Goldman, Litton, Ocwen sign New York robo-signing deal
Goldman Sachs (GS), Ocwen Financial Corp. (OCN) and Litton Loan Servicing will end robo-signing practices and write down as much as $53 million in unpaid principal on New York mortgages as part of an eight-point agreement with an Empire State regulator. In addition, Goldman will forgive 25% of the principal balance on New York home loans 60 days or more past due serviced by Litton and owned by Goldman as of Aug. 1. The investment banking giant, which is exiting the mortgage servicing business with the sale of Litton, will adopt these servicing practices if it should reenter the servicing industry. New York's Superintendent of Financial Services Benjamin Lawsky said Thursday the settlement was implemented "as a condition to allowing Ocwen's acquisition of Goldman Sachs' mortgage servicing subsidiary, Litton." When the two servicing firms merge, Ocwen will become the nation's 12th largest mortgage servicer. Goldman Sachs declined to comment Thursday and representatives for the two mortgage servicers could not be reached for comment. Robo-signing, a controversial practice that involves the mass signing of mortgage documents without review, has been under fire since last year when foreclosure moratoriums were implemented nationwide to ensure all documents receive the appropriate review. As part of the eight-point agreement, the servicers and Goldman agree to stop signing documents en masse and follow staffing and training requirements to prevent the practice from reoccurring. In addition, servicers agree to withdraw pending foreclosures tied to affidavits that were robo-signed or inaccurate. The servicers also are required to create a single-point of contact for distressed borrowers seeking aid, ensure forced insurance is reasonably priced when compared to claims, while also imposing rigorous pleading requirements for foreclosure actions to make sure the foreclosing parties have the legal right to foreclose. If the servicers find a borrower has been wrongfully foreclosed on, the agreement says servicers will have to ensure equity in the lost home is returned to the borrower or, if sold, they receive financial compensation. The deal also hits the late-fee payment structure, imposing new rules designed to stop the layering of late fees and other servicer fees on delinquent or defaulted accounts. The firms also agreed to strengthen oversight of foreclosure counselors and terminate any foreclosure attorney who has problematic document practices or who faces court sanctions. Write to: Kerri Panchuk.