Ocwen will fight CFPB plan for homeowner relief fund
Federal financial regulators are starting to put the squeeze on massive loan servicer Ocwen (OCN), reportedly by recommending the servicer contribute to a consumer relief fund that would give cash to foreclosed borrowers.
But the servicer, which says a refusal to do so could result in a $135 million penalty, doesn’t believe such a move is needed and advised in an SEC filing that "we indicated our willingness to adopt the servicing standards set out in the national mortgage settlement with certain caveats."
Furthermore, Ocwen said unequivocally it's against having to contribute to a relief fund.
The relief fund contribution was recommended by the Consumer Financial Protection Bureau, state Attorneys General and the Multi-State Mortgage Committee of the Conference of State Bank Supervisors (MMC), the servicer said in its 10-K filing.
Ocwen said in the same filing that it's committed to offering consumer assistance such as loan modifications and foreclosure avoidance, but added that the firm will fight contributions to a consumer fund even if it results in litigation.
"We do not believe such a contribution from us is warranted under the circumstances and have so notified the requesting parties," Ocwen wrote in its 10-K filing. "It is reasonably possible that legal proceedings could ensue with regard to this matter and, if so, we will defend vigorously. At this time, the amounts, if any, that ultimately could be incurred with regard to this matter are not reasonably estimable."
Ocwen more than doubled its 2012 profit as revenue soared 70% above 2011 levels.
The company’s expansive revenue growth came after Ocwen spent the year, gobbling up mortgage servicing rights.
With just the closing of the firm's two major acquisitions – a deal to acquire Homeward Residential and the purchase of servicing rights from Residential Capital — Ocwen increased its servicing portfolio by 270%, excluding master servicing, the firm said in its fourth-quarter earnings report.
Yet, any servicing issues acquired in recent deals also could be subject to some regulatory scrutiny, Ocwen suggested in its own SEC filing.
"One or more of the foregoing regulatory actions or similar actions in the future against Ocwen, OLS, Litton or Homeward could cause us to incur fines, penalties, settlement costs, damages, legal fees or other charges in material amounts, or undertake remedial actions pursuant to administrative orders or court-issued injunctions," Ocwen wrote.
One of the issues Ocwen mentioned is the fact that before it acquired Homeward Residential, the U.S. Justice Department of the Eastern District of Texas issued civil investigative demands to look into "whether HRI violated the False Claims Act in connection with its participation in the Home Affordable Mortgage Program," Ocwen wrote.
The firm added, "We were advised by HRI that documents and information have been provided pursuant to these CIDs. The investigation remains open, and we intend to cooperate in the event there are further informational requests."
Analysts with Compass Point Research & Trading Group responded to the Ocwen disclosures saying, they expect a cash payment or some other type of monetary relief with so many distressed borrowers in Ocwen’s servicing portfolios.
Still, Compass Point sees Ocwen and other servicers as still getting "high marks from the GSEs, rating agencies and other regulatory agencies concerning their servicing practices," Compass Point suggested.
But the research firm added, "we do expect further regulatory scrutiny and the possibility of monetary penalties for Ocwen, NationStar and PHH (PHH). Considering Ocwen has the largest subprime, non-agency servicing portfolio of the non-bank servicers, we believe their monetary penalty could be the largest of the group (if the others were to be invited)."