Mortgage servicer Ocwen Financial, which was accused of backdating thousands of letters to struggling borrowers, has endured a painful last two weeks, and now the company said it is preparing to settle for servicing charges that could reach $100 million.
According to Ocwen's third quarter earnings announcment, the company recorded a $100 million charge for a potential settlement with New York regulators. The Atlanta-based servicer also reported a net loss of $75.3 million, or $0.58 per share, for the third quarter compared to a net income of $60.6 million, or $0.39 per share, for the year-earlier quarter. Ocwen generated revenue of $513.7 million, down 3% compared to the 2013 third quarter.
Ocwen said the third quarter losses were impacted by $120 million of reserves for “various regulatory and legal matters.” The $120 million includes a $100 million accrual for a potential settlement with the New York Department of Financial Services; $9 million for fair value changes and $8.1 million of integration, technology-related and severance costs. "We have not reached any agreement with the New York Department of Financial Services and cannot predict whether or when we may reach such a resolution. Any future resolution of these regulatory and legal matters may be materially different from what has been accrued," the company stated.
You might also like: Ocwen issues apology letter to borrowers
"Ocwen recently reached a significant milestone by making its 500,000th loan modification, including 290,000 HAMP modifications. Ocwen is the leader in foreclosure prevention with 44% more HAMP modifications than any other servicer,"commented Bill Erbey, Ocwen's executive chairman. "We work very hard to keep borrowers in their homes and that is why we take the concerns raised by the New York Department of Financial Services so seriously. We have numerous compensating controls in place which we believe should have prevented borrower harm. Nonetheless, Ocwen is proactively creating a process whereby any borrower, who believes they received a misdated letter, and were harmed as a result, will have the opportunity to receive a complete file review to resolve any issues caused by the misdating."
Last week news broke that an investigation by the New York's Department of Financial Services found that Ocwen improperly dated time-sensitive letters to mortgage borrowers and did not take action to fix the issue despite repeated notices of concern.
In the majority of cases, borrowers received letters in the mail that denied mortgage loan modifications—letters that were dated more than 30 days before it arrived, wrote Benjamin Lawsky, superintendent of New York's Department of Financial Services, in a letter to Timothy Hayes, executive vice president & general counsel for Ocwen. Many borrowers of the lender also received foreclosure warning letters months after the deadline had already passed, according to Lawsky's letter.
You might also like: Top subprime mortgage servicer accused of backdating thousands of letters