California settlement puts Ocwen on a leash

Prohibited from acquiring California MSRs without state’s approval

It appears that the “frustrating skirmish” between the State of California and Ocwen Financial (OCN) over California’s threat to suspend the mortgage license is over, at least for now.

In a filing with the Securities and Exchange Commission, Ocwen confirmed that it reached a settlement agreement with the California Department of Business Oversight, which was threatening to suspend Ocwen’s mortgage license because the company failed to turn over documentation showing that it complies with the state’s laws.

Under the terms of the agreement, in addition to the previously disclosed $2.5 million fine Ocwen must pay California, Ocwen is also prohibited from acquiring any additional mortgage servicing rights for loans in California until the CDBO is “satisfied that (Ocwen-subsidiary) Ocwen Loan Servicing can satisfactorily respond to the requests for information and documentation made in the course of a regulatory exam.”

Perhaps most importantly though, the settlement only covers Ocwen’s failure to provide the documents to the CDBO, not what the documents contain. 

“The consent order addresses and resolves the examination disputes between the CDBO and OLS, and does not involve any accusation or admission of wrongdoing with regard to OLS’s servicing practices,” Ocwen’s SEC filing states.

In a statement, Ocwen said it is ready to move past this situation.

“This allows us to get down to the business of doing our job for consumers and determining if Ocwen has followed the law,” said Owen’s spokesman, Tom Dresslar. “We’re pleased this frustrating skirmish over what should have been a routine matter is finally resolved.”

Under the terms of the agreement, the CDBO will choose an independent third-party auditor, who will be tasked with assessing Ocwen Loan Servicing’s compliance with laws and regulations impacting California borrowers for a period of at least two years.

The auditor’s examination of Ocwen’s compliance may be extended “at the discretion of the CDBO,” Ocwen’s SEC filing states. Also, Ocwen is required to pay “all reasonable and necessary costs” for the auditor.

The auditor will report back to the CDBO periodically with updates on Ocwen’s servicing practices, and Ocwen will be required to submit a written action plan to address and implement corrective measures and address any deficiencies identified by the auditor.

According to the SEC filing, if Ocwen fails to meet the requirements of the settlement, it could be subject to additional regulatory action by the CDBO.

“The Department is committed to supporting a fair and secure financial services marketplace for all California consumers,” Jan Lynn Owen, California’s commissioner for business oversight, said in a statement to the Los Angeles Times. “This settlement allows us to move forward and ensure that Ocwen is meeting its obligations under the law.”

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