Ocwen fixes previous settlement failures, faces two new failed tests

"There is still work to be done"

Right as Ocwen Financial fixed previous compliance failures, the servicer is hit with two new compliance failures, according to the latest oversight report on Ocwen from the office of Joseph Smith, who is the monitor of the National Mortgage Settlement.

In the last report from the NMS, Ocwen failed to be back in compliance with one of the performance metrics of the National Mortgage Settlement that it failed in the second half of 2014. And because of those issues, Ocwen had to place 17,300 loans that "could have been affected" by this issue on foreclosure hold.

These issues are now resolved, according to the latest report.

Smith’s office permitted Ocwen to lift the foreclosure sale hold in July 2016 after it mailed corrected loan modification denial notices to affected borrowers and provided a sufficient timeframe for the borrower to appeal the denial.

But as the servicer wraps these foreclosure issues, the new report on the third and fourth quarter of 2015 found that Ocwen failed two tests during the fourth quarter of 2015 related to force-placed insurance.

For context, force-placed insurance is applied to borrowers who cannot or do not provide evidence that they have homeowner’s insurance.

It’s important to note that Ocwen did not fail any metrics in the third quarter, with the new failures stemming from the fourth quarter of 2015.

Specially, Ocwen failed metrics 28 and 29 during the NMS’s testing, which tested the timeliness of force-placed insurance notices sent to borrowers and the timeliness of Ocwen’s force-placed insurance policy termination and refund of premiums.

Metric 28, according to the report, “tests whether Ocwen is timely in its communications to borrowers regarding a lapse in homeowner’s insurance coverage and notifies the borrower that force-placed insurance may be obtained if evidence of the borrower’s own insurance is not submitted.”

“Errors occur on this metric if all notification letters are not sent in a timely manner, or do not contain all the necessary information, or if Ocwen places force-placed insurance when there was evidence of a valid insurance policy already in place.

In its Corrective Action Plans, Smith’s office stated that Ocwen identified several root causes that contributed to the fail. Most were attributable to the implementation of a new process for handling notifications in connection with condominium loans,” the report stated.

For example, the report stated that some letters omitted required language offering to establish an escrow account for insurance payments. In a smaller number of instances, human errors and technology issues led to non-compliance, including letters not sent within timeline requirements, letters not sent to the correct borrower address and force-placed insurance policies issued despite the borrower having submitted evidence of valid insurance.

Meanwhile, Metric 29, the report stated, “tests whether Ocwen terminated force-placed insurance and refunded premiums to affected borrowers in a timely manner.”

“An error under Metric 29 occurs when force-placed insurance is not terminated and any prorated portions of premiums are not refunded within 15 days of a servicer’s receipt of the borrower’s proof of insurance,” the report stated.

In its CAP, Smith’s office stated that Ocwen identified the root cause of the fail as miscellaneous manual errors by Ocwen’s force- placed insurance vendor.

Metric 28 and 29 recorded an error rate of 24.16% and 5.14%, respectively.

Smith’s office approved Ocwen’s CAP for Metric 28 and 29 in June 2016 and August 2016, respectively.

In response to the findings, Ocwen stated,  “In the fourth quarter of 2015, the Monitor found that Ocwen exceeded the error threshold in two metrics that were related to force placed flood insurance. The errors are primarily related to specific content that was required to be included in the notifications that are sent to borrowers (Metric 28)and timely refunds to borrowers upon providing adequate proof of private insurance (Metric 29). We were disappointed in these failures and we have worked with the Monitor to put in place approved corrective action plans on both metrics. We expect future reports to reflect our progress on resolving these concerns.”

“Ocwen is committed to taking all necessary actions to be compliant with the National Mortgage Settlement. Ocwen has made significant investments in our risk and compliance management infrastructure to ensure that we are compliant with all rules and regulations related to our business. We will continue to work closely with the Monitor and look forward to the next report,” the company stated.

With both CAPs approved, Ocwen is in the process of implementing the CAPs, and testing is expected to resume during the fourth quarter 2016.

“While there is still work to be done for Ocwen to fully comply with the National Mortgage Settlement, the servicer is making progress,” said Smith. “I will continue to monitor its progress on addressing the issues I uncovered during this period related to force-placed insurance. In addition to these failures, it is important to note that Ocwen has made progress toward correcting previous fails, most notably on letter-dating issues.”

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