Ocwen Financial Corporation (NYSE: OCN) has begun to make headway in its compliance with federal regulators, particularly the National Mortgage Settlement (NMS), according to a recent report.
Joseph A. Smith, Jr., monitor of the Settlement, last week filed a report with the U.S. District Court for the District of Columbia on his investigation into the independence of Ocwen’s internal review group (IRG), and the company’s compliance with the Settlement for the first and second quarters of 2014.
Ocwen, which is the parent of top-10 reverse mortgage lender Liberty Home Equity Solutions, had been working with the Office of the Mortgage Settlement Oversight since last year on issues related to its servicing compliance, which included processes used by Ocwen’s IRG, which is responsible for reporting on the company’s compliance with the NMS.
In May 2014, Smith noted that an Ocwen employee had contacted him, alleging “serious deficiencies” in the IRG process. Last week’s report, however, indicates that Ocwen has taken and continues to implement corrective action steps to address issues of compliance.
“I now have a measure of assurance that issues with Ocwen’s IRG’s independence, competency and capacity have been sufficiently addressed,” Smith said in a written statement.
Before reaching that conclusion, Smith authorized independent accounting firm McGladrey LLP to retest Ocwen’s performance across several metrics deemed to be at-risk for the first and second quarters of 2014.
McGladrey’s results were substantially consistent with those of Ocwen’s IRG. And after thorough retesting, McGladrey ultimately determined that Ocwen failed one metric for the first quarter of 2014 in the area of “loan modification document collection timeline compliance,” also referred to as Metric 19 in Smith’s report.
“Metric 19 tests whether the servicer is complying with the requirement to notify borrowers of any missing or incomplete documents in a loan modification application in a timely manner,” Smith states in the report.
Last year, the New York Department of Financial Services (NYDFS) raised concerns of a letter-dating issue at Ocwen, where the company had inadvertently misdated and sent letters to borrowers regarding foreclosure and loan modification.
“In many cases, borrowers received a letter denying a mortgage loan modification, and the letter was dated 30 more days prior to the date that Ocwen mailed the letter,” wrote NYDFS then-superintendent Benjamin Lawsky in a letter to Ocwen dated October 21.
To address this, Ocwen has submitted a remediation plan to identify all impacted borrowers from December 1, 2013 to March 31, 2015.
“Ocwen submitted a [Corrective Action Plan] that identified and addressed the root cause of its fail,” wrote Smith in his report. “My professionals I reviews the CAP and determined that it should sufficiently address the fail.”
Under this “Global CAP,” Smith notes there will be “rigorous testing” to determine if Ocwen appropriately implements the plan and corrects its letter-dating issues. Smith also anticipates that the Global Cap will be completed and the testing of the impacted metrics will resume in the third quarter of this year.
In the meantime, Smith stated that he will continue to closely monitor Ocwen’s compliance with the Settlement agreement and plans to report on the company’s compliance for the third and fourth quarters of 2014 in the coming weeks.
“We are pleased that after more than one year of intense scrutiny and investigation by the Monitor, our original testing was substantially validated,” Ocwen said in a written statement provided to RMD via email. “The Monitor appears to have regained confidence in our Internal Review Group and our overall compliance with the National Mortgage Settlement.”
Written by Jason Oliva
