The mortgage servicing giant Ocwen was alleged for wrong practices and a legal action was taken by the Consumer Financial Protection Bureau (CFPB) and 20 state regulators yesterday. The lawsuit filed by the CFPB alleges that the company’s incompetence and negligence cost nearly 1,000 customers their homes.
Ocwen, the West Palm Beach, Fla.-based company is considered as one of the largest non-bank mortgage servicing companies in the country. After the financial crisis of 2008, many big banks had to foreclose millions of subprime and even prime mortgages, which required hiring more manpower and building up systems.
The banks were not equipped to handle the workload and the lenders were reluctant to invest as this workload was temporary in nature and was bound to shrink with time. The new capital rules came into play, which made it unviable for the banks to continue with collecting payments.
In such a scenario, companies like Ocwen came into play by buying the rights of servicing those mortgages. They actually propagated that they are working on improving the loan terms, which will help the borrowers to stay in their homes. Since then, these companies were under the radar of the regulators who accused them of not handling the issue properly.
Richard Cordray, the CFPB Director on Thursday accused Ocwen of “years of systemic and significant errors throughout the mortgage servicing process.”
The bureau has cited in its complaint that the company did not address the complaints from the customers about mortgage servicing properly for years together. The company leadership did not pay heed to those executives who warned it about the systemic failures in a proprietary software system leading to inaccurate information. As this software was meant to streamline the servicing process, errors in it forced the employees to process servicing data manually. This manual interference led to balance calculation errors and the consumers were affected adversely.
Ocwen reacted to the lawsuit filed by the CFPB as “inaccurate and unfounded” and claims that none of its practices or actions caused any substantial harm to its consumers. The company maintains that the opposite of what CFPB claims is actually true. In a statement, the company has said, “Ocwen believes its mortgage loan servicing practices have and continue to result in substantial benefits to consumers above and beyond other mortgage servicers.”
The shares of Ocwen have reduced to less than 50% of its value after the federal and the state authorities alleged widespread failures at the company. Ocwen was also blocked from acquiring new business venture.