That memo from the head of servicing to Ocwen’s CEO continued: “I know there’s no shot in hell, but if I could change systems tomorrow I would. I can’t tell you the number of hours I and others spend on basic servicing technology blocking and tackling. I’m not talking about differentiators here. I’m talking about getting system to stay online, escrow analysis to work, letters to print, etc. It’s ridiculous.”
The laundry list of snafus involving Ocwen’s REALServicing software included “syncing and updating failures between REALServicing and Ocwen’s insurance vendor’s system” that prompted the vendor to overlook that certain homeowners had escrow accounts. The vendor consequently failed to make disbursements to the homeowners’ insurance companies, the bureau says.
Erroneous data in REALServicing resulted in Ocwen mismanaging disbursements en masse.
“Ocwen, for example, made double payments (out of borrowers’ accounts) for the same insurance policy on approximately 3,275 accounts, disbursed premiums to wrong payees and failed to timely disburse funds to pay approximately 40,000 insurance premiums,” the complaint states, without specifying a timeframe.
Ocwen’s failures resulted in hazard insurance lapses for more than 10,000 borrowers. In the year beginning in April 2015, Ocwen received complaints about its payment processing from more than 68,000 borrowers, the CFPB says.
One borrower's mortgage payment was misdirected into a suspense account, and as a result she was categorized as delinquent, even though she was pre-paying her monthly installments, according to the complaint. She received embarrassing collection calls at home and at work.
“For borrowers in bankruptcy, Ocwen has failed to process and apply payments correctly in accordance with certain bankruptcy requirements. By 2016, Ocwen had concluded that REALServicing was broken in a number of ways that adversely affected borrowers whose loans were subject to bankruptcy protections," the CFPB says.
And that’s not all. Ocwen engaged in dubious marketing for add-on products such as identity theft protection and credit monitoring, according to the lawsuit. In one marketing campaign, Ocwen sent homebuyers what appeared to be checks in the mail, using small print to subtly disclose that if they cashed the checks, the homebuyers were agreeing to enroll in an add-on product, the CFPB says.
It seeks damages for violations of the Fair Debt Collection Practices Act, the Consumer Financial Protection Act, the Homeowners Protection Act, the Truth in Lending Act and the Real Estate Settlement Procedures Act, foreclosure violations, servicing policies and procedures violations, notice of error violations, escrow violations, deceptive debt collection, unfair use of inaccurate and incomplete information to service loans, failure to timely and appropriately credit payments, deceptive marketing, unfair billing and processing, deceptive foreclosure communications, unfair foreclosure practices, and deceptive acts and practices on loans.
The lawsuit was filed in conjunction with cease-and-desist actions filed by a slew of state regulators who want to restrict Ocwen’s ability to take on new mortgage files until Ocwen provides evidence that its mortgage servicing deficiencies have been rectified.
Ocwen issued a statement in response to the CFPB’s lawsuit, saying it “strongly disputes the CFPB's claim that Ocwen's mortgage loan servicing practices have caused substantial consumer harm.”
“The company is unaware of the CFPB conducting any detailed review of Ocwen's loan servicing files. Rather, 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,” Ocwen said.
Ocwen says it does more than most mortgage servicers to work with distressed homeowners in danger of foreclosure.
“A homeowner whose loan is serviced by Ocwen has a much better chance of avoiding foreclosure than if their loan is serviced by any other large mortgage servicer. This has been confirmed by independent third-party studies, which find that Ocwen has a superior record helping borrowers bring their payments current, stay current, and repay their mortgage,” Ocwen said.
It called the lawsuit an “unfortunate example of overreaching by the CFPB,” and said it would “vigorously defend” itself “against these unfounded claims.”
“Many of the issues raised in today's suit, including those related to the company's foreclosure policies and the effectiveness of its servicing system, were addressed by the National Mortgage Settlement (NMS), which the CFPB and Ocwen signed in December 2013,” Ocwen said.
It said the allegations in the lawsuit pertain to a small percentage of its loan servicing portfolio. It repeatedly assured the Consumer Financial Protection Bureau that it will remediate any undue financial harm experienced by its customers, and has already done so in many instances, according to the statement.
The West Palm Beach, Fla.-based company on Friday released another rebuttal, disputing state regulators’ claims that its customer escrow account management is in disarray, and that its financial condition is deteriorating.
“Ocwen disagrees with any allegation it is not financially sound. Despite significant operating losses from 2014 to 2016 driven by a shrinking portfolio and $171 million of state and national regulatory monitoring expenses, Ocwen generated over $1.4 billion of positive operating cash flow,” Ocwen said.
“No mortgage servicer is perfect — to the extent mistakes are made, we have a process to identify and remediate consistent with other mortgage servicers,” the statement adds.
Ocwen has been the subject of a barrage of prior regulatory actions resulting in costly settlements in recent years.
In December 2013, as part of the National Mortgage Settlement, Ocwen agreed to dish out $2 billion to underwater borrowers.
Then in December 2014, Ocwen agreed to pay another $150 million to settle a case in which the New York Department of Financial Services accused it of mortgage-document tampering and other misdeeds. The deal generally precluded the company from buying new mortgage-servicing rights in bulk.
In February this year, HousingWire reported, Ocwen arrived at a roughly $225 million settlement with the California Department of Business Oversight that released restrictions on Ocwen in that state.
On the heels of the announcement of Thursday's CFPB lawsuit, the company lost half its market capitalization, and its share price dipped below $2.50.
The Courthouse News database contains more than 1,000 lawsuits against Ocwen since 2016, the latest being a shareholders class action filed Friday in West Palm Beach Federal Court, accusing the company of inflating its share price through false and misleading statements.
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