The test is a requirement of the terms of the 2012 national mortgage settlement, according to a report by Mortgage Servicing News. Joseph A. Smith, the settlement monitor, will to file a report in U.S. District Court outlining corrective actions the company will take. Ocwen passed eight other tests.
Smith launched an investigation of Ocwen in December, claiming the servicer’s internal review process couldn’t be trusted, according to Mortgage Servicing News. The investigation came after a whistleblower told Smith that Ocwen was selecting its own loan files to sample for testing instead of taking a random statistical sample.
Ocwen’s failure in one test isn’t actually terrible performance. Last year, for instance, Green Tree Servicing failed eight tests in one testing period, according to Mortgage Servicing News.
But it’s hardly the only trouble Ocwen has had recently. The mortgage servicer has long had a less-than-sterling reputation, with multiple accusations of poor servicing and multiple investigations by various government agencies into its business practices. The company saw a loss of half a billion dollars in 2014, due in large part to litigation costs. In March, Ocwen was fired from two mortgage servicing contracts, representing $264 million in unpaid principal, after bondholders accused the company of improper servicing practices. Moody’s Investor Service also downgraded Ocwen’s servicer rating after it was found the company had backdated foreclosure letters.
Embattled servicer Ocwen Financial has failed a test to determine whether it had notified borrowers of faulty documents for loan modifications in a timely manner.