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States Confirm Ocwen Bans Don’t Apply to Liberty, Reverse Mortgages

Agencies from 21 states across the nation sent shockwaves through the lending industry last week when they issued cease-and-desist orders against Ocwen Financial Corporation (NYSE: OCN), preventing the servicer from acquiring new mortgage servicing rights and originating new loans — and, in the case of Massachusetts, forcing it to transfer its existing portfolio.

But according to an RMD analysis of the orders and contacts with state governments, Illinois was the only jurisdiction that included Liberty Home Equity Solutions, Ocwen’s reverse-mortgage servicing and origination arm, in the bans, and not because of any malfeasance.

RMD reached out to all 21 states and the District of Columbia for clarification on the matter. At press time, 18* returned RMD’s contacts, and with the exceptions of Illinois, Maine, and Washington, D.C., all said that Liberty was not affected by their orders.

When asked why Illinois elected to include Liberty — as well as Homeward Residential, Inc., another Ocwen forward-mortgage subsidiary — in its action, Department of Financial and Professional Regulation spokesperson Terry Horstman pointed RMD to Section 5 of its order against Ocwen.

“The Department is adding Homeward Residential and LHES to this Order, although not part of the Ocwen Multi-State Examination, so that financial and loan activities that are subject to this Order are not transferred to or conducted by any Ocwen subsidiary holding an Illinois Residential Mortgage License,” the order reads.

In other words, the state of Illinois has issued a preemptive strike against potential Ocwen chicanery, preventing the servicer from simply originating forward mortgages or acquiring mortgage servicing rights through Liberty or Homeward.

In their orders, the states mentioned the Multi-State Mortgage Committee, an alliance of six states that conducted a years-long investigation into Ocwen’s operations and determined that the West Palm Beach, Fla.-based servicer had committed serious errors in handling homeowners’ escrow accounts. The committee also alleged that Ocwen failed to meet its end of a 2016 memorandum of understanding by providing the states with insufficient data about its finances. The cease-and-desist orders thus generally suspend Ocwen’s ability to originate mortgages and acquire servicing rights until it can submit a complete audit of its escrow activities, and a more complete picture of its financial standing.

William Lund, the superintendent of Maine’s Bureau of Consumer Credit Protection, told RMD that he had received the same question about Liberty from Ocwen’s legal team, and that his state was drafting a response. Maine’s cease-and-desist order against Ocwen does not mention Liberty by name.

A representative from the Washington, D.C. Department of Insurance, Securities and Banking told RMD that she was seeking clarification on the issue as of press time, although as with Maine, the District’s order includes no reference to Liberty.**

Three of the four jurisdictions that did not respond — Florida, Rhode Island, West Virginia, and Wisconsin*** — did not mention Liberty by name in the text of their orders against Ocwen, and many of the states’ actions contained nearly identical language. RMD was unable to locate a copy of the filing on the West Virginia Division of Financial Institutions’ website.

As RMD has reported over the past few days, Ocwen has sought to vigorously defend itself against both the state-level cease-and-desist orders and a federal lawsuit filed by the Consumer Financial Protection Bureau. In the former cases, Ocwen has asked for restraining orders against the governments of Illinois and Massachusetts; in the latter, the servicer has requested an early ruling on the constitutionality of the CFPB and its regulatory authority.

A spokesperson for Ocwen was not immediately available for comment. RMD will update this post with new information as we receive it.

*UPDATE, 4/28, 9:17 a.m. CDT: Matt Sheaff, a spokesperson for the Rhode Island Department of Business Regulation, confirmed to RMD Friday morning that his state’s Ocwen order also does not apply to Liberty Home Equity Solutions.

**UPDATE, 4/28, 2:50 p.m. CDT: A spokesperson for the Washington, D.C. Department of Insurance, Securities and Banking confirmed to RMD that the District’s order applies only to Ocwen Loan Servicing.

***UPDATE, 5/1, 4:32 p.m. CDT: George Althoff, director of communications for Wisconsin’s Department of Financial Institutions, told RMD that its cease-and-desist order applies only to Ocwen Loan Servicing, LLC. 

Written by Alex Spanko