Ocwen , the mortgage servicing giant will pay $20 million in settlement with California regulators for sloppy practices.
Payment to borrowers will come in the form of loan modifications. An additional $5 million will be paid to borrowers victimized by Ocwen’s “letter-dating” problem.
The violations of state and federal law at the heart of this action occurred between January 1, 2012 through June 30, 2015.
The California Department of Business Oversight headed up the investigation and negotiated the settlement.
What Ocwen did
A third party auditor conducting the investigation found that Ocwen
- Violated HBOR by: failing to provide borrowers all required information in loss mitigation denial notices; wrongly informing borrowers, in loss mitigation denial notices, they were current on their payments; and providing borrowers inaccurate information on notices of default.
- Violated the federal Servicemembers Civil Relief Act by failing in a timely manner to reduce the monthly interest rate to six percent for California active duty personnel.
- Violated other federal laws by: collecting borrower-paid mortgage insurance premiums after borrowers were obligated to make such payments; failing to inform borrowers of the timelines to accept or reject loan modification offers; sending inaccurate and untimely notices to borrowers who were more than 45 days delinquent on their payments, or sometimes failing to send such notices at all; and failing to promptly submit corrected information to credit reporting agencies on California borrowers when Ocwen previously had provided erroneous information.
How funds get to borrowers
California will name an independent party to administer delivery of the agreed relief to borrowers in the state.
The administrator will also monitor Ocwen’s compliance with an earlier order triggered by Ocwen shortcomings.
Ocwen must fund the settlement plan before it will be permitted to acquire new servicing rights on California loans.
What a loan servicer does
In a nutshell, the loan servicer is the collection arm for the actual owner of a loan. While borrowers often think that their loan itself has been sold, what usually changes hands is the right to manage collection of the loan on behalf of the loan’s owner.
Loans, these days, are often owned by trusts which bundled loans into big batches and sold shares in the batch to Wall Street investors and pension funds.
The investment trusts hire loan servicers like Ocwen , at the trust’s expense, to do the work of managing the loans.
Danger in changes of servicers
Ocwen is not the only loan servicer to have trouble following the rules and treating borrowers honestly. Shoddy work is rampant in the industry.
My charge to borrowers is to use the rights given them by Dodd Frank regulations to monitor the state of their mortgage loan regularly.
It seems that a new servicer gets only the balances for each loan when servicing changes hands. Wait too long after the servicing hand off and evidence of past glitches may be lost.
More on making a Request for Information about your loan.