20 states, CFPB take action against Ocwen for mortgage servicing violations

Last week, over 20 state mortgage regulators issued joint cease-and-desist orders to Ocwen Financial and Ocwen Loan Servicing for alleged widespread issues with consumer escrow accounts and allegations that Ocwen and its subsidiaries were conducting “willful and ongoing unlicensed activity” in certain states.

A committee of state mortgage regulators, called the Multi-State Mortgage Committee, agreed to address their enforcement actions in a “collective and coordinated manner.” Various states conducted a Multi-State Examination of Ocwen that covered January 2013 to February 2015. During that examination, investigators 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.”

One of the main issues brought up by the state regulators is that Ocwen is “unable to accurately reconcile many of the consumer escrow accounts in its portfolio.” According to the order, reconciliation of escrow account would cost $1.5 billion, which Ocwen claims is well beyond its financial capacity to fund. Ocwen instead suggested that it reconcile a sample of 457 escrow accounts out of 2.5 million active first lien escrow accounts that Ocwen has serviced since January 2013. According to the regulators, that proposal “could leave a vast number of consumers with unaudited and inaccurate escrow accounts.”

Ocwen is also facing numerous substantiated consumer complaints regarding escrow accounts that have been mismanaged, resulting in significant harm to consumers, and request for reimbursement of monies wrongfully withheld or misapplied.

The order prohibits Ocwen from originating mortgage loans or acquiring new mortgage servicing rights until Ocwen is “able to provide it can appropriately manage its consumer mortgage escrow accounts.”

CFPB files lawsuit against Ocwen

On the same day, the CFPB also announced that it is suing Ocwen for “failing borrowers at every stage of the mortgage servicing process.” According to the CFPB, Ocwen’s years of “widespread errors, shortcuts, and runarounds” have cost borrowers money, and in some cases, their homes.

The CFPB claims that it uncovered “substantial evidence that Ocwen has engaged in significant and systemic misconduct at nearly every stage of the mortgage servicing process.” In its press release, the Bureau stated that Ocwen “allegedly botched basic functions like sending accurate monthly statements, properly crediting payments, and handling taxes and insurance.” According to the Bureau, Ocwen also illegally foreclosed on struggling borrowers, ignored customer complaints, and sold off the servicing rights to loans without fully disclosing the mistakes it made in borrowers’ records.

It appears that Ocwen and its subsidiaries have failed to clean up their act, even after the CFPB ordered Ocwen in December 2013 to pay $2 billion in relief to harmed borrowers for systemic violations that occurred at every stage of the mortgage servicing process. Earlier this year, the California Department of Business Oversight also hit Ocwen with a $225 million penalty for widespread mortgage service violations.

According to Ocwen, which is headquartered in West Palm Beach, Florida, the CFPB’s claims are “unfounded.” In a statement issued last week, Ocwen vowed to defend itself against the Bureau’s lawsuit and added that it has cooperated fully with the Bureau’s inquiries.

Tags: CFPB, CFPB Enforcement, Mortgages

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