Ocwen plans $2 billion in mortgage principal reduction
Mortgage servicer reaches agreement with regulators
Ocwen Financial Corporation (OCN) committed to continue its principal forgiveness modification programs to delinquent and underwater borrowers, totaling at least $2 billion over three years, the servicer said in an annual regulatory filing.
The servicer entered a consent judgment agreement with the U.S. District Court for the District of Columbia on Feb. 26, approving the program and several other elements. The agreement was previously announced late last year.
The modification program includes underwater borrowers at imminent risk of default and is designed to be sustainable for homeowners while providing a net present value for mortgage loan investors that is superior to that of foreclosure.
Ocwen will not incur any fees other than operating expense, and principal forgiveness will be determined on a case-by-case basis.
The agreement also revealed another noteworthy factor: Ocwen established a reserve of $66.9 million with respect to its portion of the payment into the consumer relief fund.
“This reserve is expected to cover all of Ocwen’s portion of the consumer relief fund payment,” the filing said.
Additionally, a payment of $127.3 million was approved, which included a fixed amount for administrative expenses, to a consumer relief fund to be disbursed by an independent administrator to eligible borrowers.
In its latest fourth-quarter earnings report, Ocwen was still highly profitable and recorded a net income of $105 million, or 74 cents per share, and revenue of $556 million.
However, due to the company’s heightened regulatory scrutiny, it could face adverse regulatory action, fines or penalties, which could increase its operating expenses, reduce revenues or otherwise adversely affect business.