Ocwen Financial (OCN) will pay $2.1 billion to settle allegations of misconduct in its mortgage servicing and foreclosure practices.

The Atlanta mortgage servicer agreed to a settlement Thursday with the Consumer Financial Protection Bureau and several state attorneys general and agencies that would clear it of liability for alleged abuse in its residential mortgage servicing, modification and foreclosure practices, it said in a regulatory filing. Regulators accused Ocwen of failing to credit borrowers' payments and of forcing them into expensive backup insurance policies on their homes, according to the Wall Street Journal, which first reported on the settlement.

Ocwen's settlement does not include a fine. The servicer agreed to reduce borrowers' loan balances by $2 billion and provide homeowners $127.3 million into a consumer relief fund.

Under terms of the settlement, Ocwen will be also subject to supervision from an independent servicing monitor for three years, and will be required  to service loans in accordance with the monitor's guidelines.

Ocwen is already subject to similar  guidelines and oversight for the portfolio of servicing rights it purchased from former Ally Financial unit ResCap, which is under the $25 billion national mortgage settlement reached last year between the nation's five largest mortgage servicers and 49 states. Last month the monitor of the settlement determined that Ocwen is complying with the guidelines.

Ocwen's settlement will have to be approved by a court.

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