We may be years removed from the robo-signing, foreclosure free-for-all that ensued following the collapse of the housing market, but mortgage servicers continue to screw things up. Today, federal and state regulators sued one of the nation’s largest home loan companies, alleging widespread errors that caused borrowers to lose money, and in some cases their homes.
Florida-based Ocwen Financial services about 1.4 million mortgages nationwide, worth a total of $209 billion. It now faces lawsuits from both the U.S. Consumer Financial Protection Bureau and the Florida Attorney General’s office, along with cease-and-desist orders from several other states.
As a servicer, Ocwen is tasked with providing homeowners with customer service, information on loan modifications, and collecting payments from borrowers and sending those payments to the owner of the loan.
According to the CFPB’s complaint [PDF], since 2014 Ocwen has violated the Bureau’s rules aimed at protecting homeowners from questionable practices and a previous consent order [PDF] between the company, the Bureau, and 49 states and the District of Columbia that required Ocwen to revamp its mortgage serving practices.
Inaccurate Information
The CFPB claims in its lawsuit that an ongoing investigation into Ocwen found significant and widespread errors relating to its servicing of thousands of loans.
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.
The company allegedly loaded inaccurate and incomplete information into its REALServicing system.
When data was accurate, REALServicing still generated errors because of system failures and deficient programming. in some instances, Ocwen tried manual workarounds, but they often failed to correct inaccuracies and produced still more errors.
Problem Foreclosures
The company would then use this faulty information to service borrowers’ loans.
While Ocwen marketed itself as a company that was able to help troubled borrowers, the CFPB claims that the many failed to actually deliver requiredd foreclosure protection to consumers.
For example, the CFPB says Ocwen illegally initiated the foreclosure process for some homeowners before completing a review of the borrowers’ applications. In other cases, Ocwen would ask borrowers to submit additional information within 30 days, but would begin the foreclosure process before that deadline was up.
As a result, the Bureau claims the company wrongfully initiated foreclosure proceedings on at least 1,000 people.
In another foreclosure issue, the company allegedly failed to assist heirs who were seeking foreclosure alternatives. According to the CFPB, Ocwen foreclosed on some individuals who may have been eligible to save these homes through a loan modification or other loss mitigation option.
The allegedly inaccurate information in REALServicing also led Ocwen to fail in managing certain escrow accounts. For example, the CFPB says the company failed to conduct escrow analyses and sent some borrowers’ escrow statements late or not at all.
Payment & Insurance Issues
The CFPB also alleges that Ocwen failed to credit borrowers’ payments in a timely manner. The Bureau also claims that Ocwen failed to send borrowers accurate periodic statements detailing the amount due, how payments were applied, total payments received, and other information.
In other instances, Ocwen allegedly mishandled insurance for thousands of homeowners.
A company that services escrow accounts is required to make timely insurance and/or tax payment’s on behalf of the borrowers. In Ocwen’s case, the Bureau alleges the company didn’t do this, leading to the lapse of homeowners’ insurance coverage for more than 10,000 borrowers.
With regard to private mortgage insurance, the complaint claims Ocwen failed to cancel borrowers’ coverage in a timely manner, resulting in overpayments totaling $1.2 million.
According to the complaint, when servicing borrowers’ loans Ocwen allegedly enrolled consumers in add-on predicted through deceptive solicitations and without consent.
Ignoring Complaints
When a consumer complained about issues with their mortgage servicing, the Bureau claims that Ocwen routinely failed to properly acknowledge or investigate the issue.
While Ocwen changed its policy in April 2015 to address the difficulty its call center had in recognizing and escalating complaints, these changes fell short, according to the complaint.
In fact, the CFPB says that borrowers still have to complain at least five times in nine days before Ocwen automatically escalates their complaint to be resolved.
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.
In some cases, Ocwen would sell thousands of mortgages to other servicers. When this happened, however, the Bureau claims the company filed to provide complete and accurate information to the new owner. This, in turn, hindered the new servicers’ efforts to comply with laws and investor guidelines.
Through its complaint, the CFPB seeks a court order requiring Ocwen to follow mortgage servicing law, provide unspecified relief for consumers, and pay penalties.
In a similar, but separate action today, Florida Attorney General Pam Bondi filed a lawsuit against Ocwen for mortgage servicing misconduct.
The Florida lawsuit claims that Ocwen harmed Floridians by filing illegal foreclosures, mishandling loan modifications, misapplying mortgage payments, failing to pay insurance premiums from escrow and collecting excessive fees.
by Ashlee Kieler via Consumerist
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