Ocwen Financial (OCN) is preparing to pay $2.1 billion to settle allegations of misconduct in its servicing practices, according to a report in the Wall Street Journal.

The mortgage servicer is expected to enter the settlement with federal and state officials on Thursday, the Journal said, citing unnamed sources. Ocwen did not immediately respond to requests for comment.

Ocwen, based in Atlanta, is accused of failing to credit borrowers' payments and forcing homeowners into buying expensive backup insurance policies on their homes, according to the Journal.

The settlement reportedly does not include a fine. Ocwen would reduce borrowers' loan balances by $2 billion and provide homeowners $125 million in cash, the report said.

Regulators, including the Federal Housing Finance Agency, have been increasing their scrutiny of banks' and servicers' use of force-placed insurance, a type of insurance that servicers can force homeowners to buy if they fail to provide ordinary home insurance coverage. The scrutiny has focused on the unusually high costs borrowers are forced to pay for these policies and the kickbacks that insurers routinely pay to the servicers for choosing their policies.

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