Ocwen Financial Corp. agreed to pay $3.7 million to settle a Massachusetts lawsuit related to mortgage handling. Homeowners will receive $3 million while the remainder will go to state coffers.

The lawsuit alleged that Ocwen, the nation's fourth largest mortgage collector, or servicer, unlawfully foreclosed on properties and did not provide the required notices to homeowners who were at default. Further, Litton Home Servicing LP, an acquired company of Ocwen, breached state laws by allegedly initiating foreclosures when it did not hold the actual mortgages, Attorney General Martha Coakley announced Monday.

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