CFPB vs. Ocwen
CFPB vs. Ocwen
Did you or someone you know ever have a mortgage serviced by Ocwen?
The CFPB vs. Ocwen. On April 20th, 2017 The Consumer Financial Protection Bureau (CFPB) filed suit against Ocwen Financial Corporation, Ocwen Mortgage Servicing, INC., and Ocwen Loan Servicing, LLC. In it’s complaint under Sections 1054 and 1055 of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5564 and 5565, the CFPB stated that “It (Ocwen) committed numerous violations of Federal consumer financial laws that have harmed borrowers. Among other things, Ocwen has improperly calculated loan balances, misapplied borrower payments, failed to correctly process escrow and insurance payments, and failed to properly investigate and make corrections in response to consumer complaints. Ocwen has compounded these failures by illegally foreclosing upon borrowers’ loans and selling loan servicing rights to servicers without fully disclosing or correcting errors in borrowers’ loan files.” We’ll see clearly below how the CFPB vs. Ocwen suit has played out and how Ocwen has harmed it’s clients.
Ocwen has a long history of mortgage servicing; it was formed back in 1988 by William Erbey who served as the company’s CEO until 2010 when he was succeeded by Ronald Faris. Between 2010 and the first quarter of 2014 Ocwen’s servicing portfolio, that is the amount of loans that they oversee and collect payments on, grew from 350,000 loans with around $50 billion in unpaid principle balances to almost 3 million loans with around $465 billion in unpaid principle balances. A bulk of this increase came from Ocwens acquisition of Residential Capitals servicing platform in 2013 which came with 1.7 million loans with approximately $183 billion in unpaid principal balances. Unfortunately borrowers do not get to choose who services their mortgage and as we’ll see later in this article, the borrower is the individual harmed the most when a company is unable to properly service such a large portfolio.
Some of the fundamental functions of a mortgage servicer include:
- Processing and applying borrower payments
- Communicating accurate payment information to borrowers
- Managing escrow accounts
- Maintaining accurate loan balance information
- Respond to borrower inquiries
- Handle loss mitigation requests
- And initiate foreclosure proceedings
In order for a mortgage servicer to perform these tasks successfully, they use management systems run by electronic databases to input loan and borrower information. These systems are often referred to a “Systems of Record.” These systems are vital to a servicers ability to accurately service loans and keep up with legal requirements and the functions we laid out above. Lets consider a very simple example. Let’s say a homeowner called their mortgage company to make a mortgage payment on the 1st of the month. After handling that transaction over the phone, one would assume that the payment amount and date the payment was made would be properly input into some sort of system. But what if the mortgage servicer entered that information inaccurately into their system showing that the payment was made late and generated a late fee on their next statement? Or what if the system itself had deficiencies that produced inaccurate information even when the servicer input correct information? This could be disastrous for any homeowner.
Ocwen has used and continues to use a proprietary system of record called REALServicing. In 2009 Ocwen spun off its internal technology department into a separate company named Altisource Portfolio Solutions or “Altisource” for short. Ocwen contracted with Altisource to use their technology services and in 2012 and 2013, while Erbey was the Chairman of the Boards of BOTH Altisource and Ocwen, Ocwen extended this technology services contract through 2025. It’s worth mentioning that no other mortgage servicing company uses REALServicing.
The CFPB was able to determine that Ocwen was servicing loans and collected upon debts based on inaccurate and incomplete borrower loan information largely due to issues with the REALServicing platform. Ocwen often input inaccurate and/or incomplete information, or failed to input accurate or complete information about borrowers’ loans into the REALServicing system of record. Even when the information in REALServicing was accurately input, REALServicing generated inaccurate information about borrowers’ loans due to deficiencies in the system itself. Ocwen’s use of inaccurate and incomplete information to collect mortgage, tax, and insurance payments, communicate with borrowers about loss mitigation issues, proceed with foreclosures, and when selling the servicing rights of borrowers’ loans to new servicers resulted in significant harm to borrowers.
Remember when we mentioned that Ocwen aquired the servicing rights to Residential Capitals 1.7 million loans with approximately $183 billion in unpaid principal balances? Based on the finding of the CFPB, Ocwen input inaccurate and incomplete loan information and payment data from these acquisitions into the REALServicing system of record. In many instances, the systems of record that other servicers like Residential Capital use data fields that are different from the data fields in REALServicing. What a mortgage servicer is supposed to do with situations like this is check whether they are correctly boarding loan data from the prior servicer’s systems into their own system of record. Ocwen verifies critical loan data fields—such as interest rate, property type, and unpaid principal balance—by matching it with the information in the borrower’s loan documentation. If the information in REALServicing does not match what Ocwen finds in the documents, Ocwen is supposed to correct the error in REALServicing. To ensure the loan data it is using to service loans is complete and accurate, Ocwen sought to complete the loan verification process within 60 days of boarding the loan into REALServicing. However since 2014, Ocwen was not able to complete this process within 60 days. Instead, they relied on unverified loan information for months—and often for more than a year—to service hundreds of thousands of loans.
As of December 2013, Ocwen had a backlog of more than 400,000 transferred loans that remained unverified, and it took them until August of 2014 to make corrections to critical data fields for those loans. Due to that backlog, Ocwen delayed verifying the 1.7 million Residential Capital loans it acquired in 2013 until September 1, 2014; at that time, Ocwen was servicing more than 1.1 million unverified Residential Capital loans on REALServicing. By the end of 2014, when Ocwen completed boarding Residential Capital loans onto REALServicing, the verification backlog had grown to more than 1.3 million unverified Residential Capital loans. Fast forward to April of 2016, Ocwen still had a backlog of more than 263,000 unverified Residential Capital loans.
The above is just ONE example of ways that Ocwen caused harm to millions of borrowers across the United States. In total, there were 14 Counts brought against Ocwen in the lawsuit filed by the CFPB. They were:
- COUNT I – Use of Inaccurate and Incomplete Information to Service Loans is Unfair
- COUNT II – Deceptive Acts and Practices Regarding Loan Terms and Status
- COUNT III – Unfair Foreclosure Practices
- COUNT IV – Deceptive Foreclosure Communications
- COUNT V – Unfair Billing and Processing of Payments for Add-On Products
- COUNT VI – Deceptive Marketing of Add-On Products
- COUNT VII – Failure to Timely and Appropriately Credit Payments
- COUNT VIII – Use of Inaccurate and Incomplete Information to Service Loans is Unfair
- COUNT IX – Deceptive Debt Collection Practices
- COUNT X – Escrow Violations
- COUNT XI – Notice of Error Violations
- COUNT XII – Servicing Policies and Procedures Violations
- COUNT XIII – Foreclosure Violations
- COUNT XIV – Violations of the HPA
To read the full details of this lawsuit, See Case#9:17-CV-80495
Currently, we are investigating Ocwen on behalf of homeowner victims in an attempt to file one or more individual civil cases against Ocwen. These issues however are not limited to Ocwen. Numerous mortgage lenders and servicers are being sued across the country for victimizing homeowners. Some of the illegal practices that have been uncovered by both the states attorney general’s complaints and class action law suits are:
- Illegal foreclosures
- Failure to credit mortgage payments
- Failure to correct errors identified by homeowners
- Charging for additional services without homeowner consent
- Overcharging for Broker Price Opinions (BPOs) after a mortgage default
- Failing to accurately report payment history to the credit bureaus after a new mortgage modification was granted
- Charging unauthorized fees for default related services
This is just a sampling of the widespread abuse that is currently going on and forcing many homeowners into foreclosure. If you have ever been in a situation that you have been behind on your mortgage, there is probably a strong likelihood that some of the above abuses may have happened to you. Why should you look into pursuing an individual lawsuit against a mortgage company and/or servicer with our firm? First and foremost, we do not get paid unless we win which means, we require no upfront money from you if we take on your case. The Fair Debt Collections Practices Act (FDCPA) provides up to $1,000.00 per violation to the consumer. The Telephone Consumer Protection Act (TCPA) provides up to $1,500.00 for each phone call made to a cell phone by an automated dialing system without your permission. This includes calls that you did not answer. Although each case is different, some cases could be worth tens of thousands of dollars.