The Consumer Financial Protection Bureau on Thursday sued mortgage service company Ocwen Financial Corp in Florida federal court alleging that the firm’s servicing database is riddled with inaccuracies and incomplete information that resulted in wrongful foreclosure proceedings against around 1,000 families, the same day Florida filed a similar suit against the company.
The CFPB’s complaint, filed in federal district court in West Palm Beach, Florida, came at the same time that Florida Attorney General Pam Bondi and the state’s Office of Financial Regulation Commissioner Drew J. Breakspear filed their own complaint against Ocwen. North Carolina and more than 20 other states also filed cease and desist orders against Ocwen and its subsidiaries, stopping them from purchasing additional mortgage servicing rights until they can prove they’re able to handle customer escrow accounts.
Those combined actions have put West Palm Beach-based Ocwen’s future in question. …
The CFPB alleges that the company’s faulty data management practices and other problems inside the company led to Ocwen failing consumers who have no choice in mortgage servicing options.
“Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” CFPB Director Richard Cordray said in a statement. “Borrowers have no say over who services their mortgage, so the bureau will remain vigilant to ensure they get fair treatment.”
The major culprit behind the problems is Ocwen’s proprietary data system, known as REALServicing, the CFPB said. The system was intended to accurately record payments, communicate payment information with borrowers and maintain loan balance information.
But a great deal of the information inside of the REALServicing system is inaccurate or incomplete, and the system itself generated errors because of poor programming, the CFPB said.
To combat those problems, Ocwen set up manual workarounds through which employees could input data directly, but in many cases that did not work, the CFPB said.
One of Ocwen’s top executives called the problems with the system “ridiculous,” according to the complaint.
“An absolute train wreck. I know there’s no shot in hell, but if I could change systems tomorrow I would,” Ocwen’s head of servicing said in an internal email about the technology problems that the CFPB included in the complaint.
Those problems led to significant error rates.
According to the complaint, Ocwen reported that 72 percent of the loans it verified contained data errors or incomplete information in April 2014. The problem rate rose to 90 percent in a March 2016 review, the complaint said.
And when there were data problems, there were improper foreclosures, the CFPB said. According to the complaint, Ocwen wrongfully commenced foreclosure practices on around 1,000 families during the relevant time period and engaged in many improper foreclosure sales, according to the complaint.
The CFPB also cited problems with Ocwen’s crediting of borrower payments, escrow accounts, hazard and mortgage insurance and in other areas.
Ocwen was included in a 2012 nationwide mortgage settlement and has received positive reports from the settlement’s monitors, and it has reached separate settlements with regulators in California and New York as well.
Thursday’s action is also the second major enforcement action the CFPB has filed against Ocwen, which agreed to pay $2 billion to settle a CFPB lawsuit in December 2013.
But Cara Petersen, the CFPB’s deputy enforcement director, said on a conference call announcing its suit against Ocwen that the conduct at issue in the instant case happened after that settlement.
“This action involves conduct since that time, since 2013, where Ocwen has continued to fall down on the job with borrowers,” she said.
However, the CFPB’s action comes as President Donald Trump weighs whether to fire Cordray, and Republicans in Congress draw up plans to significantly reshape the bureau.
Ocwen disputed the claims put forward by the CFPB and vowed a vigorous defense. The company said that it is a recognized leader in mortgage servicing that has improved its practices, and that the CFPB’s case was just a part of the broader fight over its future.
“Given these facts, today’s suit can only be viewed as a politically-motivated attempt by the CFPB to grab headlines in reaction to the change of administration and recent scrutiny of the CFPB’s activities,” Ocwen said in a statement. …
The case is Consumer Financial Protection Bureau v. Ocwen Financial Corp., case number 9:17-cv-80495, in the U.S. District Court for the Southern District of Florida.
Fessler’s follow up:
Mortgage servicer Ocwen Financial Corp. has challenged the constitutionality of the Consumer Financial Protection Bureau, in an effort to dodge the allegations that its faulty servicing database resulted in wrongful foreclosure proceedings against at least 1,000 people.
For all those who might have experienced problems with Ocwen (or other banks and servicers), it might be advisable to call your U.S. Senators and Representatives and tell them that we need a watchdog like the Consumer Financial Protection Board to keep renegade loan services in line: let the agency do its work. Just a thought.
If you need further information, call Attorney Linda Fessler at 213-446-6766 for a free consultation.