Ocwen agrees to big penalties to resume business in California
Ocwen Financial has reached a deal with California authorities to resolve allegations that the mortgage servicing firm — a frequent target of regulators in recent years again violated a range of state and federal laws.
Under Friday’s settlement, Ocwen will pay at least $25 million for borrower restitution and other costs, according to the California Department of Business Oversight. The West Palm Beach, Fla.-based firm also agreed to make loan modifications that provide $198 million in debt forgiveness to its customers.
In return, California authorities are lifting a two-year-old prohibition on Ocwen acquiring new servicing rights for mortgages in the nation’s largest state. That ban was imposed by a January 2015 consent order between Ocwen and the state.
“This is a fair and just settlement for California consumers,” Jan Lynn Owen, commissioner of the Department of Business Oversight, said Friday in a press release. “The terms will hold Ocwen accountable for widespread violations of laws that harmed borrowers in our state.”
John Lovallo, an Ocwen spokesman, said the company set aside reserves for the settlement last year. He also noted that as a result of the agreement, Ocwen will no longer have to pay for the services of an independent auditor that was appointed under the 2015 consent order.
"Ocwen is pleased that we've entered this comprehensive settlement," Lovallo said. "It allows us to focus on our business going forward while reducing a significant expense by terminating the engagement of the independent auditor."
For Ocwen, which is among the nation’s largest mortgage servicers, the settlement is the latest chapter in a long-running series of run-ins with regulators. In December 2013, Ocwen agreed to pay up to $127.3 million and offer $2 billion in consumer relief to settle an investigation by the Consumer Financial Protection Bureau.
A year later, Ocwen CEO William Erbey resigned as part of a legal settlement with New York authorities. Then last October, Ocwen disclosed that its mortgage servicing services were again under investigation by the CFPB.
The most recent allegations in California grew out of regulatory examinations that were conducted pursuant to the January 2015 consent order. Among the accusations:
- Ocwen mailed certain communications to borrowers after the date on the letters, which endangered some customers’ ability to obtain loan modifications.
- In notices that denied borrowers’ requests for loss mitigation, Ocwen wrongly informed them that they were current on their payments.
- For active-duty members of the military, the company failed to reduce mortgage rates to 6% in a timely manner, as federal law requires.
- Ocwen collected mortgage insurance premiums from borrowers who were no longer obligated to make those payments.
The compliance audits that uncovered Ocwen’s misconduct covered the period of January 2012 through June 2015, according to California officials.
The company’s obligation to pay $25 million in cash includes $20 million for borrower restitution and $5 million for penalties, attorney fees and administrative costs.