One settlement and one enforcement
action have been announced in the last 24 hours and they are going to cost two
financial institutions a lot of money.
The enforcement action, announced Thursday by Consumer Financial
Protection Bureau (CFPB) Director Richard Cordray, was brought by authorities
in 49 states and the District of Columbia as well as CFPB against Ocwen Financial
Corporation and its subsidiary Ocwen Loan Servicing. The settlement announced Friday is between
the Federal Housing Finance Agency (FHFA) and Deutchbank AG related companies.
The court order against Ocwen which
was filed in federal district court and agreed to by the company, demands that it
refund $125 million to compensate people who have already lost their homes through
what Cordray called “years of systematic and significant servicing errors.” The court filing also demands that Ocwen provide
$2 billion in relief to current homeowners who are underwater and in danger of
losing their homes.
In prepared remarks for a press
briefing about the Ocwen action, Cordray said the servicer specializes in
subprime or delinquent loans and it has been greatly expanding its business in
the years since the housing collapse. It
is now the largest nonbank servicer and the fourth-largest mortgage servicer
overall in the country. Not only has it acquired smaller competitors, it
has taken on servicing duties for the some of the big banks and now has
customers in the millions.
The Director said that, for many
borrowers, Ocwen was not their first servicer but that CFPB believes that too
often trouble began as soon as a loan was transferred to Ocwen and the company
failed to honor trial modifications that were agreed upon by previous
servicers. He said he believes that
Ocwen violated federal consumer financial laws at every stage of the mortgage
servicing process. The complaint alleges
the company took advantage of consumers with servicing shortcuts and
unauthorized fees, misled consumers about alternatives to foreclosures, provided
false or misleading information to consumers about the status of their accounts
and denied loan modifications for eligible homeowners. It also sent robo-signed
foreclosure documents through the courts.
The $125 million in monetary
compensation will go to consumers who lost their home to foreclosure while
being serviced between 2009 and 2012 by Ocwen or by Homeward Residential
Holdings and Litton Loan Servicing which Ocwen acquired. In addition Ocwen must complete sustainable
loan modifications over the next three years that result in a reduction in
principal totaling $2 billion for homeowners who are underwater and struggling
to pay off their mortgages.
Cordray pointed out that 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 which, in
many ways overlap the enforcement action.
However, because of its conduct, Ocwen will be subject to standards and scrutiny
above and beyond the rest of the industry.