Largest Nonbank Servicer Will Also Refund $125 Million to Foreclosure Victims and Adhere to Significant New Homeowner Protections
WASHINGTON, D.C.—(ENEWSPF)—December 19, 2013. Today, the Consumer Financial Protection Bureau (CFPB), authorities in 49 states, and the District of Columbia filed a proposed court order requiring the country’s largest nonbank mortgage loan servicer, Ocwen Financial Corporation, and its subsidiary, Ocwen Loan Servicing, to provide $2 billion in principal reduction to underwater borrowers. The consent order addresses Ocwen’s systemic misconduct at every stage of the mortgage servicing process. Ocwen must also refund $125 million to the nearly 185,000 borrowers who have already been foreclosed upon and it must adhere to significant new homeowner protections.
“Deceptions and shortcuts in mortgage servicing will not be tolerated,” said CFPB Director Richard Cordray. “Ocwen took advantage of borrowers at every stage of the process. Today’s action sends a clear message that we will be vigilant about making sure that consumers are treated with the respect, dignity, and fairness they deserve.”
The proposed Ocwen Consent Order is available at: http://files.consumerfinance.gov/f/201312_cfpb_consent-order_ocwen.pdf
Ocwen, a publicly traded Florida corporation headquartered in Atlanta, Ga., is the largest nonbank mortgage servicer and the fourth-largest servicer overall in the United States. As a mortgage servicer, it is responsible for collecting payments from the mortgage borrower and forwarding those payments to the owner of the loan. It handles customer service, collections, loan modifications, and foreclosures.
Ocwen specializes in servicing subprime or delinquent loans and places a major emphasis on resolving delinquency through loss mitigation or foreclosure. In recent years, it has acquired competitors – including Homeward Residential Holdings LLC (formerly American Home Mortgage Servicing Inc.) and Litton Loan Servicing LP. It has also acquired the mortgage servicing rights from the portfolios of some of the country’s largest banks.
The CFPB is charged with enforcing the Dodd-Frank Wall Street Reform and Consumer Protection Act which protects consumers from unfair, deceptive, or abusive acts or practices by mortgage servicers – whether they are a bank or nonbank. State financial regulators, state attorneys general, and the CFPB uncovered substantial evidence that Ocwen violated state laws and the Dodd-Frank Act.
In early 2012, examinations by the Multistate Mortgage Committee, which is comprised of state financial regulators, identified potential violations at Ocwen. In addition, the Federal Trade Commission referred its investigation of Ocwen to the CFPB after the Bureau opened in July 2011. The Bureau then teamed with state attorneys general and state regulators to investigate and resolve the issues identified. Today’s settlement is a multi-jurisdictional collaborative effort.
Borrowers Pushed into Foreclosure by Servicing Errors
The CFPB and its partner states believe that Ocwen was engaged in significant and systemic misconduct that occurred at every stage of the mortgage servicing process. According to the complaint filed in the federal district court in the District of Columbia, Ocwen’s violations of consumer financial protections put thousands of people across the country at risk of losing their homes. Specifically, the complaint says that Ocwen:
Took advantage of homeowners with servicing shortcuts and unauthorized fees: Customers relied on Ocwen to, among other things, treat them fairly, give them accurate information, and appropriately charge for services. According to the complaint, Ocwen violated the law in a number of ways, including:
Failing to timely and accurately apply payments made by borrowers and failing to maintain accurate account statements;
Charging borrowers unauthorized fees for default-related services;
Imposing force-placed insurance on consumers when Ocwen knew or should have known that they already had adequate home-insurance coverage; and
Providing false or misleading information in response to consumer complaints.
Deceived consumers about foreclosure alternatives and improperly denied loan modifications: Struggling homeowners generally turn to mortgage servicers, the link to the owners of the loans, as their only means of developing a plan for payment. Ocwen failed to effectively assist, and in fact impeded, struggling homeowners trying to save their homes. This included:
Failing to provide accurate information about loan modifications and other loss mitigation services;
Failing to properly process borrowers’ applications and calculate their eligibility for loan modifications;
Providing false or misleading reasons for denying loan modifications;
Failing to honor previously agreed upon trial modifications with prior servicers; and
Deceptively seeking to collect payments under the mortgage’s original unmodified terms after the consumer had already begun a loan modification with the prior servicer.
Engaged in illegal foreclosure practices: One of the most important jobs of a mortgage servicer is managing the foreclosure process. But Ocwen mishandled foreclosures and provided consumers with false information. Specifically, Ocwen is accused of:
Providing false or misleading information to consumers about the status of foreclosure proceedings where the borrower was in good faith actively pursuing a loss mitigation alternative also offered by Ocwen; and
Robo-signing foreclosure documents, including preparing, executing, notarizing, and filing affidavits in foreclosure proceedings with courts and government agencies without verifying the information.
Remedies: Consumer Protections
Today’s proposed court order will bar Ocwen from committing such violations in the future. It requires Ocwen to provide $125 million in refunds to foreclosed-upon consumers and $2 billion in loan modification relief to its customers through principal reduction. The refunds and relief also apply to consumers whose loans were previously serviced by Homeward Residential Holdings and Litton Loan Servicing. According to the proposed order, Ocwen must:
Provide $2 billion in relief to underwater borrowers: Over a three-year period, Ocwen must complete sustainable loan modifications that result in principal reductions totaling $2 billion. For loan modification options, eligible borrowers may be contacted directly by Ocwen. Or borrowers may contact Ocwen to obtain more information about specific loan modification programs and to find out whether they may be impacted by this settlement. Ocwen can be reached at 1-800-337-6695 or [email protected] If Ocwen fails to meet this commitment, it must pay a cash penalty in the amount of any shortfall to the CFPB and the states.
Provide $125 million in refunds to foreclosure victims: Ocwen must refund $125 million to consumers whose loans were being serviced by Ocwen, Homeward Residential Holdings, or Litton Loan Servicing, and who lost their homes to foreclosure between Jan. 1, 2009 and Dec. 31, 2012. All eligible consumers who submit valid claims will receive an equal share of the $125 million. Borrowers who receive payments will not have to release any claims and will be free to seek additional relief in the courts. Ocwen will also pay $2.3 million to administer the refund process. Eligible consumers can expect to hear from the settlement administrator about potential payments.
Stop robo-signing official documents: Ocwen must ensure that facts asserted in its documents about borrowers’ loans used in foreclosure and bankruptcy proceedings are accurate and supported by reliable evidence. Affidavits and sworn statements must be based on personal knowledge.
Adhere to significant new homeowner protections: Ocwen must change the way it services mortgages to ensure that borrowers are protected from the illegal behavior that puts them in danger of losing their homes. To ensure this, the CFPB and the states are proposing that Ocwen follow the servicing standards set up by the 2012 National Mortgage Settlement with the five largest banks. Because of Ocwen’s track record of problems handling the large volume of mortgage servicing rights it has quickly acquired in recent years, Ocwen is also being ordered to adhere to additional consumer protections, including how it manages transferred lans. Among other things, Ocwen must:
Properly process pending requests: For loans that are transferred to Ocwen, the company must determine the status of in-process loss mitigation requests pending within 60 days of transfer. Until then, Ocwen cannot start, refer to, or proceed with foreclosure.
Honor previous loan modification agreements: If the borrower has a loan modification agreement, Ocwen must honor it under the terms of the company that transferred the loan.
Ensure continuity of contact for consumers: Ocwen will have to ensure that consumers get regular and dependable assistance when they call for help. This includes requiring more than just a single point of contact assigned to each borrower, but also that other Ocwen employees with access to the borrower’s information be available if the borrower wants to speak to someone immediately.
Restrict servicing fees: All servicing fees must be reasonable, bona fide, and disclosed in detail to borrowers. For example, Ocwen cannot collect any late fees if a loan modification application is under review or if the borrower is making timely trial modification payments.
Notify consumers of loss mitigation options and restrict dual tracking: Ocwen generally cannot refer a borrower’s account to foreclosure while the borrower’s application for a loan modification is still pending. If the loan-modification request is denied, the borrower can appeal that decision and Ocwen cannot proceed to foreclosure until that appeal has been resolved.
In January 2013, the CFPB released new rules on mortgage servicing that will apply to every mortgage servicer. The standards that Ocwen must adhere to according to this court order are in addition to the protections offered to consumers under the new rules that take effect on Jan. 10, 2014. More information about the CFPB’s new mortgage rules can be found at: consumerfinance.gov/mortgage.
A factsheet about the proposed order filed today can be found at: http://files.consumerfinance.gov/f/201312_cfpb_factsheet_ocwen.pdf
Common consumer questions and answers about the order can be found at: http://files.consumerfinance.gov/f/201312_cfpb_common-questions_ocwen.pdf
A copy of the Ocwen complaint that the CFPB and state attorneys general filed today can be found at: http://files.consumerfinance.gov/f/201312_cfpb_complaint_ocwen.pdf
The complaint is not a finding or ruling that the defendants have actually violated the law. The proposed federal court order will have the full force of law only when signed by the presiding judge.
Prepared Remarks of Richard Cordray, Director of the Consumer Financial Protection Bureau, Ocwen Enforcement Action Press Call, Washington, D.C., December 19, 2013
Today the Consumer Financial Protection Bureau, authorities in 49 states, and the District of Columbia are filing a proposed court order requiring the country’s largest nonbank mortgage servicer to compensate consumers for years of systemic and significant servicing errors. Ocwen Financial Corporation and its subsidiary, Ocwen Loan Servicing, must refund $125 million to people who have already lost their homes. And they must provide $2 billion in relief to current homeowners who are underwater and in danger of losing their homes.
The mortgage market is the single largest consumer financial market in the United States, with consumers owing about $10 trillion. Mortgage servicers, who bear responsibility for managing these loans, play a central role in the lives of homeowners. They are the link between a mortgage borrower and a mortgage owner. They collect and apply payments. They work out modifications to the loan terms. And they handle the difficult process of foreclosure. Importantly, consumers cannot take their business elsewhere by voting with their feet. Homeowners are stuck with their mortgage servicer, no matter how good or bad that servicer may turn out to be.
Ocwen specializes in servicing subprime or delinquent loans and it has been greatly expanding its business in the years since the housing collapse. Today it is not only the largest nonbank servicer, but also the fourth-largest mortgage servicer overall in this country. It has acquired smaller competitors such as Homeward Residential and Litton Loan Servicing. And it has taken on servicing duties for some of the big banks. Today its customers number in the millions.
Because Ocwen bought the mortgage servicing rights to millions of existing accounts, for many borrowers Ocwen was not their first servicer. For these struggling homeowners, the Consumer Bureau believes that too often trouble began as soon as a loan transferred to Ocwen, with Ocwen failing to honor trial modifications that were agreed upon by previous servicers.
We believe that Ocwen violated federal consumer financial laws at every stage of the mortgage servicing process. In our complaint filed in federal district court today, we allege that Ocwen took advantage of consumers with servicing shortcuts and unauthorized fees. It misled consumers about alternatives to foreclosures. It provided false or misleading information to consumers about the status of their accounts. It denied loan modifications for eligible homeowners. And it sent documents through the courts after they were robo-signed during the foreclosure process. After examining the potential violations, we have concluded that Ocwen made troubled borrowers even more vulnerable to foreclosure.
So today’s order, to which Ocwen has agreed, requires Ocwen to provide $125 million in refunds to consumers who lost their home to foreclosure while being serviced by Ocwen, Homeward Residential Holdings, or Litton Loan Servicing between 2009 and 2012. In addition, over a three-year period, Ocwen must complete sustainable loan modifications that result in a reduction in principal totaling $2 billion for homeowners who are underwater and struggling to pay off their mortgages. This will bring relief to Ocwen’s victims and it will improve conditions in the mortgage market by reducing the number of foreclosures.
The Consumer Bureau’s new mortgage servicing rules have been written to stop problems like the ones that occurred at Ocwen. And if Ocwen’s practices had occurred under our new rules, even more violations would have been identified. But this action against Ocwen is not and could not be based on our rules that are not yet in effect. Rather, it is based on the provisions of the Dodd-Frank Act that prohibit servicers from engaging in activity that is unfair and deceptive – which is exactly what Ocwen did.
In less than a month, the Bureau’s new mortgage servicing rules will take effect and Ocwen, like other servicers, will be subject to the new standards. In many ways, these new rules overlap with the Ocwen order. Both set forth specific rules of the road about handling loss mitigation applications. Both mitigate the harms of dual tracking by prohibiting borrowers from being referred to foreclosure before an application can be reviewed. Both demand prompt crediting of payments. Both protect borrowers from unnecessary force-placed insurance charges. And both require servicers to take steps to ensure compliance with current state foreclosure laws, including bans against the robo-signing of documents.
But because of its conduct, as described in our complaint, Ocwen will be subject to standards above and beyond the rest of the industry. For example, the proposed court order aims to solve problems surrounding Ocwen’s handling of loan modifications in transferred loans. This includes a requirement that Ocwen cannot initiate or continue a foreclosure process within 60 days after a loan is transferred to Ocwen. During that time, Ocwen must determine the status of any loss mitigation requests already in process.
Our order also ensures that Ocwen will adhere to these significant new homeowner protections through greater oversight and a court mandate. A special independent monitor will have the authority to require Ocwen’s compliance and oversee the settlement, which we believe can affect as many as 185,000 consumers who may have been unlawfully foreclosed upon. In addition, like the rest of the mortgage servicing industry, Ocwen will have to beef up its standards to ensure that when any of its consumers call for help that they get regular and dependable assistance.
Many of Ocwen’s practices described in today’s order are the same kind of practices that were also the subject of the 2012 National Mortgage Settlement involving the five largest mortgage servicers at that time. But while some of Ocwen’s portfolio was part of the settlement, the substantial majority of it was not, and most of its customers were not previously entitled to relief. Today’s action extends the standards of that settlement to the full portfolio of the largest nonbank servicer. In fact, the monitor of the National Mortgage Servicing Settlement has agreed to oversee the implementation and compliance of today’s agreement through the Office of Mortgage Settlement Oversight. This result furthers the Consumer Bureau’s objective of extending its oversight over the entire mortgage servicing market, including both bank and nonbank participants.
Today’s order came about through a coordinated partnership with state financial regulators and state attorneys general. Both the Consumer Bureau and the 49 state attorneys general who are signatories to the order can enforce its terms. In addition, state regulators can enforce the terms of concurrent administrative orders that they are also issuing against Ocwen.
I want to thank our 49 state partners and the District of Columbia for their integral role in reaching today’s result. I would also like to thank the Federal Trade Commission, which first initiated the investigation into Ocwen’s servicing practices and whose work formed the backbone of the Bureau’s own investigation into these matters.
This case stands as a landmark for the new Consumer Bureau, since it is the first time we have partnered with virtually all state attorneys general as well as state regulators. Working together toward the singular goal of protecting consumers, we intend to improve the performance of the mortgage servicing industry for all homeowners, responsible businesses, and the economy as a whole.
In many ways, this country is still emerging from the financial crisis today, more than five years after it crested. But for our housing market to fully recover, responsible homeowners must have opportunities to stay in their homes, people must be treated fairly, and mortgage servicers must be held accountable for following consumer financial laws. We are not out of the woods yet and we will not be until all mortgage servicers understand that they must step up and toe the line. Thank you.
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.