The day just went from bad to worse for Ocwen Financial Services (OCN). First, New York State Department of Financial Services superintendent Benjamin Lawsky made it clear that his office will continue to investigate Ocwen’s business practices.
Now, Ocwen is the subject of another class action lawsuit alleging the company has substandard and illegal servicing practices.
Ocwen has been sued in Pennsylvania by a group of homeowners whose mortgage loans were serviced by Ocwen. The homeowners, including lead plaintiff Jill Dempsey, say that they paid off their mortgages in full, per a payoff quote from Ocwen, only to have Ocwen take far longer than the legally prescribed amount of time to file the loan satisfaction documents with the county clerk.
In Dempsey’s case, she paid off a home equity line of credit on her house so she could refinance her first mortgage. Pennsylvania law requires the servicer to file a “satisfaction piece” with the county within 60 days of the receipt of payment from the borrower. The satisfaction piece denotes that the loan has been paid off and the lien has been released.
Instead of filing the satisfaction piece with the Chester County Recorder’s Office within 60 days, as required by Pennsylvania's Mortgage Satisfaction Act, Dempsey’s lawsuit alleges that Ocwen filed the satisfaction piece “approximately 253 days after plaintiff paid her loan in full,” which was 252 days after Dempsey’s first written request for Ocwen to send the satisfaction piece to the county.
Dempsey would subsequently send two other written requests to Ocwen without a response from the company. Ocwen “belatedly filed a satisfaction piece with the Chester County Recorder's Office on March 21, 2014” which was approximately 198 days after Dempsey’s third written request.
“It’s not just an administrative matter,” says Eric Lechtzin, who is representing Dempsey and the rest of plaintiffs. “She was trying to refinance her home loan but was unable to refinance because records showed there was a second lien on the property. It exposed her to interest rate risk and a variety of things.”
According to the lawsuit, Ocwen reported Dempsey’s mortgage as “open” to credit agencies during the 60-day period following its receipt of her request for Ocwen to send the satisfaction piece to the county.
Dempsey’s suit claims she and the other plaintiffs suffered “economic harm and actual damages including, but not limited to, being unable to refinance the first lien mortgage on her home, being required to pay a greater amount of interest on her existing lien mortgage than she would have been required to pay had she been able to refinance this loan in July 2013, and the costs of bringing this instant lawsuit.”
The class action suit, which can read in full here, also claims that Ocwen violated the federal Real Estate Settlement Procedures Act by not filing the satisfaction piece with the county within 60 days of its receipt of a “qualified written request” to file the satisfaction piece from the borrower.
The class action lawsuit claims “Ocwen’s failure to timely record a satisfaction piece in this case is typical for Ocwen, which has a nationwide pattern and practice of recording satisfaction documents beyond the statutorily prescribed time limits to do so.”
Lechtzin says that in many cases, the filing of mortgage satisfaction documents can be done electronically. “It’s not like Ocwen, which is based in West Palm Beach, Florida, has to send someone up to Pennsylvania to walk it into the county offices,” he says.
Lechtzin filed the class action suit in the U.S. District Court for the Eastern District of Pennsylvania on May 15. Lechtzin says that both counts of the lawsuit, one for violations of Pennsylvania’s MSA and one for violations of RESPA, allow for statutory penalties.
“The ball is in Ocwen’s court at this point,” Lechtzin says. “It’s an elegantly simple case. The servicer provides a payoff quote. The borrower then makes the payoff, which includes a small fee for filing the satisfaction document. The borrower does their part and the servicer is supposed to do their part too.”
And soon, Ocwen could be the subject of yet another lawsuit as Ryan & Maniskas, LLP, a national shareholder litigation law firm, announced yesterday that is has launched an investigation into “potential securities law violations by certain officers of Ocwen Financial Corp.”
The firm is seeking Ocwen shareholders to join in a class action suit against the company. The investigation alleges that the company has made “no significant improvements to its (servicing) practices” in the aftermath of a December 2013 settlement between Ocwen and the Consumer Financial Protection Bureau after a CFPB investigation revealed that the company “took advantage of borrowers at every stage of the process.”
Ryan & Maniskas’ press release notes that Ocwen’s stock has fallen nearly 30% this year. In fact, according to HousingWire’s own Ocwen stock ticker page, Ocwen’s stock has actually dropped by nearly 41% this year. And if Lawsky and others have their way, the company’s stock will continue to drop into the foreseeable future.