Ocwen Financial and its subsidiaries faced a slew of accusations from federal and state regulators on Thursday, as the Consumer Financial Protection Bureau and Florida accused it of widespread servicing errors, while 20 states filed separate cease-and-desist orders against the firm for improper handling of consumer escrow accounts.
Taken together, the actions sent Ocwen’s stock price tumbling 55% to $2.43 a share by mid-day, and raised questions about whether the firm could survive.
The actions cap years of state and federal investigations into Ocwen. The once high-flying West Palm Beach, Fla., mortgage servicer grew quickly after the financial crisis only to get caught by regulators for allegedly violating mortgage servicing standards. The CFPB said it had uncovered “substantial evidence” that Ocwen has engaged in significant and systemic misconduct “at nearly every stage of the mortgage servicing process.”
“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 press release.
The CFPB alleged that Ocwen botched basic servicing functions like sending accurate monthly statements to borrowers, properly crediting payments, and handling taxes and insurance in escrow accounts. The lawsuit, filed in U.S. District Court for the Southern District of Florida, claims Ocwen violated numerous federal consumer financial laws by failing to properly investigate and make corrections in response to consumer complaints.
The CFPB also alleged that Ocwen sold mortgage servicing rights to other servicers without fully disclosing or correcting errors in borrowers’ loan files. Ocwen also illegally foreclosed on struggling borrowers, the CFPB said.
Ocwen, one of the largest mortgage servicers, services roughly 1.4 million loans with a total principal balance of $209 billion.
The CFPB said Ocwen violated the Consumer Protection Act, which protects consumers from unfair, deceptive, or abusive acts or practices, and failed to comply with mortgage servicing rules that went into effect in 2014. Those rules require that servicers promptly credit payments, correct errors and provide protections for struggling homeowners, including those facing foreclosure.
The CFPB claimed that Ocwen loaded inaccurate and incomplete information into a proprietary technology system and used the faulty information to service loans. Ocwen tried “manual workarounds” but often failed to correct inaccuracies and produced even more errors. The agency said that Ocwen’s head of servicing called the system “ridiculous” and a ‘train wreck” in 2014.
Florida Attorney General Pam Bond and Florida’s Commissioner of Financial Regulations filed its lawsuit against Ocwen and two mortgage servicing subsidiaries Ocwen Loan Servicing and Ocwen Mortgage Servicing for filing illegal foreclosures and other issues.
The CFPB and Florida’s actions came within an hour after 20 states, led by North Carolina, filed cease-and-desist orders against the firm and its units, accusing them of mishandling consumer escrow accounts. Those orders prohibit the company from acquiring new servicing rights and the origination of new loans.
“Ocwen has consistently failed to correct deficient business practices that cause harm to borrowers,” said Ray Grace, the commissioner of banks for North Carolina. “We cannot allow this to continue.”
The states also said Ocwen had operated unlicensed mortgage servicing facilities in certain states over a period of years.
Ocwen did not immediately respond.
Owen has been making a push to wrap up all of its outstanding legal and regulatory issues but the latest actions could cripple the company. Ocwen was already subject to a 2013 consent order by the CFPB requiring that it fix its actions, Cordray said.
Ocwen also had been prohibited from purchasing mortgage servicing rights — which it needs to do to grow its business — because of past consent orders in New York and California.