Mortgage

Ocwen reaches mortgage servicing settlements with two more states

Also agrees to give company shares in class action settlement

Ocwen Financial’s settlement streak is continuing, as the nonbank announced Wednesday that it reached settlements with two more states that will remove each state’s mortgage servicing restrictions on Ocwen’s business.

Ocwen also disclosed Wednesday that it finalized a settlement agreement covering a class action lawsuit over the nonbank restating its 2013 and 2014 earnings after its auditor found a potential “material weakness” in the way it valued and recorded a financial transaction.

Over the last few months, Ocwen began settling with some of the 31 states that took regulatory actions against the nonbank earlier this year over alleged escrow and other servicing issues.

The first round of settlements included Georgia, Idaho, Illinois, Maine, Michigan, Mississippi, Montana, Rhode Island, South Carolina, and Wisconsin. Then came New Mexico, Virginia, West Virginia; followed by Alabama and Minnesota; then Arkansas, Tennessee, and the District of Columbia; then TexasHawaii; and most recently, Nebraska.

And Wednesday, Ocwen disclosed in a filing with the Securities and Exchange Commission that it reached settlement agreements with Oregon and Wyoming.

According to the SEC filing, the agreement resolving the Oregon regulatory action “contains key terms that are similar” to Ocwen’s previous settlements, which prohibit the nonbank from acquiring any new residential mortgage servicing rights until April 30, 2018.

Previous settlements also stipulate that Ocwen develop a plan to move away from REALServicing, Ocwen’s proprietary platform that is used to process and apply borrower payments, communicate payment information to borrowers, and maintain loan balance information.

That plan will be achieved by Ocwen moving its servicing to Black Knight’s platform, a deal that was announced in early November.

In the SEC filing, Ocwen said that it reached a “separate agreement” with Wyoming, which included the state dismissing its cease and desist order against the nonbank. The company did not provide additional details on the nature of the agreement with the state.

In total, Ocwen has now reached a settlement with 25 jurisdictions that brought regulatory action earlier this year.

Ocwen said that it “continues to seek timely resolutions with the remaining six regulatory agencies and two state attorneys general” that have outstanding actions against the company.

“If Ocwen is successful in reaching such resolutions, they may contain some or all of the previously disclosed Multi-State Common Settlement Terms and may also contain additional terms, including potentially monetary fines or penalties or additional restrictions on our business,” the company said in its SEC filing.

“There can be no assurance that Ocwen will be able to reach resolutions with the remaining regulatory agencies and state attorneys general,” the company continued. “It is possible that the outcome of these matters, whether through negotiated settlements, court rulings or other resolutions, could be materially adverse to our business, reputation, financial condition, liquidity and results of operations.”

In a statement, Ocwen spokesperson John Lovallo said the company is pleased to reach more settlements in the ongoing matter.

“Ocwen is pleased to have reached resolutions with Oregon and Wyoming to resolve regulatory actions brought against the company, bringing the total number of jurisdictions where we have reached a resolution to 25,” Lovallo said. “We continue to work cooperatively with the remaining six state regulatory agencies and two state attorneys general to reach acceptable resolutions.”

The company also said Wednesday that its previously announced class action settlement over its restated earnings is now finalized.

Back in July, Ocwen announced that it will pay at least $49 million to settle a class action lawsuit over the company misstating its net income for the last three quarters of 2013 and the first quarter of 2014 due to a flaw in the company’s system.

As part of the settlement, Ocwen also agreed to give $7 million in company stock to the plaintiffs.

In its Wednesday filing with the SEC, Ocwen stated that the judge overseeing the settlement granted final approval, meaning that the bank will issue a total of 2.5 million shares of company stock to the plaintiffs within 30 days of Dec. 22, 2017.

That total matches the previously agreed upon settlement terms. When the settlement was first announced, Ocwen said it agreed to give 2.5 million shares of the company’s stock to the class members, provided the shares have a total value of $7 million based on the company’s stock price over a five-day period.

However, if the value of the 2.5 million shares did not equal $7 million because Ocwen’s stock value was too low, Ocwen would be required to give the class members more shares.

But the final settlement stipulates that Ocwen will provide 2.5 million shares to the class members. As of 12:39pm Eastern on Wednesday, Ocwen’s stock was trading at $3.09 per share, which gives those 2.5 million shares a value of $7.725 million.

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