Ocwen Servicing Abuses in Maryland and Elsewhere: Foreclosures Spark Lawsky Investigation and Lawsuits

Ocwen is a mortgage servicing company: it’s paid to collect payments from consumers in Maryland and elsewhere, deal with escrow accounts, and sort out any problems that arise. Servicers do not necessarily own the mortgage itself, only the “servicing rights”. The CFPB’s guidance for examining mortgage servicers explains “[t]his is because some entities have expertise in payment processing and other servicing responsibilities, while others seek to invest in the underlying mortgages.” Mortgage servicers are supposed to help the mortgage repayment process run smoothly and to deal with problems – such as mistakes in escrow or missed payments. According to Ocwen’s slogan “Helping homeowners is what we do!”

Homeowners Sue

However, lawsuits filed in Maryland and around the country accuse Ocwen of everything from blatant fraud to utter incompetence, all to the detriment of the homeowners it claims to be helping.  A lawsuit filed in Florida recently accuses Ocwen of needlessly forcing homeowners into foreclosure by turning minor problems into major ones. NPR reports the story of one couple who were charged massive fees after an error regarding property taxes:

When taken all together, these fees were not small. In fact, Ocwen claims the couple now owes more than they borrowed in the first place. They borrowed $98,000. But an Ocwen bill cited in the lawsuit claims the couple now owes $150,000 despite a decade of making their mortgage payments.

The story shows Ocwen charging fees completely unrelated to the original problem: force-placed insurance (even though the homeowners kept current home insurance) and “property restoration” fees. When the homeowners tried to talk to Ocwen about the problem, their calls went to a call center abroad. The call center staff were not equipped to answer any of their questions or fix the problem.

In Trouble With The Law…

The Florida lawsuit is far from the first time Ocwen has been in trouble. Less than a year earlier, in December 2013, Ocwen settled a national lawsuit with federal regulators and State Attorneys General, agreeing to change its ways and give billions of dollars in relief and compensation to homeowners. But already, Ocwen is subject to regulatory investigation. The New York Department of Financial Services is investigating several aspects of Ocwen’s business.

First, the Department is investigating Ocwen’s dealings with a company called Altisource. The Department alleged in a letter to Ocwen in August 2014, that Ocwen was channeling money to Altisource for nominal services, and that Ocwen was not honest with its investors about the relationship with Altisource. Following the Department’s letter, a group of investors filed a suit against Ocwen, reported here.

Second, the Department is investigating the backdating of mortgage modification letters to homeowners. The date of a mortgage modification letter is vital, because the homeowner has a limited amount of time to agree to modification. Backdating letters can unfairly deprive homeowners of the chance to modify. Ocwen has conceded that backdating occurred, although its account of what happened is somewhat confused. The Department’s allegations on October 21st were answered the same day, first by a press release claiming that only 283 backdated letters had been sent, due a software error. However, later the same day, Ocwen admitted that it did not know how many letters had been backdated and a few days later, wrote to homeowners with a different explanation for backdating the letters. Ocwen’s new explanation confirmed that backdating was company policy, rather than a “software error”: “Historically letters were dated when the decision was made to create the letter versus when the letter was actually created.”