attorneys whose document practices are problematic or who are
sanctioned by a court.
Contact: David Neustadt, 212-709-1690
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