You had one job, Ocwen, and you couldn't even do that!
Mortgage servicer Ocwen is being sued by the Consumer Financial Protection Bureau (CFPB) for “failing borrowers at every stage of the mortgage servicing process.”
The lawsuit alleges that Ocwen's “widespread errors, shortcuts, and runarounds cost some borrowers money and others their home.”
According to the CFPB, for years Ocwen has consistently demonstrated an inability to perform the most fundamental duties required of a mortgage servicer, such as sending accurate monthly statements to borrowers, crediting their account for payment, and correctly handling tax and insurance payments.
Ocwen is even alleged to have illegally foreclosed on homeowners. It seems like they treated servicing mortgages with less respect than a raffle for a $5 gift certificate to McDonald's.
In addition to the lawsuit from the CFPB, Florida's attorney general has also filed a lawsuit against Ocwen, and individual state financial regulators are taking their own actions to hold Ocwen accountable and protect consumers from their harmful practices.
The accusations are serious and far-reaching because Ocwen is one of the country's largest non-bank mortgage servicers with almost 1.5 million home loans worth $209 billion in their portfolio. A lot of people could be victims of Ocwen's servicing failures.
A home is most people's largest purchase and a leading way for them to build wealth. Mortgage servicers have a lot of power and responsibility in managing the loan. Failing to fulfill these responsibilities can have enormously negative consequences in people's lives. And that's exactly what Ocwen is accused of doing.
Allegations against Ocwen in CFPB lawsuit:
Servicing loans using a flawed information system.
Ocwen's servicing software, called REALServicing, is almost comically inadequate. It regularly created statements for borrowers with the wrong terms or interest rate. It was constantly down. It used 10,000 comment codes, but had no complete dictionary defining these codes for the employees who used the system. So Ocwen's employees can't understand everything in their own system, much less give good info to their borrowers. Our firm has had problems getting consistent answers from Ocwen regarding a client's mortgage. Sometimes one employee would give us one story, and another would give us a different one. Without accurate information, a servicer can't manage a loan properly even if it wanted to. Again, you had one job, Ocwen! Fail.
Ocwen focuses its portfolio on subprime loans which are at a higher risk of foreclosure and “has long touted its ability to service and modify loans for troubled borrowers.” But the CFPB alleges the servicer has not given required foreclosure protections to some borrowers. The CFPB says Ocwen wrongfully initiated foreclosure proceedings on more than 1,000 people and has held unwarranted foreclosure sales. Ocwen has also started foreclosure before finishing a review of an application for loss mitigation and foreclosed on borrowers who were performing on their loss mitigation agreement.
Failure to credit payments.
A fundamental part of servicing a mortgage is crediting the account for payments. But even that was apparently too much for Ocwen. From the CFPB's press release:
“Ocwen has allegedly failed to appropriately credit payments made by numerous borrowers. Ocwen has also failed to send borrowers accurate periodic statements detailing the amount due, how payments were applied, total payments received, and other information.”
“Botched” escrow accounts.
Ocwen handles escrow accounts for most of the loans it services. Borrowers pay into an escrow account for things like taxes and insurance. Ocwen is accused of sending some borrowers their escrow statements late or failing to send them, as well as not correctly applying payments to correct escrow shortages. Some of these escrow problems resulted in unnecessary force-placed insurance.
There are many, many other accusations made against Ocwen by the CFPB, including failure to provide complete information to new servicers, signing up borrowers for additional products without their consent, failing to help heirs with foreclosure alternatives, and mishandling hazard insurance and private mortgage insurance.
As you'd imagine, Ocwen has gotten a lot of complaints from borrowers. “Since April 2015, Ocwen has received more than 580,000 notices of error and complaints from more than 300,000 different borrowers” according to the CFPB, but the company didn't have a policy to handle the complaints.
All these mistakes led to thousands of unnecessary foreclosures. In foreclosure, Ocwen continued to disregard borrowers rights by dual-tracking, which is pursuing foreclosure while considering a homeowner for a loan modification.
The CFPB isn't the only one taking action against Ocwen. Multiple states are prohibiting the company from obtaining servicing rights on new mortgages. Massachusetts basically put Ocwen out of business in the state by prohibiting them from servicing mortgages in the state, ordering them not to acquire any new mortgage servicing rights and prohibiting them from originating new loans.
Not the first time for Ocwen
This isn't the first time the CFPB has sued Ocwen. In 2013 the CFPB and 49 states issued a $2.1 billion consent order against Ocwen for many of the exact same issues as this current lawsuit. Apparently they didn't learn their lesson.
Now, are you ready for the bad news? Ocwen has a reputation as one of the best servicers to work with if you want a loan modification. If Ocwen is one of the best, and it's alleged to be failing at mortgage servicing so terribly, then how bad is the rest of the industry?
Whoever your loan servicer is (you don't get a choice, by the way) you should get a qualified professional on your side to help you when you encounter serious problems with your mortgage. There are rights you have that you may not even know about, and that your servicer may have no compunction about violating.
An experienced foreclosure defense attorney could fight your servicer's wrongful actions and demand that your rights are respected. Some homeowners are able to stay in their homes for years without making a payment, then get a permanent loan modification with a lower monthly payment.
Our firm has helped many clients avoid foreclosure and get a loan modification with Ocwen. Some of the results can be seen here.