Illinois, Montana Reach Agreements with Ocwen Over Servicing Issues

Ocwen Financial Corporation (NYSE: OCN) entered into consent agreements with the states of Illinois and Montana, providing the servicer a pathway out of a servicing ban that started earlier this year.

Under the terms of the agreements, both of which were announced Thursday, Ocwen will agree to discontinue use of its existing servicing software in both states. The West Palm Beach, Fla.-based firm will also be required to hire a third-party auditing firm to probe its previous servicing efforts.

In addition, Ocwen and its reverse mortgage arm, Liberty Home Equity Solutions, will see a ban on the acquisition of mortgage servicing rights in Illinois lifted on April 30 of next year. Ocwen can also begin originating new loans in the Land of Lincoln as long as it doesn’t use its existing servicing software to handle them, the Illinois Department of Financial and Professional Regulation (IDFPR) said in announcing the agreement.


The IDFPR specifically pointed to the software, known as REALServicing, as the cause of many of Ocwen’s problems — including  erroneous customer information and delayed property insurance payments on behalf of homeowners.

The two deals mark a major step toward rectifying a wave of enforcement actions that stripped Ocwen of its ability to pick up new MSRs in 21 states and the District of Columbia, the result of a multi-state investigation into its servicing practices. State banking authorities alleged that Ocwen had mishandled homeowners’ escrow accounts and declined to provide authorities with details about its financial picture.

As RMD reported back in April, Illinois was the only jurisdiction that specifically included Liberty in its action against Ocwen, though officials indicated that the move was simply designed to prevent the company from performing an end-around on the ban by originating forward loans through its other entities.

Though the pair of moves still leaves many more states out on the table, a spokesperson for the IDFPR told RMD that Georgia, South Carolina, Idaho, Wisconsin, Maine, and Mississippi signed consent agreements with Ocwen on Thursday as well. Those states’ financial department websites did not have any announcement of consent agreements as of press time, and an Ocwen spokesperson directed RMD to public information available from the states of Illinois and Montana.

Under the terms of the Illinois deal, Ocwen must provide a quarterly report to state regulatory authorities, and develop a specific plan of action for replacing REALServicing. Montana authorities also specified that all customers harmed by Ocwen’s practices must receive restitution.

“I’m pleased we have reached this agreement with Ocwen,” said Melanie Hall, commissioner of Montana’s Division of Banking and Financial Institutions, in a statement announcing the agreement. “The consent order allows both the division and the company to move forward with a focus on what specific steps need to be taken in order to provide consumers with accurate processing of their mortgage payments and for improved customer service in the future.”

Written by Alex Spanko

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