Ocwen Financial Halved As CFPB Alleges Failure 'At Every Stage'

Shares of Ocwen Financial tumbled after U.S. and state regulators said they were suing the mortgage-servicing giant

Numerous errors, the CFPB says, came about through Ocwen's flawed proprietary servicing system that the company's servicing head once referred to as a "train wreck".

Specifically, on April 20, 2017, the CFPB announced that it had sued Ocwen stating that the Company had "engaged in significant and systemic misconduct at almost every stage of the mortgage servicing process".

One of the biggest complaints is about how Ocwen handles the foreclosure process.

Twenty states filed similar actions, along with the federal Consumer Financial Protection Bureau.

Other times, Ocwen "failed to appropriately credit payments made by numerous borrowers", the agency claims.

"Ocwen has consistently failed to correct deficient business practices that cause harm to borrowers", said Ray Grace, the commissioner of banks for North Carolina.

The CFPB's lawsuit alleges a host of violations, including illegally foreclosing on 1,000 borrowers, mishandling escrow accounts, enrolling consumers in add-on programs without their consent, and knowingly populating its mortgage-tracking software with incorrect or incomplete information.

A company that services escrow accounts is required to make timely insurance and/or tax payment's on behalf of the borrowers. According to the lawsuit, Ocwen's head of services called the company's technology "an absolute train wreck".

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The CFPB said Ocwen violated the Consumer Protection Act, which protects consumers from unfair, deceptive, or abusive acts or practices, and failed to comply with mortgage servicing rules that went into effect in 2014.

In a completely separate move, the state of North Carolina today slapped Ocwen with a cease-and-desist letter that will indefinitely prevent it from acquiring new mortgage servicing rights in the state, as well as originating mortgages that it plans to service.

Specifically, the Bureau claims that the system used by Ocwen to process and apply borrower payments, communication information to borrowers, and maintain loan balance information was riddled with errors.

Florida Attorney General Pam Bond and Florida's Commissioner of Financial Regulations filed its lawsuit against Ocwen and two mortgage servicing subsidiaries Ocwen Loan Servicing and Ocwen Mortgage Servicing for filing illegal foreclosures and other issues.

Ocwen did not immediately respond.

According to the North Carolina order, Ocwen told a multi-state investigatory committee that reconciling all its escrow accounts would cost $1.5 billion "and be well beyond Ocwen's financial capacity to fund".

Through its complaint, the CFPB seeks a court order requiring Ocwen to follow mortgage servicing law, provide unspecified relief for consumers, and pay penalties.

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