Mortgage servicer Ocwen will pay $225 million in refunds and loan forgiveness to California consumers after entering into a consent order with the California Department of Business Oversight (California DBO) last week.
According to the California DBO’s February 17, 2017 press release, an independent investigation of Ocwen’s mortgage servicing practices revealed hundreds of violations of state and federal law that occurred between January 2012 and June 2015.
The independent audit reached the following findings:
- Ocwen violated the California Homeowners Bill of Rights by providing incomplete information in loss mitigation notices to borrowers, misrepresenting to borrowers that they were current on their payments when they were not, and providing borrowers with inaccurate notices of default.
- Ocwen violated the Servicemembers Civil Relief Act (SCRA) by failing to reduce monthly interest rates to 6% for servicemembers on active duty.
- Ocwen violated the Truth in Lending Act (TILA) by sending monthly statements that did not contain a breakdown of late fees and charges.
- Ocwen violated the Homeowners Protection Act by collecting private mortgage insurance premiums beyond the statutorily-mandated termination dates and failed to recalculate amortization schedules and termination dates after borrowers executed loan modifications.
- Ocwen violated the Real Estate Settlement Procedures Act (RESPA) by failing to disclose to borrowers the deadline to accept loan modification offers.
- Ocwen violated the Fair Credit Reporting Act (FCRA) by failing to timely correct inaccurate credit information.
- Ocwen violated the Flood Disaster Protection Act (FDPA) by obtaining insurance on borrowers’ home before expiration of the statutory waiting period, by not obtaining flood insurance when a home was located in a flood zone, or requiring force-placed insurance for homes that were not located in a flood zone.
The California DBO also alleged that Ocwen sent time-sensitive letters after the date represented on the letter. According to the California DBO, the delays endangered borrowers’ ability to obtain loan modifications in some cases. Ocwen had already agreed to pay approximately $2 million to borrowers affected by the “letter-dating” issue.
Terms of the Settlement
Under the terms of the settlement, Ocwen will pay a total relief package of $225 million, which breaks down as follows:
- A $25 million cash payment consisting of $20 million in restitution to borrowers and $5 million in penalties, costs and fees to the California DBO.
- $198 million in debt forgiveness through loan modifications to take place over the next three years.
- $2 million in compensation to borrowers affected by Ocwen’s delay in sending time-sensitive letters. In addition, Ocwen must resolicit claims from other borrowers who may have been affected by the delayed letters and pay restitution to eligible borrowers.
In January 2015, Ocwen entered into a previous consent order with the California DBO as a result of Ocwen’s repeated failure to produce information and documents as part of a routine regulatory examination. Under the terms of that consent order, Ocwen agreed to an independent audit. In addition, the California DBO prohibited Ocwen from servicing any new loans in California until the audit and compliance review was completed.
According to the California DBO, the settlement ends the prohibition on Ocwen acquiring new servicing rights in California. However, Ocwen must first make the $25 million cash payment before it can acquire new servicing rights.