Mortgage Servicer Ocwen Settles with Nebraska

Mortgage servicer Ocwen Financial recently disclosed that it has reached a settlement with the state of Nebraska to lift the state’s restrictions on Ocwen’s business.

Earlier this year, 31 states filed individual suits against the non-bank mortgage servicer, most in connection with alleged errors with homeowners’ escrow accounts. The suits came “en masse” in April-May after the Consumer Financial Protection Bureau filed a complaint against Ocwen alleging the company and its subsidiaries failed borrowers “at every stage of the mortgage servicing process.”

Some of the states that brought action temporarily restricted Ocwen’s activities, while others went so far as to prevent the servicer from operating at all.

As of the end of October, Ocwen had reportedly settled with 21 of the states that took action against it, including Georgia, Idaho, Illinois, Maine, Michigan, Mississippi, Montana, Rhode Island, South Carolina, Wisconsin, New Mexico, Virginia, West Virginia, Alabama, Minnesota, Arkansas, Tennessee, the District of Columbia, Texas and Hawaii.

Similar to the agreements with the other states, Ocwen’s agreement with Nebraska prohibits the company from acquiring any new residential mortgage servicing rights (MSRs) for a period of time – in this case until April 30, 2018 – according to a consent order issued by the Nebraska Department of Banking and Finance.

In addition, Ocwen has agreed to replace its current mortgage servicing system, REALServicing, and adopt Black Knight’s mortgage servicing platform, MSP, for all new loans it boards.

Ocwen will also have to provide the regulator with detailed reports on its servicing activity on a periodic basis. In addition, it will have to establish an “enhanced consumer complaints processing procedure.”

“The department will also receive regular reports on the Ocwen entities’ financial condition for three years and will get direct notification if certain liabilities are incurred by the Ocwen entities,” the department said in its consent order.

What’s more, Ocwen is required to “engage an independent third-party auditor to test approximately 9,000 loan files for compliance with state and federal escrow laws” at an estimated cost to the company and its related companies “of at least $4.4 million.”

The settlement terms are similar to those already reached in the other states. In a recent SEC filing, Ocwen said it “continues to seek timely resolutions with the remaining eight regulatory agencies and two state attorneys general.”

Ocwen’s settlements with the 21 states are part of a long string of settlements that the servicer has endured during the past several years.

Earlier this year, the servicer reached a $223 million settlement with the California Department of Business Oversight, thus lifting restrictions that severely limited its mortgage business in that state for more than two years.

And in July, Ocwen agreed to pay at least $49 million to settle a class action lawsuit over the company restating its 2013 and 2014 earnings after its auditor found a potential “material weakness” in the way it valued and recorded a financial transaction.

Earlier this week, Ocwen disclosed that it reached additional settlements in various matters, including a settlement with investors related to the company’s previously restated earnings and a settlement with CIT Bank over an MSR deal that took place in 2013.

Interestingly, the settlement with CIT Bank will see Ocwen on the receiving end of a settlement payout. According to an SEC filing, CIT will pay Ocwen $29.9 million for “certain claims arising from indemnification obligations under a 2013 transaction pursuant to which Ocwen acquired certain mortgage servicing rights and related servicing advance receivables from OneWest,” as part of its settlement.

Although Ocwen will see a windfall of nearly $30 million as a result, this will be more than offset by the settlement related to its restated earnings.

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