Ocwen Financial Corp., one of the country’s largest nonbank mortgage loan servicers, is being sued for failing borrowers at every stage of the mortgage servicing process. Ocwen’s years of widespread errors, shortcuts, and runarounds cost some borrowers money and others their homes, the Consumer Financial Protection Bureau said Thursday.
Ocwen allegedly botched basic functions such as sending accurate monthly statements, properly crediting payments, and handling taxes and insurance. It also illegally foreclosed on struggling borrowers, ignored customer complaints, and sold off the servicing rights to loans without disclosing the mistakes it made in borrowers’ records, the bureau alleges.
The Florida Attorney General also sued Ocwen Thursday in a separate lawsuit. In addition, many state financial regulators issued cease-and-desist and license revocation orders against Ocwen Thursday for escrow management and licensing issues.
“Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” said Richard Cordray, director of the bureau.
As of Dec. 31, 2016, Ocwen serviced almost 1.4 million loans with an unpaid principal balance of $209 billion. It services loans for borrowers in all 50 states and the District of Columbia.
Ocwen specializes in servicing subprime or delinquent loans.
The bureau’s mortgage servicing rules require that servicers promptly credit payments and correct errors on request.
In its lawsuit, the bureau alleges that Ocwen:
- Serviced loans using error-riddled information. Ocwen allegedly loaded inaccurate and incomplete information into its REALServicing system. In 2014, Ocwen’s head of servicing described its system as “ridiculous” and a “train wreck.”
- Illegally foreclosed on homeowners: The bureau alleges that Ocwen has wrongfully initiated foreclosure proceedings on at least 1,000 people and has wrongfully held foreclosure sales.
- Failed to credit borrowers’ payments: Ocwen has allegedly failed to correctly credit payments made by many borrowers. Ocwen has also failed to send borrowers accurate statements on the amount due, how payments were applied, total payments received, and other information.
- Botched escrow accounts: Ocwen has allegedly failed to conduct escrow analyses and sent some borrowers’ escrow statements late or not at all. Ocwen also allegedly 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.
- Mishandled hazard insurance: Ocwen allegedly 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.
- Bungled borrowers’ private mortgage insurance: Ocwen allegedly failed to cancel borrowers’ private mortgage insurance in a timely way, causing consumers to overpay. Ocwen overcharged borrowers about $1.2 million for PMI premiums, and refunded the money later.
- Deceptively signed up and charged borrowers for add-on products: When servicing borrowers’ mortgage loans, Ocwen allegedly enrolled some consumers in add-on products using deceptive methods and failed to get their consent. Ocwen then billed and collected payments from these consumers.
- Failed to assist heirs seeking foreclosure alternatives: Ocwen allegedly mishandled accounts for heirs of a deceased borrower. As a result, Ocwen denied assistance to help avoid foreclosure.
- Failed to adequately investigate and respond to borrower complaints: Since 2014, Ocwen has allegedly routinely failed to acknowledge and investigate complaints, or make necessary corrections. Since April 2015, Ocwen has received more than 580,000 notices of error and complaints from more than 300,000 different borrowers.
- Failed to provide complete and accurate loan information to new servicers: Ocwen has allegedly failed to include correct loan information when it sold its rights to service thousands of loans to new mortgage servicers.
The Bureau also alleges that Ocwen has failed to reimburse 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.