A federal monitor is investigating whether Ocwen Financial Corp. is treating borrowers fairly after a whistleblower said the company may have improperly influenced which mortgages were picked for a compliance review.

Joseph Smith, who is overseeing a 2012 settlement with five lenders over flawed foreclosures, said he hired an outside accountant to review Ocwen's loan servicing after becoming convinced the company's self-reporting was unreliable. Workers picking loans for review weren't independent from management as required by the court, he said in a report released today.

"I'm not saying everybody there did wrong," Smith said in a telephone interview. "The best you could say about it was it was sloppy. It could be more."

Smith's findings are the latest trouble for Ocwen, which has seen its stock plunge 60 percent this year amid heightened regulatory scrutiny and last month canceled an acquisition to expand its business. Benjamin Lawsky, head of New York's Department of Financial Services, revealed in October that the company had backdated thousands of loan-modification denial notices, leaving borrowers little time to respond. The company has said the backdating was inadvertent.

"We will continue to support the monitor's efforts to ensure we are fully compliant with all of the aspects of the national mortgage settlement," Ocwen President and Chief Executive Officer Ronald Faris said in a statement. "We are committed to delivering best-in-class services as we help troubled borrowers keep their homes."

Smith said Ocwen had hired a new head for its internal review group and adopted a charter to formally separate its review employees from management.

Ocwen received good marks for its servicing performance during the last half of 2013 based on the company's internal reporting, which was reviewed by an outside auditor. Servicers are responsible for supervision and administration of mortgage loans, including collections, escrow and foreclosures.

Smith said he hired a team of forensic accountants and trial lawyers to interview company staff and review documents after hearing from the whistleblower in May.

The monitor said he had previously been aware of problems with Ocwen's transfer of loans to a computer system run by an affiliated company. The probe revealed even more, he said.

"We were aware of that issue, but as we got into it, it became clear that this was only one of many issues they had," Smith said.

The committee of state and federal regulators monitoring the national settlement began an investigation of the situation earlier this year, said Iowa Assistant Attorney General Patrick Madigan. That panel, which Madigan leads, would be responsible for taking action against Ocwen if wrongdoing is found.

"It's ongoing and it's active and it's serious," according to Madigan, who said he was the one initially approached by the whistleblower. "I can't tell you the results because it's not done."

Ocwen became subject to the 2012 accord last year when it bought the servicing business of Residential Capital LLC, a unit of one of the banks that agreed to pay $25 billion over improper foreclosures. Under the settlement terms, the company must credit payments properly and issue timely notifications on loan modifications, short sales and foreclosures, among other standards.

The accounting firm's review of Ocwen's 2014 performance should be complete early next year, Smith said. Earlier quarters will be revisited if the first review finds problems, he said.

Additional fines and penalties could be imposed if the company is found to be violating the settlement terms.

"It's a serious matter," Smith said of Ocwen. "The company's taking it seriously. What I'm trying to do is get this thing fixed."

Ocwen separately reached a roughly $2 billion settlement with state and federal authorities last December, promising to adhere to servicing standards. In January it agreed to buy servicing rights on $39 billion of loans from Wells Fargo & Co. A month later, Ocwen put the deal on indefinite hold amid reviews of its business, ultimately canceling it last month.

The company's stock closed at $22.25 in New York yesterday after reaching a record $59.97 last year.

Other banks subject to the national servicing settlement — including Wells Fargo, Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. — were complying with most of the servicing standards, Smith said in his new report.

Green Tree Servicing LLC, another purchaser of the ResCap portfolio, was pursuing corrective action after failing most metrics earlier this year.

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