By Emily Stephenson
WASHINGTON Dec 19 U.S. officials on Thursday
ordered the largest nonbank mortgage servicer to provide $2
billion in help to underwater borrowers to resolve allegations
of misconduct that led to thousands of people losing their
Ocwen Financial Corp must reduce loan balances for
struggling homeowners and refund $125 million to foreclosed
borrowers under an agreement with the U.S. Consumer Financial
Protection Bureau and officials from 49 states and the District
Ocwen failed to account for borrowers' payments, gave false
reasons for denying loan modifications and robo-signed legal
documents, the consumer bureau said.
In many cases, after Ocwen began servicing loans, it did not
respect trial modifications that had already been agreed to by
the lenders, consumer bureau Director Richard Cordray said.
"After examining the potential violations, we've concluded
that Ocwen made troubled borrowers even more vulnerable to
foreclosure," Cordray said in a conference call with reporters.
Ocwen separately disclosed the agreement on Thursday and
said it had already set aside funds to cover all but about
$500,000 of the required refund payments.
"The agreement, which is subject to court approval, is in
alignment with the same ultimate goals that we share with the
regulators - to prevent foreclosures and help struggling
families keep their homes," Ocwen said in a statement.
The firm did not admit to the allegations, according to
Mortgage servicers include banks and nonbank firms that
collect borrowers' payments, communicate with them about
modifying loans in distress and handle foreclosure processes.
The consumer bureau, which was created by the 2010
Dodd-Frank law, has written tough new rules for the industry
that take effect in January. Cordray said that, under those
rules, Ocwen would have had even more servicing violations.
Regulators found widespread abuses by servicers in the years
after the 2007-2009 financial crisis, when foreclosures spiked.
Several big banks, including Bank of America and
Citigroup, settled with officials and agreed to tougher
consumer protection requirements.
Ocwen, Nationstar Mortgage Holdings and other
nonbank servicers grew rapidly in the years after the crisis,
prompting concerns from some in the mortgage industry that
borrower abuses might also migrate.
Ocwen, which specializes in handling subprime and delinquent
loans, is now the fourth-largest mortgage servicer in the United
It bought servicing rights from Morgan Stanley,
Goldman Sachs and Ally Bank, which was part of the
national settlement in 2012.
Some of its portfolio, including the portion purchased from
Ally, fell under the requirements of the 2012 settlement, which
covered about half of the servicing market. The new agreement
covers the rest of Ocwen's loan portfolio, Cordray said.
Under the agreement, Ocwen will have to wait 60 days after
acquiring a loan before any foreclosure proceedings can begin.
The agreement limits the fees Ocwen can charge and forces the
company to tell distressed borrowers about options to avoid
foreclosure, the consumer bureau said.
Cordray said Ocwen's compliance with the new agreement will
be overseen by the same person who monitors the 2012 settlement,
former North Carolina bank regulator Joseph Smith Jr.