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New York fines Ocwen $150 million

Posted by Jeffrey Foster | Dec 23, 2014 | 0 Comments

Ocwen Financial voluntarily agrees to pay the state of New York $150 million to settle claims of loan servicing malfeasance. Additionally, Ocwen founder and chairman of the board resigned as part of the settlement. Will the floodgates open for other states to bring suits against Ocwen?  Against other default servicers?

A summary of the settlement is below:

Settlement Summary of Monetary Provisions

Ocwen will pay a civil monetary penalty of $100 million to the DFS by December 31, 2014, which will be used by the State of New York for housing, foreclosure relief and community redevelopment programs.Ocwen will also pay $50 million as restitution to current and former New York borrowers in the form of $10,000 to each borrower whose home was foreclosed upon by Ocwen between January 2009 and December 19, 2014, with the balance distributed equally among borrowers who had foreclosure actions filed, but not completed, by Ocwen between January 2009 and December 19, 2014.Settlement

Summary of Non-Monetary Provisions:

Borrower Assistance:  Beginning 60 days after December 19, 2014, and for two years,

Ocwen will:

Provide upon request by a New York borrower a complete loan file at no cost to the borrower;

Provide every New York borrower who is denied a loan modification, short sale or deed-in-lieu of foreclosure with a detailed explanation of how this determination was reached;

Provide one free credit report per year, at Ocwen's expense, to any New York borrower on request if Ocwen made a negative report to any credit agency from January 1, 2010, and Ocwen will make staff available for borrowers to inquire about their credit reporting, dedicating resources necessary to investigate such inquiries and correct any errors.

Operations Monitor:

The DFS will appoint an independent Operations Monitor to review and assess the adequacy and effectiveness of Ocwen's operations.

The Operations Monitor's term will extend for two years from its engagement, and the DFS may extend the engagement another 12 months at its sole discretion.

The Operations Monitor will recommend and oversee implementation of corrections and establish progress benchmarks when it identifies weaknesses.

The Operations Monitor will report periodically on its findings and progress. The currently existing monitor will remain in place for at least three months and then for a short transitional period to facilitate an effective transition to the Operations Monitor.

Related Companies:

The Operations Monitor will review and approve Ocwen's benchmark pricing and performance studies semi-annually with respect to all fees or expenses charged to New York borrowers by any related party.

Ocwen will not share any common officers or employees with any related party and will not share risk, internal audit or vendor oversight functions with any related party.

Any Ocwen employee, officer or director owning more than $200,000 equity ownership in any related party will be recused from negotiating or voting to approve a transaction with the related party in which the employee, officer or director has such equity ownership, or any transaction that indirectly benefits such related party, if the transaction involves $120,000 or more in revenue or expense.

Corporate Governance:

Ocwen will add two independent directors who will be appointed after consultation with the Monitor and who will not own equity in any related party. As of January 16, 2015, Bill Erbey will step down as an officer and director of Ocwen, as well as from the boards of Ocwen's related companies. The Operations Monitor will review Ocwen's current committees of the Board of Directors and will consult with the Board relating to the committees. This will include determining which decisions should be committed to independent directors' oversight, such as approval of transactions with related parties, transactions to acquire mortgage servicing rights, sub-servicing rights or otherwise to increase the number of serviced loans and new relationships with third-party vendors.The Board will work closely with the Operations Monitor to identify operations issues and ensure that they are addressed. The Board will consult with the Operations Monitor to determine whether any member of senior management should be terminated or whether additional officers should be retained to achieve the goals of complying with this Consent Order.

MSR Purchases:

Ocwen may acquire MSRs upon (a) meeting benchmarks specified by the Operations Monitor relating to Ocwen's onboarding process for newly acquired MSRs and its ability to adequately service newly acquired MSRs and its existing loan portfolio, and (b) the DFS's approval, not to be unreasonably withheld.These benchmarks will address the compliance plan, a plan to resolve record-keeping and borrower communication issues, the reasonableness of fees and expenses in the servicing operations, development of risk controls for the onboarding process and development of a written onboarding plan assessing potential risks and deficiencies in the onboarding process.

About the Author

Jeffrey Foster

Attorney Jeffrey Foster is the founding partner of Foster Law Offices. An accomplished litigation and transaction attorney, Jeff proudly represents Washington individuals and businesses in legal matters Personal Injury, Bankruptcy, Real Estate and Civil Litigation.

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