Ocwen Agrees to $2.1 Billion Settlement on Servicing AbusesCarter Dougherty
Ocwen Financial Corp., the biggest non-bank in the mortgage-servicing industry, will provide $2.1 billion in relief for homeowners to resolve regulators’ claims over abuses in its handling of borrowers’ loans.
Under the agreement with the Consumer Financial Protection Bureau and 49 states, Ocwen will provide $2.1 billion for foreclosure compensation and “principal forgiveness modification programs” for people who are behind on payments or whose homes are worth less than they owe, the company said today in a regulatory filing. The Atlanta-based company will also follow specific guidelines on servicing mortgages and face independent monitoring of that work.
“Ocwen took advantage of borrowers at every stage of the process,” Richard Cordray, the consumer bureau’s director, said in a statement. “Today’s action sends a clear message that we will be vigilant about making sure that consumers are treated with the respect, dignity and fairness they deserve.”
Mortgage-servicing banks including Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. reached a similar settlement, worth $25 billion and based on explicit standards for servicing mortgages, with 49 states last year. Under today’s agreement, which is subject to federal court approval, Ocwen will follow the same standards, according to the consumer bureau.
“What we found in the Ocwen case is similar to a lot of the problems we saw in our other mortgage-servicer enforcement cases,” Arizona Attorney General Tom Horne said in a statement.
The consumer bureau’s statement detailed a series of unfair and deceptive practices by Ocwen, including imposing unauthorized fees on homeowners for default-related services. Ocwen also misled people on foreclosure alternatives and denied modifications to those who should’ve qualified, the bureau said.
The company provided “false and misleading information” about the status of a foreclosure at times when borrowers were actively seeking a loan modification, the consumer bureau said. It also engaged in “robo-signing” on foreclosures, filing documents that weren’t personally attested to by the signer, according to the regulator.
“Ocwen is pleased to have finalized a comprehensive settlement agreement,” the company said in a statement. “Our agreement includes detailed servicing guidelines that provide welcome clarity and certainty concerning best industry practices.
The company will provide the $2 billion in modifications and principal reductions over three years, according to its filing. The company will also pay $127 million into a ‘‘consumer relief fund’’ to be disbursed by an independent administrator to foreclosure victims, it said.
‘‘Principal forgiveness does not involve an expense to Ocwen other than the operating expense incurred in arranging the modification, which is part of Ocwen’s role as loan servicer,’’ the company said in the filing.
Mortgage-bond investors including BlackRock Inc. and Pacific Investment Management Co. have criticized past settlements between the government and lenders or servicers that pushed for modifications of loans backing their holdings. Agreements requiring consumer aid, such as JPMorgan’s $4 billion pledge as part of a $13 billion accord last month, are potentially damaging to holders of the bonds and the market, as well as unfair because investors’ actions weren’t the targets of the probes, bondholders have said.
‘‘This is ridiculous and it’s got to stop happening,” said Vincent Fiorillo, a DoubleLine Capital LP executive who’s president of the Association of Mortgage Investors trade group’s board. “If this is all third-party-owned assets they’re going to be taking $2 billion of Main Street’s money out of, they’re going to be hurting Mr. and Mrs. America who didn’t do anything wrong except they were smart and prudent and saved their money,” he said, referring to investors in vehicles such as pension and mutual funds.
The money will go to people who lost homes between Jan. 1, 2009, and Dec. 21, 2012, and whose loans were serviced by Ocwen, Homeward Residential Holdings or Litton Loan Servicing, according to consumer bureau. Ocwen bought Litton from Goldman Sachs Group Inc. for $264 million in June 2011.
Arizona’s Horne said the settlement would provide troubled borrowers in his state with as much as $20.7 million in principal reductions on first lien mortgages. Foreclosure victims in Arizona number about 10,300, and could get more than $1,000 per loan, Horne said.
The settlement with Ocwen more than doubles the amount that Consumer Financial Protection Bureau actions have recovered for consumers. Before today, it had obtained $797 million in restitution and imposed $93 million in civil penalties.
The case is 1:13-cv-0204, U.S. District Court, District of Columbia (Washington).