Ocwen Financial Corp. (OCN) agreed to offer $2 billion in consumer relief and pay up to $127.3 million to settle a Consumer Financial Protection Bureau (CFPB) investigation into its servicing practices, according to one of the servicer’s recent securities filings.
The investigation involved not only the CFPB, but various attorneys general and mortgage regulators who saw a need to cite Ocwen for its handling of borrowers’ loans.
While the deal's announcement hit the market quietly as part of an Ocwen SEC filing, the CFPB issued a statement moments ago about the enforcement order filed with the court.
"Deceptions and shortcuts in mortgage servicing will not be tolerated," said CFPB Director Richard Cordray. "Ocwen took advantage of borrowers at every stage of the process. Today’s action sends a clear message that we will be vigilant about making sure that consumers are treated with the respect, dignity, and fairness they deserve."
For some time, the market has been waiting for a servicer to face bureau scrutiny with the agency advising servicers earlier this year to remain cognizant of all servicing guidelines, while still remaining mindful of the inherent risks in massive MSR transfers.
As part of the deal, Ocwen agreed to service home loans in a manner that complies with all national servicing guidelines and to remain subject to the oversight of an independent monitor for three years. Ocwen is already under the microscope of an independent party that oversees a portion of the ResCap portfolio Ocwen acquired in 2013.
The $127.3 million payment discussed by Ocwen will cover some administrative expenses, but is mostly designed to compensate eligible borrowers. The CFPB released a statement saying in total Ocwen will refund $125 million to nearly 185,000 borrowers who have already been foreclosed upon.
The payout will be managed by an independent monitor. However, half of the relief fund will be funded by some of the servicing portfolios' original owners, according to Ocwen.
Ocwen set aside a reserve fund of $66.4 million earlier in the year. While that reserve will cover most of the deal, it still falls $500,000 short in covering the consumer relief provision.
Ocwen assured regulators it would continue offering principal forgiveness to delinquent and underwater borrowers – with the total offered relief valued at approximately $2 billion over the course of three years.
In return for signing the deal, Ocwen and the loans' former owners will receive immunity when it comes to remaining mortgage servicing, modification and foreclosure issues.
Servicers wanting to comply can review the laundry list of allegations against Atlanta-based Ocwen.
The CFPB accused the servicer of failing to timely and accurately apply payments made by borrowers.
In addition, the firm said the company charged borrowers unauthorized fees for default-related services, imposed force-placed insurance on consumers when Ocwen knew or should have known that the borrower already had coverage and provided false and misleading information in response to consumer complaints.