Regulators Fear More Bad Mortgage Practices
By Patrick M. Sheridan
NEW YORK — You may have gotten a mortgage through the local branch of one of the megabanks, but did you know there’s a good chance your bank turned around and sold the rights to service your loan to somebody else?
The mortgage servicing industry is a big business and growing. Servicers handle the daily operations of your loan, such as collecting payments and calculating late charges. They also track when loans get in trouble, and can even start foreclosure proceedings.
The biggest non-bank mortgage servicer is Ocwen Financial (OCN). It specializes in what it calls “high risk loans.” You’ve probably never heard of Ocwen, but regulators are keeping close tabs on the company.
In December, the Consumer Financial Protection Bureau and 49 state attorneys general reached a $2.1 billion settlement with Ocwen because of mortgage servicing violations. The head of the CFPB, Richard Cordray, said that Ocwen took “advantage of borrowers at every stage of the process.” He also estimated that as many as 185,000 consumers may have been unlawfully foreclosed upon by Ocwen.
CFPB spokesman Sam Gilford added that Ocwen’s violations included “robo-signing documents during the foreclosure process”.
Remember robo-signing? That was when bank employees basically authorized foreclosure documents without reading them. More than a dozen banks ultimately ended up settling with the government over foreclosure abuses tied to robo-signing.
Ocwen has remained in the crosshairs of regulators though. In 2012, the New York Department of Financial Services issued a consent order against Ocwen. The regulator found what it called “gaps in the servicing records of certain loans,” and evidence that Ocwen “commenced foreclosure actions without sufficient documentation.”
And it appears that Ocwen’s troubles may not be over yet. The company said recently it was putting “an indefinite hold” on plans to buy a portfolio of servicing rights from Wells Fargo (WFC, Fortune 500) that consisted of about 184,000 loans with a total principal balance of $39 billion.