The drama continues to unfold for Ocwen Financial Corp. (NYSE: OCN), which today which today announced the resignation of Founder and Chairman William C. Erbey, following a $150 million settlement with one of its top scrutinizers, the New York Department of Financial Services (NYDFS).
After nearly 30 years of service with the company, Erbey will step down from his position as Executive Chairman, effective January 16, 2015. Upon his resignation, current Ocwen Director Barry Wish will assume the role of Non-Executive Chairman on that date.
“I am grateful to the many associates who have worked alongside me and proud of what we have accomplished,” Erbey said in a written statement. “I am confident about Ocwen’s future under the experienced leadership of the executive team.”
In agreement with the settlement, Erbey will also step down from his positions as Board Chairman at each of Ocwen’s four related companies, including Altisource Portfolio Solutions S. A.; Altisource Residential Corporation; Altisource Asset Management Corporation; and Home Loan Servicing Solutions, Ltd.
“As of these resignations, Mr. Erbey will have no directorial, management, oversight, consulting, or any other role at Ocwen or any related party, or at any of Ocwen’s or the related parties’ affiliates or subsidiaries,” said the NYDFS in a statement.
Under the terms of the settlement, Ocwen will pay a civil monetary penalty of $100 million to the NYDFS by December 31, which will be used by the State of New York for housing, foreclosure relief and community redevelopment programs, according to a release from the regulator.
The remaining $50 million will be used as restitution to current and former New York borrowers in the form of $10,000 to each borrower whose home was foreclosed upon by Ocwen between January 2009 and December 19, 2014. The balance will then be distributed equally among borrowers who had foreclosure actions filed, but not completed, by Ocwen between that timeframe.
The settlement, which arrived after the company inadvertently misdated hundreds of letters sent to borrowers regarding loan modifications and foreclosures, was largely prepared for by Ocwen.
In the third quarter, the company recorded a $100 million charge in payments in anticipation to settle for servicing charges in the midst of investigations from the NYDFS. As for the other $50 million, Ocwen said it will record that amount in its fourth quarter 2014 financial statements.
Also as part of the settlement, Ocwen will not be permitted to acquire additional mortgage servicing rights, or begin to acquire additional MSRs unless it receives approval from the NYDFS, and meets benchmarks developed by the independent monitor concerning the adequacy of Ocwen’s onboarding process for newly acquired MSRs.
“Today’s agreement will deliver significant assistance to Ocwen homeowners in New York and provide a new path for the company to clean up its operations,” said Lawsky in a written statement. “We will continue to closely monitor Ocwen to ensure that it lives up to its obligations under this agreement, and treats struggling homeowners with the respect and dignity they deserve.”
Ocwen has also agreed to several non-monetary provisions under the settlement, including monitor-led oversight of its operations, in addition to the New York borrower assistance measures.
Beginning 60 days after December 19—and for two years—Ocwen will provide, upon request, New York borrowers with complete loan files at no cost, as well as provide every N.Y. borrower detailed explanations as to why a loan modification, short sale or deed-in-lieu of foreclosure were denied.
The company will also provide one free credit report per year, at its own expense, to any N.Y. borrower on request if Ocwen made a negative report to any credit agency from January 1, 2010, the company will make staff available for borrowers to inquire about their credit reporting, dedicating resources necessary to investigate such inquiries and correct any errors.
Another non-monetary provision of the settlement requires the NYDFS to appoint an independent Operations Monitor to review and assess the adequacy and effectiveness of Ocwen’s operations for two years, with the regulator having the option to extend this engagement for another 12 months.
The year has been a tumultuous one—to say the very least—for Ocwen, marked by numerous investigations from regulators, including the NYDFS as well as the Monitor of the National Mortgage Settlement, which released a report this month examining the company’s compliance with NMS standards.
Even with the ongoing federal probes, penned apology letters from executive leadership and series of servicing downgrades, Ocwen has reiterated its cooperation with regulators time and time again. Today’s settlement is no exception, though 2015 looks to be a rigid year.
“We believe this agreement is in the best interests of our shareholders, employees, borrowers and mortgage investors,” said Ocwen CEO Ronald Faris. “We will continue to cooperate with the DFS in the implementation of the terms of this settlement which we believe will allow Ocwen to continue to focus on what we do best—helping homeowners.”
The fourth-largest mortgage loan servicer in the U.S., Ocwen services an unpaid principal balance of approximately $430 billion. In New York alone, the company services nearly 130,000 residential home loans with a total UPB of more than $30 billion.
Written by Jason Oliva