NEW YORK (AP) — State and federal authorities have sued mortgage servicer Ocwen Financial Corp., saying the company botched the handling of millions of mortgage accounts. The action sent shares of Ocwen plunging more than 50 percent.READ MORE: South Florida Attorney David Weinstein Shares Reaction To Verdict In Derek Chauvin Murder Trial
The Consumer Financial Protection Bureau said Thursday that the accounts Ocwen serviced were riddled with errors throughout the repayment process. It said the company would go after borrowers long before verifying whether the debt was valid, allegedly foreclosed illegally on at least 1,000 homeowners, and charged borrowers for add-on products without their consent.
Those are just a few of the violations the CFPB alleged in its 93-page complaint. In extremely heavy trading, Ocwen shares fell 54 percent to $2.49 a share, a sign that Wall Street may have lost confidence in the company’s future.
Ocwen, which is based in West Palm Beach, called the lawsuit “politically motivated” and disputes the CFPB’s allegations.
The company is one of the nation’s largest non-bank mortgage servicers, focusing mostly on subprime and delinquent mortgages, handling 1.4 million mortgages in all 50 states as well as Washington, D.C., worth roughly $209 billion.
Mortgage servicing companies are an intermediary between homeowners and the bank that they borrowed the money from. Mortgage servicers don’t own the mortgage, but are in charge of collecting payments and making sure the accounts are credited correctly. Consumers don’t get to pick their mortgage servicing companies, leaving homeowners at the mercy of whether the company is competent.
In its lawsuit, authorities allege that Ocwen failed at even the most basic tasks for a mortgage servicer.
Ocwen’s primary software for servicing mortgages, known as REALServicing, was poorly designed and added errors to borrowers’ files, regulators said. Ocwen employees had to manually enter basic information on a borrower, which in turn led to more errors, the CFPB said.READ MORE: Jaime's Law, Named After Parkland Shooting Victim, Reintroduced In Congress To Require Ammunition Background Checks
Even executives at Ocwen seemed to be aware that its software was failing. According to the lawsuit, Ocwen’s head of services called the company’s technology “an absolute train wreck.”
“If I could change systems tomorrow I would,” the Ocwen executive said.
The CFPB, the state of Florida, and 21 other state agencies are suing Ocwen or issuing cease-and-desist orders against the company in the joint action filed Thursday.
“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.
Regulators said when consumers complained to Ocwen, the company routinely failed to acknowledge or investigate the grievances.
“Enough is enough. Florida’s distressed Ocwen borrowers should no longer have to endure costly servicing errors and unfair practices,” Florida Attorney General Pam Bondi said in a statement.
Ocwen has been in regulatory trouble before. The CFPB went after Ocwen in 2013, again alleging that the company had failed to services its loans improperly. The company had to refund $125 million to roughly 185,000 borrowers at the time and provide $2 billion in principal reduction to homeowners who were underwater in their mortgages.
The CFPB says the lawsuit filed Thursday is for violations since that 2013 action.
Earlier this year, an Ocwen subsidiary, Ocwen Loan Servicing, signed a $225 million settlement with California regulators to settle allegations it overcharged active-duty military members, was late in providing key information for some civilian borrowers seeking to modify their loans and violated other laws.MORE NEWS: Florida Regulators Scale Back Citizens Rate Hikes
Wilbur Ross, who is now Commerce Secretary, served on the board of Ocwen Financial Corp. in 2013-14.
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