Ocwen Under More Fire From Regulators on Servicing Errors

Following numerous investigations into non-bank mortgage servicers conducted by the New York Department of Financial Services, the regulator this week brought more claims against Ocwen Financial (NYSE: OCN) regarding its servicing practices in New York. 

Specifically, the department found instances of backdating of borrowers’ servicing letters, which the regulator says caused undue harm to borrowers. Potentially, there were hundreds of thousands of letters backdated, the state noted. 

In a letter sent to Ocwen Tuesday, the department’s superintendent Benjamin Lawsky and his staff point to a review finding letters to borrowers that were backdated 30 days from when the borrowers received them.

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“In many cases, borrowers received a letter denying a mortgage loan modification, and the letter was dated 30 more than days prior to the date that Ocwen mailed the letter,” the regulator writes. “These borrowers were given 30 days from the date of the denial letter to appeal that denial, but those 30 days had already elapsed by the time they received the backdated letter.” 

Lawsky’s letter also points to findings of letters sent by Ocwen to borrowers facing foreclosure indicating instructions as to how they could cure their defaults, but those letters were sent after the date when the borrower was able to take action toward curing the defaults. 

“Even worse,” the letter says, “Ocwen did nothing to investigate or address the backdating issue when an employee questioned the accuracy of Ocwen’s letter dating practices and altered the company’s vice president of compliance.” 

Ocwen initially responded to the letter through a press release with a statement indicating it had found 283 borrowers in New York who had received incorrect dates, 281 of whom are still current borrowers. 

“Ocwen regrets that, due to software errors in our correspondence systems, we inadvertently sent improperly dated letters to some borrowers,” the statement reads. “As always, our goal is to avoid foreclosure. … We believe that we have resolved the letter dating issues that have been identified to date, and we continue our investigation as to whether there are additional letter dating issues that need to be resolved….”

But hours later, Ocwen rescinded its initial statement and issued another, indicating there may be more borrowers impacted in New York. 

“Ocwen wishes to correct its statement in a press release earlier today that 283 borrowers in New York received letters with incorrect dates,” the company said. “Ocwen is aware of additional borrowers in New York who received letters with incorrect dates but does not yet know how many such letters there were. Ocwen is continuing its investigation into these matters. We are working with and fully cooperating with DFS and the Monitor to address their concerns.”

Ocwen’s share price plummeted following the news, closing down more than 18% from Tuesday’s open. 

The company is the parent of Liberty Home Equity Solutions reverse mortgage originations platform and is a servicer of reverse mortgages.

Written by Elizabeth Ecker

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  • Like Countrywide (CW) before it, Ocwen appears oblivious to what is legal, best for consumers, and the mortgage industry. Who knows where Bank of America would be today if they had not acquired CW? Would we be seeing the nonsense that is still going on if the Attorney General and state Attorney Generals actually done their jobs in the last five years and prosecuted just some of the most abusive?

    It is too bad that the various governmental and regulatory bodies refused to take criminal action against bond raters, lenders, bond issuers, and others. Many of the same element that foisted the mortgage disaster in the US are still actively involved in the industry.

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