Published: Fri, April 21, 2017
Money | By Oscar Reynolds

Regulators sue Ocwen Financial, say it mishandled mortgages

Regulators sue Ocwen Financial, say it mishandled mortgages

Since April 2015, Ocwen has received more than 580,000 notices of error and complaints from more than 300,000 different borrowers, the Bureau alleges.

"We allege that these violations were significant and systemic, and harmed thousands of consumers", CFPB director Richard Cordray said on a conference call this afternoon.

As Ocwen grew, it failed to properly integrate the systems of businesses it acquired, and improperly foreclosed on borrowers in some cases, NY regulators headed by Benjamin Lawsky said in their 2014 order.

The investigation focuses on whether the Company and its executives violated federal securities laws by engaging in activities that resulted in lawsuit being filed by the U.S. Consumer Financial Protection Bureau ("CFPB").

The federal consumer agency alleged that Ocwen conducted an error-plagued operation that failed to credit borrower payments, sent inaccurate statements and didn't make insurance payments on time, leading to a lapse of coverage.

The company is one of the nation's largest non-bank mortgage servicers, focusing mostly on subprime and delinquent mortgages, handling 1.4 million mortgages in all 50 states as well as Washington, D.C., worth roughly $209 billion.

Ocwen, in a statement, said it "strongly disputes" the CFPB's accusations. Ocwen tried "manual workarounds" but often failed to correct inaccuracies and produced even more errors.

The CFPB claimed that Ocwen loaded inaccurate and incomplete information into a proprietary technology system and used the faulty information to service loans. According to the lawsuit, Ocwen's head of services called the company's technology "an absolute train wreck".

The CFPB and Florida's actions came within an hour after 20 states, led by North Carolina, filed cease-and-desist orders against the firm and its units, accusing them of mishandling consumer escrow accounts.

"Ocwen believes its mortgage loan servicing practices have and continue to result in substantial benefits to consumers above and beyond other mortgage servicers".

Following the legal actions against the company, Piper Jaffray recommended traders short shares of REIT New Residential Investment Corp (NYSE: NRZ), which owns some of Ocwen's servicing rights.

A spokesman for Ocwen wasn't able to immediately comment on Thursday.

Regulators said when consumers complained to Ocwen, the company routinely failed to acknowledge or investigate the grievances.

The CFPB says the lawsuit filed Thursday is for violations since that 2013 action.

Ocwen also had been prohibited from purchasing mortgage servicing rights - which it needs to do to grow its business - because of past consent orders in NY and California.

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