Federal and state regulators on Thursday sparked a prosecution and enforcement shootout against Ocwen Financial Corp., a large mortgage manager, aimed at curbing what they said were years of blatant abuse and repeated, including illegal foreclosures, deceptive charges and mismanagement of customers. ‘mortgage repayments.
Some of the regulatory orders directly questioned Ocwen’s ability to continue operating, and the market reacted accordingly: the company’s shares fell 54%, closing at $ 2.49 per share.
Twenty-two state mortgage regulators have filed enforcement orders to limit or freeze Ocwen’s ability to acquire new mortgages to repay in their states. Serving a loan involves billing customers and routing payments to the lender; Ocwen, which is not a bank, specializes in this area for subprime mortgages – home loans given to people with less than stellar credit.
Wall Street’s mismanagement of subprime home loans was a major catalyst for the 2008 financial crisis, in which Ocwen played a role, scooping up distressed loan portfolios to maintain them. Part of Ocwen’s major growth spurt was related to the implosion of Taylor, Bean & Whitaker. After the Ocala bankruptcy and mortgage lender scandal in 2009, Ocwen inherited many of her loans, but quickly found herself caught up in customer complaints about uncredited payments and unwarranted foreclosure actions. .
The latest round of accusations stems from activity in recent years.
In a statement, Ocwen said he was “proud of his company-wide commitment to a culture of integrity, transparency, compliance and service.”
State regulators, however, have said the company is failing in some of its most basic duties and needs to be shut down.
Among the many actions taken against Ocwen on Thursday, the Consumer Financial Protection Bureau and the Florida Attorney General have filed lawsuits accusing the company of botched mistakes at nearly every stage of the collection process, inflicting frustration and millions of dollars in additional costs to borrowers trying to repay their home loans.
Ocwen denied the accusations, calling them “inaccurate and unfounded”.
This is Ocwen’s second major dispute with the Office of Consumer Affairs. In 2013, the company agreed to pay $ 2.1 billion to settle a series of similar charges.
At the time, the company was committed to reform, but instead it “continued to go after the work of borrowers,” said Cara Petersen, a lawyer in the consumer office.
More than 580,000 customers have complained to Ocwen of errors in the past two years, according to the Office of Consumer Affairs. Some of the company’s “systemic and significant” errors have cost customers their homes, office manager Richard Cordray said at a press conference.
Ocwen, who collects payments from 1.4 million borrowers on mortgage debt of more than $ 200 billion, said he would review orders from state regulators. He intends to fight the consumer office lawsuit and called it an “unfortunate example of overstepping.”
“Ocwen strongly disputes the CFPB’s assertion that Ocwen’s mortgage management practices have caused substantial harm to consumers,” Ocwen said Thursday. “In fact, quite the opposite is true. Ocwen believes that its mortgage management practices have and continue to translate into substantial benefits for consumers beyond other mortgage services.”
But legal documents from some state regulators have indicated the company is failing in its core responsibilities – and may be unable to resolve the issues.
Ocwen made significant errors in handling her clients’ escrow accounts, according to a cease and desist order filed by Ray Grace, the North Carolina banking commissioner. These accounts contain funds that clients give to their mortgage agent to cover property taxes and home insurance bills. The repairer is then expected to make these payments on behalf of the customer.
The North Carolina regulator said Ocwen often fails to make payments on time – a mistake that can impose additional fees on homeowners or even, in extreme cases, put their homes at risk. When state regulators urged Ocwen to reconcile all funds held in her escrow accounts, the company responded that it would “cost $ 1.5 billion and far exceed Ocwen’s financial ability to fund,” according to the company. ordinance of North Carolina.
Grace said in a statement that the company’s negligence had lasted too long.
“Ocwen has still failed to correct poor business practices that hurt borrowers,” Grace said. “We cannot allow this to continue.”
John Lovallo, a spokesperson for Ocwen, said the company had no immediate comment on the North Carolina charges.
The consumer office lawsuit depicts a company with shoddy technical systems that were grossly inadequate for the tasks the company had to perform. Ocwen’s own maintenance manager described his systems as an “absolute train wreck” in an internal message sent in 2014 to Owen’s general manager, Ronald M. Faris, and quoted in the office of the lawsuit. consumption.
“I know there is no shooting in hell, but if I could change the system tomorrow, I would,” the executive wrote, according to the lawsuit. Even a task as simple as keeping the system online was a challenge, in order.
Loans acquired from other service providers were imported into Ocwen’s proprietary management system and were supposed to be checked for errors made during the conversion. But accounts often dragged on for months or more before this check – and mistakes were commonplace, according to the Office of Consumer Affairs. In one particular month, Ocwen found errors in 90 percent of the loans he audited, the bureau said in its lawsuit.
According to regulators, lawyers and borrowers, problems with mortgage agents are particularly frustrating for homeowners because they have no choice over which company manages their loan. Mortgage lenders can assign the rights to manage their loans to any company they choose.
“A landlord is forced into a consumer relationship with someone they haven’t chosen and cannot fire,” said Marc Dann, a Cleveland attorney who has represented numerous borrowers in cases against Ocwen and other mortgage agents.
For borrowers, Ocwen’s missteps have sometimes had serious consequences.
Kathleen Hanover of Dayton, Ohio, had just returned from a trip to Vancouver, Canada, in 2014, when she had a dirty comeback: Bank of America had transferred the rights to collect its mortgage payments to Ocwen, who was in the process of seize his house.
Hanover, 51, said she was in the process of applying for a loan modification from Bank of America. “I was in such a state of shock,” she said. “It was a total nightmare.”
With the help of a lawyer, she was able to get a modification from Ocwen, but she continued to fight with the company over other aspects of her loan, she said.
Diane Wynn of Queens, New York, was also stumped when she learned last March that Ocwen was in the process of foreclosing on her home. The company had just approved him for a trial mortgage modification.
“It’s absolutely crazy that they approved a foreclosure when they had already approved it for a change,” said Aisha A. Baruni, an attorney at Queens Legal Services.
Such mistakes were common, according to the Office of Consumer Affairs.
He cited a borrower’s complaint: “It’s very embarrassing to come home and see a notice on my door that there is a foreclosure impending, especially when I have made and continue to make my mortgage payments to Ocwen. “
The story of Ocwen, founded in 1988, is one of rapid growth. After the financial crisis, the company exploded in size, rapidly acquiring mortgage services business from banks.
Regulators and consumer watchdogs feared the rapid expansion of the business could create new risks for borrowers already under siege. Many found themselves struggling with stalled mortgage modifications and other problems, just as they became on a more solid financial footing.
Regulators in New York and other states have focused. In December 2014, Benjamin M. Lawsky, then head of the New York Financial Services Department, struck a deal with Ocwen, which agreed to pay $ 150 million for relief measures and submit to scrutiny. by an independent controller. In an extraordinary gesture, William C. Erbey, the founder of the company, stepped down as chairman as part of the deal.
Recently, Ocwen seemed to come out of the regulatory cloud. As recently as last month, Maria T. Vullo, now New York’s leading financial regulator, changed the state’s settlement with Ocwen, agreeing to remove the monitor and consider easing restrictions on Ocwen’s ability to develop. California also lifted some restrictions on Ocwen this year.
On Thursday, Vullo released a statement in support of the actions of the Office of Consumer Affairs and other state regulators and said his office would continue to “control more” Ocwen.
“Ocwen has made progress in correcting these shortcomings but still has work to do,” she said.