Ocwen Prepares for $100 Million Servicing Settlement

After a tumultuous several weeks for Ocwen Financial, the company says it is preparing to settle for servicing charges that may amount to $100 million in payments.

The company recorded the $100 million charge Thursday in announcing third quarter earnings performance which netted Ocwen losses of $75.3 million or $.58 per share for the quarter ended September 30. The losses compare with net income of $60.6 million, or $.39 per share for the same period in 2013. The third quarter losses accounted for the $100 million potential settlement charges as part of $120 million reserved for “various regulatory and legal matters.” 

Ocwen was investigated recently by the New York Department of Financial Services, which charged the company with back dating hundreds of borrower letters and resulted in borrowers receiving notices based on dates that had already passed, or did not allow adequate time for borrower resolution. 

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Despite the regulatory issues, Ocwen’s chief executive highlighted positive milestones for the company, including the completion of its 500,000th loan medication. 

“I want to emphasize that Ocwen takes great efforts to keep borrowers in their homes and to avoid foreclosures,” said Bill Erbey, Ocwen’s Executive Chairman. “Ocwen recently reached a significant milestone by making its 500,000th loan modification, including 290,000 HAMP modifications. Ocwen is the leader in foreclosure prevention with 44% more HAMP modifications than any other servicer.”

With respect to the back dating concerns, Erby said the company is reviewing the issues and is working to address them. 

“We work very hard to keep borrowers in their homes and that is why we take the concerns raised by the New York Department of Financial Services so seriously,” he said. “We have numerous compensating controls in place which we believe should have prevented borrower harm. Nonetheless, Ocwen is proactively creating a process whereby any borrower, who believes they received a misdated letter, and were harmed as a result, will have the opportunity to receive a complete file review to resolve any issues caused by the misdating.”

Though the company reported a net loss, Ocwen pointed to grown within its reverse mortgage business, which partially offset lower forward volumes. During the quarter, Ocwen originated $168 million of reverse loans through its Liberty Home Equity Solutions platform.

Written by Elizabeth Ecker

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