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Ocwen Sued by CFPB as Regulators Question Company’s Survival (4/20/17)

by David McLaughlin and Dan Wilchins

Shares of mortgage collection company tumble most on record

Consumer Financial Protection Bureau alleges widespread errors

U.S. and state officials sued Ocwen Financial Corp., a processor of consumer mortgage payments, for allegedly making widespread errors and illegally foreclosing. North Carolina’s bank regulator said fixing some of the company’s problems could put it out of business.

The U.S. Consumer Financial Protection Bureau said Ocwen botched basic functions like sending accurate monthly statements, crediting payments and handling taxes and insurance from escrow accounts. A group of state mortgage regulators blocked the company from acquiring new business. Ocwen’s shares fell the most on record.

“As regulators, we encourage and advise companies to remain compliant with state and federal laws. However, Ocwen has consistently failed to correct deficient business practices that cause harm to borrowers,” Ray Grace, North Carolina’s Commissioner of Banks, said in a press release on Thursday. “We cannot allow this to continue.”

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

Ocwen submitted a plan to a group of more than 20 state regulators in January to fix the escrow accounts, and said that reconciling the accounts would cost $1.5 billion, and would be “well beyond Ocwen’s financial capacity to fund,” according to a North Carolina cease-and-desist order.

That same order said that if Ocwen properly accounted for known or anticipated regulatory penalties and required operational fixes, “it would indicate that Ocwen continuing as a going concern would be in doubt.” The company’s shares fell as much as 61 percent to $2.12.

The lawsuits and cease-and-desist orders are blows for a company that grew fast after the financial crisis. From 2009 through the end of 2013, its business jumped eight-fold, as measured by loans it was collecting on, according to a separate 2014 consent order from New York. Big banks were eager to shed business known as subprime mortgage servicing, both because of the relatively high levels of capital required to finance it and the investments in staff and systems that would likely be required.

As Ocwen grew, it failed to properly integrate the systems of businesses it acquired, and improperly foreclosed on borrowers in some cases, New York regulators headed by Benjamin Lawsky said in their 2014 order. That order forced William Erbey, then executive chairman, to step down from his roles at Ocwen and related companies. Ocwen also agreed to provide $150 million in relief for borrowers.

https://www.bloomberg.com/news/articles/2017-04-20/ocwen-blocked-from-acquiring-mortgage-servicing-rights-by-states