There are bad days, and worse days, and there are days
like Ocwen Financial Corporation (OFC) had on Thursday. The company was not only sued on multiple
grounds by both the Consumer Financial Protection Bureau (CFPB) and the State
of Florida, but saw its operations effectively shut down by the North Carolina
Commissioner of Banks.
to CFPB, Ocwen, headquartered in West Palm Beach, Fla., is one of the nation's
largest nonbank mortgage servicers. As of Dec. 31, 2016, it serviced almost 1.4
million loans with an aggregate unpaid principal balance of $209 billion. It
services loans for borrowers in all 50 states and the District of Columbia.
First, the North Carolina commissioner, Ray Grace, issued
a cease and desist order against the company after a determination that it "has
engaged in, or is engaging in, or is about to engage in, acts of practices
constituting violations of state and federal law and applicable regulations."
Grace acted under the authority of the Multi-State
Mortgage Committee (MMC), composed of state mortgage regulators who agreed to collectively
address their concerns over OFC's operations.
On February 28, 2015, Florida, Maryland, Massachusetts, Mississippi,
Montana, and Washington conducted a multi-state examination of the company covering
operations from January 1, 2013 to the examination date. That examination identified several violations
of state and federal law including consumer escrow accounts that could not be
reconciled and willful and ongoing unlicensed activity in certain states. The examination also found that the company's
financial condition was deteriorating.
The order alleges the company subsequently failed to
respond to requests for information on its apparent unlicensed activity and company
executives were warned the violations were unacceptable and would not be
tolerated. OFC partially addressed these
violations after a lapse of two years, but the Commissioner's order states that
unlicensed activity is believed to continue in some jurisdictions.
In addition to being unable to reconcile consumer
escrow accounts (used to hold consumer funds for payment of insurance and taxes), the examination also found OFC had failed to make disbursements from the accounts
on numerous loans. The company also
appeared to routinely send customers inaccurate confusing and misleading escrow
In December 2016 OFC and state regulators entered into
a Memorandum of Understanding (MOU) which required OFC to retain an independent
auditing firm to perform a comprehensive audit and reconciliation of all escrow
accounts with a report submitted to and approved by the MMC by January 13,
2017. On that date, the company informed
the MMC that the $1.5 billion cost of that audit was beyond its financial
capability and asked to sample 457 accounts out of the 2.5 million it had serviced
over the initial audit period. The
company has also failed to provide a suitable going-forward business plan to
address its financial condition.
The Cease and Desist Order requires OFC to immediately
cease acquiring new mortgage servicing rights and acquiring or originating new
residential mortgages until it provides a sufficient analysis of its financial
condition and provides state regulators with a reconcilement of its escrow
accounts showing that consumer funds are appropriately collected, accounted
for, and distributed. OFC has 20 days in
which to request a hearing.
The CFPB suit was filed against OFC and its
subsidiaries "for failing borrowers at every stage of the mortgage servicing
process." The Bureau alleges that the
company's years of "widespread errors, shortcuts, and runarounds cost some borrowers
money and others their homes."
In addition to the problems with unreconciled escrow accounts and
unpaid tax and insurance bills outlined in the state regulators' order, CFPB
accuses OFC of a litany of other abuses against its consumers.
It allegedly loaded
inaccurate and incomplete information into its servicing system. The system
generated errors with even accurate data through system failures and deficient
programing. It then used this faulty
information to service borrowers' loans.
The Bureau alleges
that OFC has wrongfully initiated foreclosure proceedings on at least 1,000
people, and has wrongfully held foreclosure sales. It has initiated the
foreclosure process before completing a review of borrowers' loss mitigation
applications, asked borrowers to submit additional information, but foreclosed
on the borrowers before the deadline for doing so, and foreclosed on borrowers
who were fulfilling their obligations under a loss mitigation agreement.
- The company allegedly failed to appropriately credit
payments made by numerous borrowers, failed to send accurate periodic
statements and failed to correct billing and payment errors.
- It allegedly enrolled some consumers in add-on products
through deceptive solicitations and without their consent, then billed and
collected payments from these consumers.
- It is alleged that, since 2014, OFC has routinely
failed to properly acknowledge and investigate complaints, or make
necessary corrections. In April 2015, OFC attempted to rectify its call
center problems, adopting a policy wherein borrowers have to complain at
least five times in nine days before their complaint is escalated to be
resolved. Since April 2015, OFC has received more than 580,000 notices of
error and complaints from more than 300,000 different borrowers.
- The company has allegedly failed to include complete
and accurate borrower information when it sold its rights to service
thousands of loans to new mortgage servicers. This has hampered the new
servicers' efforts to comply with laws and investor guidelines.
The Bureau also alleges that OFC has failed to remediate
borrowers for the harm it has caused, including the problems it has created for
struggling borrowers who were in default on their loans or who had filed for
bankruptcy, a group of borrowers for whom these servicing errors have been
The suit filed by the State of Florida makes similar allegations
as the CFPB filing.