The Consumer Financial Protection Bureau has ordered Ocwen Financial Corporation (NYSE:OCN) to provide $2 billion in principal forgiveness relief to homeowners throughout the next three years as part of a larger settlement agreement.
The mortgage servicer announced on Thursday a settlement agreement with the CFPB and state officials resolving allegations it mistreated consumers and committed “systemic misconduct at every stage of the mortgage servicing process,” according to the Bureau.
Ocwen, the parent company of Liberty Home Equity Solutions, has been accused of failing to record borrowers’ mortgage payments in a timely manner, and improperly forcing them to purchase costly homeowners insurance policies. No reverse mortgage borrowers will be included in the settlement, however, officials told RMD.
“Deceptions and shortcuts in mortgage servicing will not be tolerated,” said CFPB Director Richard Cordray in a statement. “Ocwen took advantage of borrowers at every stage of the process. Today’s action sends a clear message that we will be vigilant about making sure that consumers are treated with the respect, dignity, and fairness they deserve.”
Terms of the agreement include a commitment by Ocwen to service loans in accordance with specified servicing guidelines and to be subject to oversight by an independent national monitor for three years.
The mortgage servicer must also pay $127.3 million to a consumer relief fund that will be disbursed by an independent administrator to eligible borrowers. Approximately half of this consumer relief fund payment will be funded by the former owners of certain servicing portfolios previously acquired by Ocwen and integrated into the company’s servicing platform.
Ocwen must also continue its principal forgiveness modification programs to delinquent and underwater borrowers—including underwater borrowers who are at imminent risk of default—amounting to at least $2 billion in relief in the next three years.
With 49 states and the District of Columbia participating in the agreement alongside the CFPB, Florida homeowners are expected to get the largest chunk of the relief settlement, at around 17%, officials said.
During the second quarter of 2013, Ocwen established a reserve that it expects will cover all but about $0.5 million of its direct payment obligations in connection with the agreement, it said in a regulatory filing.
View the proposed Ocwen Consent Order, subject to approval.
Written by Alyssa Gerace