By K.K. MacKinstry, LendingLies
CFPB claims “widespread errors, shortcuts, runarounds cost borrowers money, homes”
Ocwen is in its death throes. Not only did 20 state banking regulators issue cease-and-desist orders but the Consumer Financial Protection Bureau also took action citing Ocwen Financial for “failing borrowers at every stage of the mortgage servicing process.”
Ocwen Financial engages in predatory servicing.
It is obvious by the allegations set forth by the CFPB lawsuit that Ocwen’s business model is not to service mortgage loans but instead to implement predatory practices that ensure defaults occur. If Ocwen can successfully steer a homeowner into foreclosure, they receive an absolute financial windfall. Ocwen’s reign of terror may finally be coming to an end.
According to the CFPB lawsuit, they allege that Ocwen cost borrower’s money and some of them their homes, with its history of “widespread errors, shortcuts, and runarounds.”
The CFPB states in the suit that Ocwen “botched basic functions like sending accurate monthly statements, properly crediting payments, and handling taxes and insurance.”
The CFPB says Ocwen, “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.”
What the CFPB failed to investigate is that Ocwen routinely robosigns notes and assignments and is unable to provide evidence of a creditor. The CFPB is looking at the surface issues but unfortunately is not concerned about Ocwen’s deeper fraudulent practices
The CFPB uncovered “substantial evidence that Ocwen has engaged in significant and systemic misconduct at nearly every stage of the mortgage servicing process.” Ocwen was aware that a CFPB investigation into its servicing practices was likely and set aside $12.5 million to settle with the bureau. Considering they are making huge profits from wrongful servicing and foreclosing on homes it doesn’t own- a mere $12.5 million is a pathetic penalty by any standard.
In October of 2016 Ocwen revealed that they were under investigation and it appears that Ocwen’s negotiations with the bureau were unsuccessful.
The CFPB release states that Ocwen serviced almost 1.4 million loans with an aggregate unpaid principal balance of $209 billion, at the end of 2016. Servicing violations, include (from the CFPB report):
- Servicing loans using inaccurate information: Ocwen uses a proprietary loan management system called REALServicing to process and apply borrower payments, communicate payment information to borrowers, and maintain loan balance information. Ocwen is accused of loading inaccurate and incomplete information into its REALServicing system. Even when data was deemed accurate (yeah- right), REALServicing generated errors because of system failures and deficient programming. To manage this issue, Ocwen attempted to implement manual workarounds, but they often failed to correct inaccuracies and produced additional errors. Ocwen then used this faulty information to service borrowers’ loans. In 2014, Ocwen’s head of servicing described its system as “ridiculous” and a “train wreck.”
- Illegally Home Foreclosures: Ocwen brags about its superior ability to service and modify loans for customers. The investigation found that Ocwen has failed to implement mandated foreclosure protections. The Bureau alleges that Ocwen has wrongfully initiated foreclosure proceedings on at least 1,000 people, and has wrongfully held foreclosure sales (Livinglies readers know the numbers are likely triple this number or more). Ocwen dual-tracked customers and initiated foreclosure proceedings before completing a review of borrowers’ loan modification applications. Ocwen also repeatedly asked borrowers to submit additional information with a 30-day deadline, but would then foreclose on the borrowers before the deadline. Ocwen has also foreclosed on borrowers who were compliant with their obligations under a loan modification agreement.
- Failure to post borrowers’ payments: Ocwen reportedly failed to appropriately credit payments made by some borrowers resulting in inaccurate account information. Ocwen also failed to send borrowers accurate periodic statements detailing the amount due, how payments were applied, total payments received, and other information. Ocwen also failed to correct billing and payment errors. It is well known that Ocwen does not respond to Qualified Written Requests or provide the information requested as a routine policy.
- Botched escrow accounts: Ocwen manages escrow accounts to pay insurance and taxes for over 75% of the loans it services. Ocwen has allegedly botched basic tasks in managing these borrower accounts causing huge headaches for customers. Ocwen has allegedly failed to conduct escrow analyses and sent some borrowers’ escrow statements late or not at all and blames it on computer issues. Ocwen failed to properly account for and apply payments by borrowers to address escrow shortages, such as changes in the account when property taxes go up. This resulted in tax and insurance issues.
- Hazard insurance issues: Ocwen failed to administer escrow account for customers. A servicer is obligated to make timely insurance and/or tax payments on behalf of the borrower if contracted to do so. Ocwen failed to make timely insurance payments to pay for borrowers’ home insurance premiums. Ocwen’s failures led to the lapse of homeowners’ insurance coverage for more than 10,000 borrowers. Some borrowers were pushed into force-placed insurance.
- Private mortgage insurance failures: Ocwen failed to cancel borrowers’ private mortgage insurance, or PMI, in a timely way, causing consumers to overpay. Borrowers must purchase PMI when they obtain a mortgage with less than 20% down, or when they refinance their mortgage with less than 20% equity in their property. Servicers must end a borrower’s requirement to pay PMI when the principal balance of the mortgage reaches 78% of the property’s original value. Since 2014, Ocwen has failed to end borrowers’ PMI on time after learning information in its REALServicing system was unreliable or missing altogether. Ocwen ultimately overcharged borrowers about $1.2 million for PMI premiums, and refunded this money only after the fact.
- Deceptively charged homeowners for add-on products: Ocwen pulled a Wells Fargo and enrolled some customers in add-on products through deceptive solicitations and without their consent. Ocwen then billed and collected payments from these consumers without their consent.
- Heirs seeking foreclosure alternatives were denied assistance: Ocwen mishandled accounts for heirs or successors to deceased borrowers. These people included widows, children, and other relatives. Ocwen failed to properly recognize individuals as heirs, and thereby denied assistance to help these individuals avoid foreclosure. In some cases, Ocwen foreclosed on individuals who may have been eligible to save these homes through loan modifications or other loss mitigation options. This is the epitome of engineering a default so Ocwen could illegally steal a home.
- Failed to adequately investigate and respond to borrower complaints: Servicer are required to investigate errors and correct the error identified by the borrower, called a notice of error. Since 2014, Ocwen has allegedly routinely failed to properly acknowledge and investigate complaints, or make necessary corrections. In April 2015 Ocwen failed to address the difficulty its call center had in recognizing and escalating complaints. Under its new policy, borrowers must complain at least five times in nine days before Ocwen automatically escalates their complaint to be resolved. Since April 2015, Ocwen has received more than 580,000 notices of error and complaints from more than 300,000 different borrowers.
- Provided incomplete and inaccurate information to new servicers: Ocwen failed to include complete and accurate borrower information when it sold servicing rights for thousands of loans to new mortgage servicers. This resulted the new servicers’ efforts to comply with laws and investor guidelines. It is likely that not only does Ocwen have incomplete payment histories but cannot produce the original notes or assignments without resorting to fraudulent means to recreate them.
The CFPB accuses Ocwen of failing 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.” The CFPB need only contact Livinglies and we will be happy to provide information about the challenges our clients have faced while trying to obtain basic information about their loans including who the real creditor is. In some cases it appears that Ocwen had no idea who they were servicing the loan for.
CFPB Director Richard Cordray summarized Ocwen’s alleged failings. He wrote, “Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” Cordray continued, “Borrowers have no say over who services their mortgage, so the Bureau will remain vigilant to ensure they get fair treatment.”
Ocwen denying any liability and released a lengthy statement in response to the CFPB’s allegations. To read the statement click here. The market responded with a drastic loss of over 50% per share.