Ocwen Financial Corp., the nation’s largest servicer of subprime mortgages, may have denied struggling borrowers the chance to fix loan problems and avoid foreclosures, according to regulators.
An investigation by the New York's Department of Financial Services found that Atlanta-based Ocwen Financial inappropriately backdated thousands of 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 a letter 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.
He added that borrowers are only allowed 30 days to appeal the denial, so the appeal period had largely passed by the time they received the letter.
Many borrowers of Ocwen also received foreclosure warning letters months after the deadline had already passed, according to Lawsky's letter.
Ocwen responded to the letter blaming software errors in the company’s correspondence systems for the improperly dated letters to at least 281 of its New York borrowers. The company said that it is investigating two other cases and cooperating with regulators.
"We believe that we have resolved the letter-dating issues that have been identified to date, and we continue our investigation as to whether there are additional letter-dating issues that need to be resolved," the company said in its official statement.
Ocwen’s stock declined 18.2% yesterday to $21.48 per share. The stock price is down 61% this year.