Ocwen to Pay $25M, Forgive Nearly $200M in California Settlement

Ocwen Financial Corporation (NYSE: OCN) emerged from an auditor’s shadow in California last week after paying a $25 million settlement and agreeing to nearly $200 million in loan forgiveness over the next three years.

The Atlanta-based mortgage servicer nearly lost its license to operate in California in 2015 after authorities said it failed to turn over documentation proving that it was following the state’s lending laws, the Los Angeles Times reported at the time. In order to keep operating, Ocwen — which originates reverse mortgages through its Liberty Home Equity Solutions subsidiary — agreed to pay $2.5 million and subject itself to independent third-party auditing as recommended by the State of California Department of Business Oversight. Under the terms of that settlement, Ocwen was also temporarily prevented from acquiring the mortgaging servicing rights to any loans in the state of California.

In a statement released late Friday night, ahead of the long Presidents Day weekend, Ocwen said the new settlement would free itself from the independent auditor and allow it to begin picking up new mortgages in the Golden State.

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“Ocwen is pleased to have reached a comprehensive settlement with the DBO related to matters the agency raised, and we will quickly move forward to implement all terms associated with this agreement,” wrote Ron Faris, Ocwen’s president and CEO, in the statement. Requests for comment from Ocwen and a third-party public relations firm were not returned to RMD by press time.

Despite the seemingly hefty terms of the settlement, Ocwen had been actively attempting to reach such a deal since the summertime, as HousingWire reported back in July, due to even more onerous costs associated with the third-party monitor: According to a company 10-Q report filed in October, Ocwen’s regulatory expenses jumped from $27.8 million during the nine months ended September 2015 to $73.3 million over the same period in September 2016, due primarily to the California audit.

Ocwen noted in its statement that it would admit no wrongdoing as part of the settlement agreement.

Written by Alex Spanko

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  • Can Liberty avoid being painted by the misdeeds of its parent? Guilt by association would be justified. It is certainly not unheard of and has its place in business.

    It seems the efforts by Ocwen to have its case dropped was not only one of inconvenience but perhaps even more, one of cutting off 1) more legal defense costs and 2) more exposure to other states following suit.

    Everyone in our industry seemed to gasp with the acquisition of Liberty by Ocwen in fear of the reputation of Ocwen rubbing off on this industry. It becomes much harder to defend alleged misconduct now with these payments and the no admission admission of wrongdoing.

    As one Florida originator is found of saying, perception is everything. To save the value of Liberty perhaps there is the need for a sell off of Liberty to another HECM originator.

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