April 20, 2017 / 8:21 PM / 8 months ago

U.S. regulator sues Ocwen for 'deceptive practices'; shares plunge

WASHINGTON (Reuters) - For the second time since 2013, the U.S. Consumer Financial Protection Bureau on Thursday sued Ocwen Financial Corp over accusations of widespread misconduct in how it serviced borrowers’ loans, from foreclosure abuses to a basic failure to send accurate monthly statements.

North Carolina was among at least 20 states that also took actions against Ocwen. News of the North Carolina actions and the CFPB lawsuit sent shares of Ocwen crashing by nearly 60 percent in just over an hour.

CFPB officials said that mortgage servicer Ocwen and its subsidiaries have failed to clean up their act, even after the CFPB ordered Ocwen in December 2013 to fork over $2 billion in relief to harmed borrowers because of similar violations.

“The consumer bureau has uncovered substantial evidence that Ocwen engaged in unfair and deceptive practices,” CFPB Director Richard Cordray said, adding that thousands of customers were harmed.

Florida Attorney General Pam Bondi on Thursday filed a parallel lawsuit against Ocwen, and at least 20 other state regulators, including North Carolina, issued regulatory orders or charges against Ocwen subsidiaries to address violations of state and federal laws.

In a statement, West Palm Beach, Florida-based Ocwen vowed to defend itself against the CFPB’s “unfounded claims,” saying it had cooperated fully with the bureau’s inquiries and that the regulator was overreaching.

“Ocwen strongly disputes the CFPB’s claim that Ocwen’s mortgage loan servicing practices have caused substantial consumer harm,” the company said.

Ocwen is one of the country’s largest nonbank mortgage servicers, servicing almost 1.4 million loans.

It added that many of the issues were addressed in its 2013 settlement with the CFPB and that the allegations in the new complaint represent “only a small percentage of Ocwen’s 1.3 million customers.”

Ocwen shares were last down about 50 percent on the day, on pace for their largest daily percentage decline ever. Nearly 60 million shares had traded, a record for a single day of trading.

The actions against Ocwen also weighed on shares of two other mortgage servicing companies, Altisource Portfolio Solutions SA and New Residential Investment Corp , which fell by more than 36 percent and 12 percent, respectively.

The bureau said some of Ocwen’s alleged violations included illegally foreclosing on homeowners, failing to credit borrowers’ payments, botching escrow accounts, servicing loans using error-riddled information, and deceptively signing up and charging borrowers for add-on products.

Many of the 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.”

In one case, a borrower with a mortgage modification started having her payments rejected. She later learned the system was off by a few cents in how it calculated her new modified monthly payment, misapplied her payments to the prior month, and caused her to receive delinquency notices.

“It is very embarrassing to come home and see a notice on my door of an impending foreclosure especially when I have made and continue to make my monthly mortgage payments,” it quotes the borrower as saying.

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