Ocwen Settlement with NY AG Could Spell Doom for Servicers

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The new settlement with New York’s Department of Financial Services calls for resignation of the Chairman (Erbey), payment of a $100 million fine, Payment of $50 million in restitution to borrowers who were wrongfully foreclosed, and a set of rules requiring Ocwen to help borrowers avoid foreclosure. Schneiderman, Attorney General, was prosecuting the case aggressively. This will add to the growing list of questions from judges over rotating servicers and trustees, servicing practices, robo-signing, forgery, fabrication of documents and the refusal of the foreclosing party to simply show the funding for the loan and the consideration paid for the acquisition of the loan.

Why is this important: it reflects an administrative finding that Ocwen has been wrongfully foreclosing on people from 2009 to the present. And it directs money and other assistance to homeowners who find themselves tangled in the complex web of deceit that we call securitization (Adam Levitin calls it “securitization fail” because the loans never actually made it into the trust — because the proceeds of sale of mortgage bonds were never given to the trust by the investment bank who sold them).

The fine is a fraction of what it should be and the amount set aside for victims of wrongful foreclosure is pathetic. And it basically leaves the completed foreclosures to stand even though it is obvious that Ocwen was following the directive “We are in the business of foreclosure, not modification). And while the settlement requires Ocwen to provide the complete loan file on request it fails to state what happens if they don’t and perhaps more importantly it fails to give details of what must be in that loan file even though they are widely known. Specifically, the completed loan file would show wire transfer receipts and wire transfer instructions from a party who was acting as a conduit for the investor money — a party unrelated to the REMIC Trust and not tied to the investors by contract.

Another key provision requires Ocwen to provide a detailed explanation of why and how a request for workout or modification was denied.

But remember this is one state. If all 50 states demanded the same results, based upon the New York findings there could be a global fine of $5 Billion and restitution ($2.5 Billion) for U.S. homeowners who are victims of wrongful foreclosure in the amount of $2.5 billion. And if you add the other servicers who have been doing exactly the same thing as Ocwen, the amounts increase geometrically.

A key provision of the settlement is continued monitoring. So if there is an issue with a foreclosure of a mortgage serviced by Ocwen, a complaint to the office of the attorney general or the office of the New York Department of Financial Services will help — perhaps even if you are not a resident of the state of New York.

One obvious concession to the banks is the reference to the onboarding process. In allowing Ocwen to purchase servicing rights (MSR) the reference is vague as to defining “onboarding.” This phrase is often being used in Court to avoid producing real records and real testimony from real companies who were real servicers. Judges, seeing only what is in front of them, are forced to rule that the records of the new “servicer” are business records within the exception provided under the hearsay rule in most states.

PRACTICE POINTER FOR LAWYERS: If you fail to argue that the business record must contain entries made at or near the time of the transaction, you will most likely end up with records from a “new” party who is not a servicer but whose records contain the alleged records of other servicers. I don’t see how the onboarding process could ever be accepted in lieu of records and testimony from companies who actually did servicing of the account — i.e., receipt of payments from the borrower and remittance to the creditors.

Here are some salient quotes from the article:

ATLANTA, Dec. 22, 2014 (GLOBE NEWSWIRE) — Ocwen Financial Corporation (OCN) (“Ocwen”) today announced that it has reached a comprehensive settlement with the New York Department of Financial Services (“DFS”) related to the agency’s recent investigation.

“We are pleased to have reached a comprehensive settlement with the DFS and will act promptly to comply with the terms,” said CEO Ronald Faris. “We believe this agreement is in the best interests of our shareholders, employees, borrowers and mortgage investors. We will continue to cooperate with the DFS in the implementation of the terms of this settlement which we believe will allow Ocwen to continue to focus on what we do best — helping homeowners.”

Under the terms of the settlement, 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. The Company will also pay $50 million as restitution to current and former New York borrowers who had foreclosure actions filed against them by Ocwen between January 2009 and December 19, 2014. As previously communicated in the third quarter of 2014, Ocwen recorded a charge of $100 million to increase its legal reserves in anticipation of a potential settlement with the DFS. Ocwen will record an additional $50 million charge in its fourth quarter 2014 financial statements to reflect the final settlement amount.

…. founder William C. Erbey will step down from his position as Executive Chairman of Ocwen, effective January 16, 2015. Barry Wish, a current director of Ocwen, will assume the role of Non-Executive Chairman on that date.

Ocwen has also agreed to non-monetary provisions relating to New York borrower assistance measures, a monitor-led oversight of Ocwen’s operations, interactions with related parties and certain corporate governance measures. MSR acquisitions will be subject to Ocwen meeting specified benchmarks as well as DFS approval.

A summary of the settlement terms 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.

22 Responses

  1. Great article Neil!

    These are all my points exactly. Great job by the NY AG!

    Happy Holidays to Neil & everyone!

  2. @ JenninGA ,

    please e:mail me at brian.tracy1324 AT gmail.com ,, if you sent anything to the old e:mail associated with this account I’ll never get it (don’t know how to update the associated e:mail) …

    Happy Holidays..

  3. @neidermeyer – if ever you have extra time please check for old email I sent you – a Wf doc from the trust – paid in full???

  4. That’s great Neidermeyer
    I’ll pray you get the justice you seek It will be a wonderful day.

  5. @ Deb ,

    2015 is gonna be SWEET … My home was sold a year ago but I’m still in it … I may lose the appeal but I’m receiving big $$$ soon and will be able to pay a years rental in cash and initiate retaliatory actions against many of the players.. They screwed up bigtime by manipulating the docket calendar to deny me the (scheduled) trial and the ability to introduce evidence.. which I have by the truckload.

    I haven’t harped on it before here but in 2011 I put 15 separate sales into limbo for almost a year with complaints regarding standing and the ability to credit bid… I found out just a few months ago that my judge has on her online resume that she had as one of her achievements that she revamped the auction process just a few months before my action to reduce the appearance of impropriety… I didn’t know it then but I made her look like a complete ass in front of the head judge back then… immediately after my complaints were filed the court cancelled ALL SALES (about 700 total!) for 3 solid months while they implemented an online system to fix her problem… (the sales are still rigged but now they have another layer of deniability).

  6. Neidermeyer it’s called the wells Fargo shuffle
    I was told they were investor and owner of my loan. Wells was found to be master servicer , the sub servicer to that trust told me this however my ” loan” is awaiting for a delivery of 1099c release from the DEBT

  7. @ Louise and Deb W ,

    Hitting that avenue also … deposed OCWEN “expert” lied saying WF was investor ,, and claimed “onboarded” docs as legit ,,, when OCWEN bought note from AHMSI in my case ,, trust blew up 90 days after close ,, prior to maiden lane being initiated and was a private sale after AIG payoff to BAC (owner of note/underwriter) ,, WF nowhere to be found.

  8. @ Jan Van Ech

    …..my guess is that the “Trust” has no idea of that suit and likely has nothing to do with Ocwen in the first place. So the avenue for recovery by the aggrieved homeowner is to sue the law firm, which as a practical matter is engaging in a deceit on the Court, claiming to represent the “Trust” when in actuality ti represents Ocwen.

    We’ll see soon enough ,, I’m heading down the onramp to that highway … OCWEN has had 5 different legal teams against me so far… and I have docs that show WF as Trustee had no recorded default at time of acceleration.

  9. and FDIc insured – right, right

  10. Deb, They do not have the documents necessary to prove much of anything. It is similar to the scam that all debt collectors use: the ignorance of the mark.

  11. If mortgage backed securities comprise 9% of public retirement holdings for judges across America, how much money are we talking about?

  12. Heres the example i got of ” onboarding ” under a FOIA proper request to the FDIC which i had to appeal with fdic to press them ” all files were transferred” ….got bupkis, result from ” them”- since i was already in court with ” them”
    i got this though ” purchased many assets ” one being servicing rights”

  13. I believe
    There were no trusts it was an illusion. We have to prove that, which is a challenge to say the least. the fat emperor is naked as a jay bird and the judges cant see this. But they will when they realize their investments are no more safe or real thAn the borrowers belief that they had equity in their homes. Watch wolf of wallstreet ( it may make you physically sick but thats what they do … And they are very sick, like a heroine addict- and not to be trusted – period, hence we need them to fear the consequences and do jail time and then oversight needs to be reinvented and conducted by a truely independent body- perhaps some bloke from Iceland could arrange forthis to happen because no one has the nuts to get on with it properly here ( yet)

  14. Wells Fargo is the biggest lying servicer out there. And BOA ain’t far behind. Time to Take these debt collecting scumbags down.

  15. Reblogged this on patrickainsworth.

  16. Nationstar anyone ? No wonder why Ocwen is pawing off it’s so called servicing rights to nationstar…

  17. Wells Fargo is Ocwen’s example of the corruption, but Ocwen down fall was spending out the denial letter 30 days late, when the HAMP programs have a 30 day appeal period from the day of the denial. How Wells Fargo was allowed to get away with the crime for so long is that they simply did not send out the denial letters (Borrower Notice) as like Ocwen they actual never underwrote the files as they don’t have ownership and are not working for an entity that got ownership.

    This should be part of the reason Wells Fargo broke off negotiation with the Fed Gov, as BOA got caught as well as Suntrust for not conducting modification. Wells Fargo problem is that they got more government insured loan corruption because they are such a larger servicer, and I am sure they don’t want to pay the figure the government coming up with, especially since most of the illegal profit ended in the hand of the “investors”, like the Fed!

  18. …have been wrongfully foreclosing since 09? Neil you were out of the loop prior 09? Want some 07 cases? No doubt in my mind cases prior 07 exist. You were representing the banks back then I think.

  19. Some good news for a change. Let’s hope it spreads…

  20. Ocwen may well go out of business; their stock price has dropped by an astounding 65% in 2014. What this tells you is that the flinty-eyed money managers on Wall Street – Ocwen’s buddies in crime – have no confidence in the outfit. The problem this creates for Ocwen’s millions of victims is that, by the time their lawsuits against Ocwen run their course, there will be no recovery.

    The other huge problem for Ocwen, so far unexplored, is that they are filing these foreclosure suits in the name of some other entity, typically a so-called “Trust.” Except: my guess is that the “Trust” has no idea of that suit and likely has nothing to do with Ocwen in the first place. So the avenue for recovery by the aggrieved homeowner is to sue the law firm, which as a practical matter is engaging in a deceit on the Court, claiming to represent the “Trust” when in actuality ti represents Ocwen. The conundrum is whether the “litigation privilege” that typically would insulate the law firm from suit would apply in these circumstances. My guess is that the privilege does not bar such suit, when the law firm knows that the client is not the Trust but Ocwen, hiding behind the skirts of the Trust. And, if you can get that past the Judge (by arguing a fraud on the court), then the door is open to the big bucks from the insurance carriers of that law firm.

  21. Ocwen is only the tip of the iceberg in abusive servicing practices. They are all into it.

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