Ocwen Financial Corp. received both good and bad news from an independent settlement monitor on Thursday.
First the good news: Ocwen has satisfied its consumer relief obligation under the 2012 National Mortgage Settlement (NMS), having provided 23,812 borrowers with approximately $2.1 billion in consumer relief to eligible distressed borrowers from November 3, 2014, to September 30, 2015, according to a report released Thursday from Joseph A. Smith Jr., monitor of the NMS. Ocwen was required to provide $2 billion in consumer relief under the terms of the NMS by February 26, 2017.
Smith also determined in the test for Ocwen’s compliance with the NMS that the Atlanta-based servicer did not fail any metrics during the first half of 2015 and that Ocwen had corrected many previously failed metrics.
“The Monitor’s latest Consumer Relief Report is another positive step for Ocwen, and confirms our commitment to providing real solutions to struggling homeowners,” said Ron Faris, President and CEO of Ocwen. “Our work with distressed borrowers will not end just because we have exceeded our NMS obligations. Families across the country are still being impacted by the financial crisis. Ocwen will continue to work with our customers, especially those facing foreclosure, to find loan modification programs, including principal reduction programs, to help them better afford and remain in their homes.”
Now the bad news: Smith said Ocwen has not fully resolved the issues that led to the failure of Metric 31, which tests whether the servicer has sent the borrower a notification that their request for a modification has been denied. That notification should include the reason for the denial, information the servicer used to make the decision, and a window of opportunity for the borrower to provide evidence that the servicer's decision was erroneous.
According to Smith, Ocwen was delayed in implementing the Corrective Action Plan (CAP) for the failure of Metric 31; the delay was caused by difficulties in resolving the technical issues that led to Ocwen originally failing the metric for the third calendar quarter of 2014. Smith said in his report that he has approved a revised Metric 31 CAP to address the technical issues and that Ocwen had informed him recently that the implementation of the CAP is complete. Smith said if he determines that the CAP has been implemented, Ocwen expects testing to resume as of Q2 2016.
Due to the delay in implementing the CAP for the failure of Metric 31, Smith is requiring Ocwen to hold certain loans so that no foreclosure sale will be completed until Smith has determined that the Metric 31 CAP has been implemented.
“Ocwen has exceeded its consumer relief obligation by providing more than 23,000 borrowers with $2.1 billion in consumer relief,” Smith said. “While Ocwen has made progress toward correcting a number of past fails, it has not resolved its issues that led to its failure of Metric 31. Therefore, I will not allow Ocwen to move forward with foreclosures on any borrowers who could have been affected by this failure until each of these borrowers has correct information and a chance to appeal. Despite its progress, Ocwen continues to have work to do. I will continue my efforts to review Ocwen’s compliance with the NMS and resolve any outstanding issues. I will report to the Court and the public on these efforts in the coming months.”
“While Ocwen has made progress toward correcting a number of past fails, it has not resolved its issues that led to its failure of Metric 31.”
Joseph A. Smith, Jr., NMS Monitor
It has been a tough week for Ocwen. The servicer received the news about the hold on the foreclosures just one day after reporting a net loss of $111.2 million in the first quarter. One of the factors offsetting a reduction in expenses for Ocwen during Q1 was $30 million in monitoring costs.
According to Smith, the progress Ocwen has made toward correcting its previous fails involve completing the Global Corrective Action Plan (Global CAP), which is a plan to correct a variety of letter-dating issues previously uncovered, and completing CAPs for Metrics 7, 8, 19, and 23.
- Metric 7 evaluates the timeliness, accuracy, and completeness of pre-foreclosure initiation notification (PFN) letters that servicers sent to borrowers.
- Metric 8 tests whether the servicer complied with servicing standards regarding the propriety of default-related fees they collect from borrowers. Those fees may include property preservation fees, valuation fees, and attorneys’ fees.
- Metric 19 tests whether the servicer complied with servicing standards regarding timeliness for responding to borrowers about missing or incomplete information.
- Metric 23 tests the servicer’s compliance with the requirement to notify borrowers of any missing documentswithin 30 days of a borrower’s request for a short sale.
The NMS was originally finalized in April 2012 between 49 states and the District of Columbia, the federal government, and five banks and/or mortgage servicers (Bank of America, Citi, JPMorgan Chase, ResCap Parties, and Wells Fargo—ResCap’s assets were acquired by Ocwen after the settlement), creating new servicing standards and providing relief to distressed homeowners as well as funding for state and federal governments. As part of the agreement, the five servicers were required to provide $20 billion in consumer relief and $5 billion in other payments. The settlement is considered landmark because it established the first-ever nationwide reforms to mortgage servicing that include better communication between servicers and borrowers as well as a single point of contact and appropriate standards servicers for executing documents in foreclosure cases.
Click here to for an update on Ocwen’s Consumer Relief and Compliance.