Mortgage servicing giant Ocwen Financial Corporation has just been dealt a tremendous blow as more than 20 states have issued cease-and-desist orders to the company. The orders could effectively cripple the company’s mortgage business.
According to a news release by the North Carolina Commissioner of Banks, regulators from more than 20 states issued enforcement orders today to address “mishandling of consumer escrow accounts” by Ocwen subsidiaries.
The North Carolina regulator specifically prohibited subsidiary Ocwen Loan Servicing from acquiring new servicing rights and from originating new mortgage loans “until the company is able to prove it can appropriately manage its consumer mortgage escrow accounts.” Most of the other states that issued enforcement orders against the business included similar prohibitions in the orders.
There’s just one problem: Ocwen doesn’t have the money it would take to reconcile those accounts.
According to the North Carolina order, Ocwen told a multi-state investigatory committee that reconciling all its escrow accounts would cost $1.5 billion “and be well beyond Ocwen’s financial capacity to fund.” Instead of fixing all 2.5 million active first-lien escrow accounts, Ocwen suggested reconciling “a sample” of just 457. The states found that proposal unacceptable.
“This proposal could leave a vast number of consumers with unaudited and inaccurate escrow accounts,” the order said.
“The orders are the culmination of several years of examinations and monitoring that revealed the company is mismanaging consumer escrow accounts,” the North Carolina agency said in a news release. Mortgage escrow accounts are used to pay taxes and insurance and hold borrower funds “that the company is entrusted to appropriately disburse,” according to the regulator.
The regulators also found that Ocwen had for years operated unlicensed mortgage servicing facilities in some states, apparently in violation of state statutes.
"As regulators, we encourage and advise companies to remain compliant with state and federal laws," said North Carolina Commissioner of Banks Ray Grace. "However, Ocwen has consistently failed to correct deficient business practices that cause harm to borrowers. We cannot allow this to continue."
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