Ocwen Financial Corporation OCN reached a $225 million settlement with the California Department of Business Oversight (DBO) to resolve claims that it violated federal and state laws tied with borrowers’ rights.
As part of the settlement anounced on Friday, Ocwen is set to pay $25 million to the DBO and an additional $198 million in debt forgiveness through loan modifications over a three-year period to the existing California borrowers. The company said it did not admit to any wrongdoing. Notably, it has already reserved for the $25-million settlement as of Sep 30, 2016. Ocwen estimates that it has already paid about $2 million to 3,127 California borrowers affected by the letter-dating problem, an event when the company sent time-sensitive letters to borrowers after the date on the letter.
The settlement also ends the Jan 2015 Consent Order between Ocwen Loan Servicing, LLC and the DBO, and terminates engagement of the independent auditor, which has been in place under the consent order. Further, the DBO will lift its restriction on Ocwen’s ability to acquire mortgage servicing rights in California.
Ron Faris, President and CEO of Ocwen stated, “Ocwen is pleased to have reached a comprehensive settlement with the DBO related to matters the agency raised, and we will quickly move forward to implement all terms associated with this agreement.” Faris also noted that the termination of the engagement of the independent auditor will lead to reduction in a significant expense.
The settlement resolves allegations related to Ocwen’s servicing practices from the period between Jan 1, 2012 through Jun 30, 2015. During this period, the company serviced over 531,000 California loans.
In its release, the DBO mentioned that the third-party auditor’s review found “Ocwen committed hundreds of violations of state and federal laws and regulations, including the California Homeowner Bill of Rights (HBOR).” Among the several findings, Ocwen violated the HBOR by failing to provide borrowers all necessary information in loss mitigation denial notices and providing borrowers incorrect information on notices of default.
DBO Commissioner Jan Lynn Owen said, “The terms will hold Ocwen accountable for widespread violations of laws that harmed borrowers in our state.”
Ocwen’s shares gained 63.8% over the past six months; outperforming 20.3% growth for the Zacks categorized Mortgage & Real Estate Services industry.
Ocwen currently carries a Zacks Rank #3 (Hold).
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