• DYE CULIK PC | Consumer Protection Division

How Ocwen’s $2.1B Settlement Affects Massachusetts Homeowners






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In 2012, the nation’s five largest banks entered into a Consent Order, the 2012 National Mortgage Settlement, agreeing to pay as much as $25 billion to distressed borrowers and direct payments to the federal government and the states. The settlement was a result of an investigation that found that the banks engaged in unfair and deceptive practices against consumers.

Ocwen Loan Servicing, LLC was not included in the 2012 settlement because it is not a bank. Rather, Ocwen is a mortgage loan servicer specializing in sub-prime mortgages. Today, Ocwen is the largest non-bank servicer of mortgages in the U.S., and is the fourth largest servicer of mortgages overall.

After the 2012 National Mortgage Settlement, federal and state regulators cooperated in an investigation into the mortgage servicing practices of Ocwen and two companies Ocwen had acquired, Litton Loan Servicing and Homeward Residential Holdings, LLC (formerly AHMSI – American Home Mortgage Servicing, Inc.).

As a result of this investigation, on December 11, 2013, the Consumer Financial Protection Bureau and 49 state attorneys general filed a complaint against Ocwen in federal court, alleging unfair and deceptive acts in violation of state and federal laws. Some of these violations included:

  1. Failing to apply payments properly and timely,

  2. Charging unauthorized fees,

  3. Improperly denying loan modifications,

  4. Failing to honor loan modifications granted by prior servicers,

  5. Improperly charging homeowners for force-placed insurance policies, and

  6. Proceeding with foreclosure when borrowers were under consideration for a loan modification.

On December 16, 2013, Ocwen signed a Consent Order agreeing to provide $125 million in refunds to consumers who lost their homes to foreclosure and $2 billion in relief to distressed borrowers. Ocwen’s Consent Order does not provide for any payments to the federal government or any states – 100% of the settlement proceeds are earmarked to directly benefit consumers.

The first part of the settlement requires Ocwen to pay $125 Million to qualifying borrowers serviced by Ocwen, Litton, or Homeward/AHMSI who were foreclosed upon between January 1, 2009 and December 31, 2012. The Consumer Financial Protection Bureau estimates that approximately 185,000 consumers were affected. A settlement administrator has been appointed to solicit and process claims, and the funds will be divided equally among consumers who successfully file eligible claims. If you believe you are eligible but do not receive a notification, you can contact the Massachusetts Attorney General’s Office to provide your current address and request information.

The settlement also requires Ocwen to provide $2 billion in loan modification relief in the form of principal reductions to borrowers who are underwater (that is, who owe more on their loan than their home is worth) and who are in default or are at imminent risk of foreclosure. The settlement does not specify which consumers are entitled to relief; it does not provide any specific borrowers with a legal right to a loan modification. It also requires Ocwen to follow specific guidelines to improve its service to borrowers.

Importantly, consumers who accept payment under either prong of this settlement DO NOT WAIVE their right to alternative remedies. In other words, borrowers who have been harmed as a result of any unfair or deceptive acts by Ocwen or the companies it acquired can receive payment under the settlement and still retain the right to individually file a lawsuit to obtain relief.

For example, even though there is no right to sue Ocwen under the settlement directly, the violation of the settlement might violate the Massachusetts Consumer Protection Act, called Chapter 93A.

To read more about the settlement, visit the Consumer Financial Protection Bureau’s website at www.cfpb.gov, or click on the links below.

The Complaint: http://files.consumerfinance.gov/f/201312_cfpb_complaint_ocwen.pdf

The Consent Order: http://files.consumerfinance.gov/f/201312_cfpb_consent-order_ocwen.pdf

Fact Sheet: http://files.consumerfinance.gov/f/201312_cfpb_factsheet_ocwen.pdf

#foreclosureprevention #loanmodification #Mortgageservicers #Ocwen