Mortgage

Ocwen settles with Massachusetts over alleged “widespread” mortgage servicing issues

Settlement will see Ocwen provide $2 million in restitution

Ocwen Financial will provide $2 million in restitution to mortgage borrowers in the state of Massachusetts as part of settlement with the state over alleged “widespread” mortgage servicing problems.

The settlement brings an end to a lawsuit filed by the state against the nonbank back in May 2017. The lawsuit came on the heels of a sweeping round of sanctions placed on Ocwen by more than 30 other states over alleged escrow and other mortgage servicing issues.

As part of that action, Massachusetts’ Office of Consumer Affairs & Business Regulation’s Division of Banks prohibited Ocwen from acquiring new MSRs, prohibited it from originating new loans, prohibited it from servicing any mortgages in the state, and ordered Ocwen to transfer all mortgages it services to other servicers.

Beyond that, Massachusetts Attorney General Maura Healey sued the company, alleging that Ocwen charged homeowners in the state for “unnecessary and expensive force-placed insurance policies, imposed excessive fees on delinquent borrowers, and failed to properly process escrow and insurance payments.”

Just over a year ago, Ocwen settled with the Massachusetts banking regulator, but Healey’s lawsuit remained.

Now, Ocwen and Massachusetts are settling the state’s lawsuit as well.

According to Healey’s office, the settlement resolves allegations that Ocwen “violated state law and committed unfair and deceptive practices by charging Massachusetts homeowners for unnecessary fees and overpriced force-placed insurance policies.”

Specifically, Healey accused Ocwen of a number of violations, including (taken directly from Healey’s office):

  • Unnecessary flood insurance: Ocwen force-placed borrowers in expensive flood insurance policies for time periods when properties were not in special hazard flood area and did not require flood insurance. The force-placed policies carried high deductibles and did not provide critical liability and personal property coverage to borrowers.
     
  • Improperly administering insurance premiums: Ocwen forced borrowers to pay their insurance premiums into an escrow account and then failed to disburse these escrowed insurance premiums to insurers, causing borrowers’ insurance policies to lapse and leaving them exposed to serious gaps in insurance coverage.
     
  • Charging inflated and duplicative fees: Ocwen took advantage of struggling borrowers by charging duplicative and unnecessary pre-foreclosure property inspection and preservation fees for grass cuts, landscaping, and title review. In some cases, Ocwen conducted three property inspections in the same month and ordered several grass cuts within the same week, then passed the costs on to the borrower.
     
  • Failing to respond to borrower disputes and requests for information: Ocwen failed to provide timely and adequate responses to borrowers’ requests for information, complaints, and notices of error, causing problems to go unaddressed.

Under the terms of the settlement, Ocwen does not admit liability, but the company will pay $2 million in restitution, including direct cash refunds and account credits to affected borrowers.

Additionally, Ocwen will send notifications to 4,000 borrowers who may be eligible to receive a loan modification. The company also agreed to halt foreclosure proceedings for certain homeowners so they can apply for said loan modification.

“Ocwen will also pay three times the damages for borrowers for whom the company wrongfully failed to disburse escrowed insurance premiums and reimburse borrowers who were unnecessarily charged for flood insurance policies,” Healey’s office stated.

Also, Healey’s office said that Ocwen must implement new policies relating to the handling of customer complaints.

“Keeping families in their homes remains a top priority for my office,” Healey said in a statement. “This settlement will provide relief to thousands of Massachusetts homeowners harmed by abusive and unfair mortgage servicing practices.”

In a statement, Ocwen said that it believes it has “sound legal and factual defenses” to the allegations levied by Healey, but chose to settle the lawsuit and move on.

“We have agreed to resolve this matter, which covers certain legacy servicing activities, without admitting liability,” Ocwen said in a statement.

While Ocwen believes that it has sound legal and factual defenses, we concluded that settling this matter in order to avoid the distraction and expense of litigation is in the best interest of Ocwen and its constituents, and resolves another legacy matter,” the company continued. “We are committed to serving our customers in a fair and appropriate manner, and we look forward to continuing to work proactively with our regulators and making a difference in the lives of the customers we serve.”

According to Ocwen, the settlement will see them make a payment to Massachusetts of $675,000, enact a loan modification program for certain eligible Massachusetts borrowers, along with “certain already-completed relief.”

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