Superintendent Benjamin M. Lawsky has announced that the New York State Department of Financial Services is requiring Ocwen Financial Corporation to hire a monitor to ensure that the company complies with an agreement to reform its mortgage servicing practices. The action was taken after an examination by the Department found indications of Ocwen violating the agreement. The monitor will be in place for two years. Ocwen is one of the largest mortgage servicers and has been growing rapidly, servicing more than 764,000 residential mortgages nationally as of August. In New York, the company services more than 40,000 residential home loan accounts held largely by distressed homeowners.
“It is not enough to have banks and mortgage servicers sign agreements promising to reform their businesses. The best unrealized reforms won’t protect homeowners. To protect homeowners facing the risk of losing their homes, we must ensure that the companies are actually living up to their promises,” Superintendent Lawsky said. “Following complaints about Ocwen’s servicing practices, we conducted a targeted exam of Ocwen’s performance and discovered gaps in the company’s compliance. The Department is requiring the company to hire a monitor so that we can be sure that the reforms are implemented and homeowners have a real chance to avoid foreclosure.”
In September 2011, Ocwen was the first mortgage servicer to agree to the Department’s landmark new Mortgage Servicing Practices designed to correct robo-signing and other troubling foreclosure and servicing practices that were depriving homeowners of the opportunity to avoid foreclosure.
The Department’s examination of Ocwen’s mortgage servicing practices found that, in some instances, the company failed to demonstrate that it had sent out required 90-day notices before commencing foreclosure proceedings or even that it had standing to do bring the foreclosure actions. The exam also revealed gaps in Ocwen's Servicing Practices, including indications that in some instances it failed to provide the single point of contact for borrowers; pursued foreclosure against borrowers seeking a loan modification; failed to conduct an independent review of denials of loan modifications; and failed to ensure that borrower and loan information was accurate and up-to-date.
Under the new Consent Order, Ocwen has 20 days to find an independent monitor acceptable to the Department. The monitor will review Ocwen’s operations and identify and report on corrective actions within 90 days.
Ocwen, one of the biggest mortgage servicers, is expanding. In the past two years, Ocwen has acquired several major servicers’ portfolios of distressed home loans, including Litton Loan Servicing LP in 2011, Saxon Mortgage Services Inc. and EMC Mortgage Corporation in 2012 and has announced plans to further expand its servicing operations through the acquisition of additional mortgage servicing rights, including from Homeward Residential, Inc., formerly known as American Home Mortgage Servicing Inc. (AHMSI). Ocwen just won an auction to acquire Residential Capital LLC (ResCAP).
The Department’s Mortgage Servicing Practices are designed to redress troublesome and unlawful practices that have plagued the mortgage servicing industry as a whole. Those practices include:
►“Robo-signing,” where servicer staff signed affidavits stating they reviewed loan documents when they had not actually done so.
►Weak internal controls and oversight that compromise the accuracy of foreclosure documents.
►Referring borrowers to foreclosure at the same time as those borrowers are attempting to obtain modifications of their mortgages or other loss mitigation.
►Improper denials of loan modifications.
►Failing to provide borrowers with access to a single customer service representative, resulting in delays or failure of the loss mitigation process.
►Imposition of improper fees by servicers.
The Practices, which have been agreed to by eight mortgage servicers, require the following changes:
1. End robo-signing and impose staffing and training requirements that will prevent robo-signing.
2. Require servicers to withdraw any pending foreclosure actions in which filed affidavits were robo-signed or otherwise not accurate.
3. End “dual tracking,” i.e., referring a borrower to foreclosure while the borrower is pursuing loan modification or loss mitigation, and prohibit foreclosures from advancing while denial of a borrower’s loan modification is under an independent review, which is also required by the agreements.
4. Provide a dedicated single point of contact representative for all borrowers seeking loss mitigation or in foreclosure so borrowers are able to speak to the same person who knows their file every time they call.
5. Require servicers to ensure that any force-placed insurance be reasonably priced in relation to claims incurred, and prohibit force-placing insurance with an affiliated insurer.
6. Impose more rigorous pleading requirements in foreclosure actions to ensure that only parties and entities possessing the legal right to foreclose can sue borrowers.
7. For borrowers found to have been wrongfully foreclosed, require servicers to ensure that their equity in the property is returned, or, if the property was sold, compensate the borrower.
8. Impose new standards on servicers for application of borrowers’ mortgage payments to prevent layering of late fees and other servicer fees and use of suspense accounts in ways that compounded borrower delinquencies and defaults.
9. Require servicers to strengthen oversight of foreclosure counsel and other third party vendors, and impose new obligations on servicers to conduct regular reviews of foreclosure documents prepared by counsel and to terminate foreclosure attorneys whose document practices are problematic or who are sanctioned by a court.