WASHINGTON (AP) — The monitor overseeing a national mortgage settlement said Tuesday that Ocwen Financial Corp., one of the biggest U.S. servicers of home loans, had produced unreliable information about its business practices.
Joseph Smith, who is monitoring banks' and mortgage servicers' compliance with the $25 billion settlement over foreclosure abuses, said Tuesday he has hired an independent accounting firm to re-evaluate Ocwen's progress in the first half of the year. Smith said he started investigating in May after an Ocwen employee alleged there were "serious deficiencies" in the company's internal review. The employee's complaint raised questions about the review's independence from Ocwen management, Smith said in a report.
Atlanta-based Ocwen said Tuesday it has made changes to its review process to make it more independent. The company said it has put new managers in charge of the internal compliance review.
"We will continue to support the monitor's efforts to ensure that we are fully compliant with all aspects of the national mortgage settlement," Ocwen CEO Ronald Faris said in a statement. "We are committed to delivering best-in-class servicing as we work to help struggling borrowers keep their homes."
Ocwen is the fourth-largest mortgage servicer in the country and the biggest that isn't a bank. It specializes in servicing mortgages for high-risk borrowers. At the start of this year, it managed $106 billion worth of subprime mortgages, according to Inside Mortgage Finance, a publication that tracks the mortgage industry.
Under its December 2013 agreement with the Consumer Financial Protection Bureau and 49 states, Ocwen was required to provide $2.1 billion in relief to struggling homeowners, mostly by reducing their loan balances, and to comply with standards for treating them fairly. The regulators said Ocwen pushed borrowers into foreclosure through illegal actions, such as failing to promptly and accurately credit mortgage payments. The company also miscalculated interest rates and charged borrowers improper fees, according to the regulators.
In October, New York state's financial regulator said Ocwen may have denied struggling borrowers the chance to fix loan problems and avoid foreclosures. An investigation by the state's Department of Financial Services found that Ocwen improperly backdated foreclosure warnings and letters that rejected requests for reduced loan balances, making it nearly impossible for borrowers to appeal the company's decision.
Many borrowers who had fallen behind on loan payments also received warning letters months after the deadline for avoiding foreclosure had passed, department investigators found.
Ocwen blamed software errors in the company's correspondence systems for generating improperly dated letters.