The survival of one of the nation's largest nonbank mortgage servicing companies was thrown into question Thursday as the company was hit with federal and state lawsuits, including a cease-and-desist order in MI, for allegedly failing borrowers with mistakes, shortcuts and other problems that cost some people their homes.
Ocwen submitted a plan to a group of more than 20 state regulators in January to fix the escrow accounts, and said that reconciling the accounts would cost $1.5 billion, and would be "well beyond Ocwen's financial capacity to fund", according to a North Carolina cease-and-desist order.
"Ocwen failed to properly recognize individuals as heirs, and thereby denied assistance to help avoid foreclosure", the CFPB claims.
USA and state officials sued Ocwen Financial Corp.
"We allege that these violations were significant and systemic, and harmed thousands of consumers", CFPB director Richard Cordray said on a conference call this afternoon.
According to the lawsuit, Ocwen serviced loans using error-filled data, illegally foreclosed on at least 1,000 homeowners, failed to credit borrower payments, mismanaged escrow accounts, failed to cancel borrowers' private mortgage insurance in a timely manner, deceptively signed up and charged borrowers for add-ons, failed to adequately investigate borrower complaints, failed to provide accurate information to new servicers when rights were sold, and failed to assist heirs with foreclosure prevention. The federal consumer watchdog alleged Ocwen also ignored customer complaints and failed to make disclosures about errors in borrowers' records when selling off the servicing rights to their loans to other companies. While not a member, North Carolina examined the committee's findings as part of its routine regulatory operations.
Ocwen said it received the orders from state regulators and "are in the process of reviewing them in detail". Ocwen is one of the largest non-bank mortgage servicing companies in the country, and many of its clients hold subprime mortgages. "Borrowers have no say over who services their mortgage, so the Bureau will remain vigilant to ensure they get fair treatment". The frustrating and expensive experience of one consumer cited in the CFPB lawsuit illustrated the problems some borrowers confronted when dealing with Ocwen.
Numerous errors, the CFPB says, came about through Ocwen's flawed proprietary servicing system that the company's servicing head once referred to as a "train wreck".
After receiving her May mortgage statement, the borrower reported that Ocwen mistakenly placed her principal and interest payment into a suspense account. "I can't tell you the number of hours I and others spend on basic servicing technology blocking and tackling".