One of the nation’s largest mortgage servicing companies has agreed to pay $2.1 billion in a joint state-federal settlement that could be worth more than $40 million to Connecticut borrowers.
The Consumer Financial Protection Bureau and 49 state attorneys general announced that Atlanta-based Ocwen Financial Corp. and its subsidiary Ocwen Loan Servicing pushed borrowers into foreclosure through illegal actions, such as failing to promptly and accurately credit mortgage payments.
The company also miscalculated interest rates and charged borrowers improper fees.
Under the agreement, Ocwen also will refund a combined $125 million to about 185,000 borrowers who had been foreclosed on from 2009 to 2012.
Connecticut borrowers will receive an estimated $39,789,256 in principal reductions through the settlement. Additionally, consumers holding 1,612 loans will be eligible to receive a cash payment. The exact payment amount is contingent on the number of borrowers who submit valid claims.
The principal reductions will go to families who are in default or at imminent risk of default. Thus, the benefits will be targeted to those who are most at risk and stand the greatest chance of avoiding foreclosure as a result of this relief.
Ocwen is the country’s fourth largest mortgage servicer and specializes in servicing high-risk mortgage loans.
“We believe that Ocwen violated federal consumer financial laws at every stage of the mortgage servicing process,” Richard Cordray, director of the national Consumer Financial Protection Bureau, said in a conference call with the media. “We have concluded that Ocwen made troubled borrowers even more vulnerable to foreclosure.”
Ocwen said in a statement it was pleased to have reached the settlement. The agreement, the company said, “is in alignment with the same ultimate goals that we share with the regulators—to prevent foreclosures and help struggling families keep their homes.”
The settlement, pending approval from a federal court in Washington, D.C., also requires Ocwen to change the way it manages mortgages. Specifically, the company must stop “robo-signing,” or automatically signing off on foreclosure documents without proper review. Officials said the practice was also employed by two companies later acquired by Ocwen: Homeward Residential Inc. and Litton Home Servicing LP.
The investigation also found Ocwen and its related companies engaged in improper servicing practices, including but not limited to: failing to apply payments made by borrowers accurately and in a timely manner; failing to maintain accurate account statements; charging consumers unauthorized fees for default-related services; and failing to provide accurate and timely information to borrowers seeking information about loss mitigation services.
Ocwen’s compliance with the settlement will be overseen by Joseph Smith Jr., the monitor for the $25 billion settlement reached in February 2012 between the federal government and the states and five major banks: Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.
Also under the settlement, homeowners will be sent new mortgage loan servicing and foreclosure standards. Ocwen will pay an additional $2.3 million for settlement administration costs. A settlement administrator will contact qualified borrowers associated with foreclosed loans.
The settlement does not prevent homeowners or investors from pursuing their own individual or class action lawsuits against Ocwen nor does it grant immunity to the mortgage servicer from potential criminal prosecution.
“This settlement with Ocwen continues the important work of the 2012 National Mortgage Settlement and, while we cannot prevent every foreclosure, this will extend opportunities for relief to thousands of Connecticut borrowers,” Attorney General George Jepsen said in a statement.
The National Mortgage Settlement was a three-year agreement reached in 2012 with 49 state attorneys general and the District of Columbia, the federal government and five mortgage servicers. Oklahoma is the only state not participating. To date, the National Mortgage Settlement has provided more than $51 billion in relief to distressed homeowners nationwide, including approximately $450 million in benefits to nearly 6,300 Connecticut borrowers.
In Connecticut, assistant attorneys general Joseph Chambers and Matthew Budzik, head of the Finance Department, assisted Jepsen in the matter. •