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Ocwen SEC filing reveals details of CFPB mortgage servicing investigation

Nonbank set aside $12.5 million for potential settlement

During a call with investors to discuss the company’s fourth-quarter earnings, Ocwen Financial CEO Ron Faris said resolving the Consumer Financial Protection Bureau’s investigation into the company’s mortgage servicing practices is a top priority in 2017.

In Ocwen’s third-quarter 10-Q filing with the Securities and Exchange Commission, the company revealed that it could be facing a fine and/or other disciplinary action from the CFPB.

At the time, Ocwen said that the CFPB’s enforcement staff “has been authorized to engage with us regarding the resolution of their concerns” about Ocwen’s compliance with federal servicing laws.

During Ocwen’s investor call, Faris was asked about the company’s disclosure in its fourth-quarter earnings that it set aside $12.5 million for “potential” regulatory settlements. Faris responded by directing observers to the disclosures in the company’s upcoming 10-K filing with the SEC.

Well, Ocwen filed its 10-K on Thursday, and as it turns out, that $12.5 million is for a potential settlement with the CFPB after all.

“We are currently engaged with the CFPB in efforts to resolve certain concerns the CFPB has expressed relating to our servicing practices and technology,” Ocwen stated in its 10-K filing.

“These concerns primarily stemmed from a CFPB examination of us that began in 2014,” Ocwen continued. “Our negotiations with the enforcement staff of the CFPB could result in a consent order with the CFPB and could entail payment of monetary amounts by us or injunctive relief, among other consequences.”

As a result of the negotiations with the CFPB, Ocwen said it reserved that $12.5 million, but cautioned that booking that money doesn’t mean that a settlement is coming.

“We have not reached any agreement with the CFPB and cannot predict whether or when we may reach such an agreement,” Ocwen said.

“If we are unable to agree upon a resolution, the CFPB could bring an adversarial enforcement action against us,” Ocwen continued.

“An adversarial enforcement action could be costly to defend, could adversely affect our reputation and could adversely impact our relationships with counterparties, including lenders, among other consequences,” Ocwen added. “Accordingly, whether or not we reach an agreement after discussions with the CFPB, it is possible that we could incur losses that materially exceed the amount accrued as of December 31, 2016, and the resolution of the matters raised by the CFPB could have a material adverse impact on our business, reputation, financial condition, liquidity and results of operations.”

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