AG Healey Sues Ocwen for Abusive Mortgage Servicing Practices
Widespread Mortgage Servicing Violations Harmed Thousands of Massachusetts Homeowners
BOSTON – One of the nation’s largest mortgage servicers has been sued for allegedly violating Massachusetts law by charging Massachusetts homeowners for unnecessary and expensive force-placed insurance policies, imposing excessive fees on delinquent borrowers, and failing to properly process escrow and insurance payments, Attorney General Maura Healey announced today.
AG Healey filed a lawsuit today against Ocwen Loan Servicing, LLC, which services tens of thousands of mortgages for Massachusetts homeowners.
“It is alarming that one of the nation’s largest mortgage loan servicers has proven itself to be incapable of properly handing homeowners’ mortgages in Massachusetts,” AG Healey said. “Borrowers are entitled to fair, competent, and accurate handling of their mortgage and escrow accounts. We remain committed to helping homeowners avoid improper charges and abusive foreclosure practices.”
The Consumer Financial Protection Bureau (CFPB), the Florida Attorney General, and 25 state banking regulators, including the Massachusetts Division of Banks, have also recently initiated legal actions against Ocwen.
The AG’s complaint alleges that Ocwen failed to respond to borrower disputes about their accounts and to correct account errors. According to the complaint, the company’s servicing failures increased Massachusetts borrowers’ mortgage and insurance expenses, exposed borrowers to serious risk through insurance lapses, and contributed to loan delinquencies and foreclosures.
Mortgage investors hire loan servicers like Ocwen to collect payments from borrowers, to maintain records of loan payments and balances, to follow up on delinquent accounts, to ensure that borrowers maintain property insurance, and to disburse property tax and insurance payments from borrowers’ escrow accounts. The AG’s office alleges that Ocwen has consistently fallen short of its obligations to borrowers in various ways, including:
- Funneling fees and commissions: Ocwen arranged for commissions and other fees to be paid to companies related to Ocwen, even though those companies did little or no work, resulting in higher charges to Massachusetts borrowers.
- Improperly administering insurance premiums: Ocwen failed to disburse borrowers’ escrowed insurance premiums to insurers, causing their insurance policies to lapse, leaving them exposed to serious gaps in insurance coverage. The force-placed policies that Ocwen then puts in place are very expensive, carry high deductibles, and do not provide critical liability and personal property coverage.
- Unnecessary flood insurance: Ocwen force-placed borrowers in expensive flood insurance policies for time periods when properties were not in special hazard flood area and did not require flood insurance.
- Duplicative insurance policies: Ocwen force-placed certain borrowers who already had insurance coverage, either through their own homeowners’ insurance or through other policies that Ocwen itself had acquired on behalf of the borrowers.
- Charging inflated and duplicative default-related fees: Ocwen took advantage of struggling borrowers by ordering unnecessary and duplicative title search, property inspection and landscaping services and then passing the costs on to the borrower.
The AG’s lawsuit alleges that Ocwen both overcharged homeowners and failed to give them information necessary to understand or dispute inappropriate charges. The lawsuit alleges that inflated costs led to improper late fees, spiraling collection costs and unnecessary foreclosures.
The suit seeks civil penalties and full restitution for harm to borrowers, as well as injunctive relief to ensure the misconduct is not repeated.
The AG’s Office has been a national leader in securing restitution for borrowers from banks and servicers. The office has obtained recoveries from Morgan Stanley, Goldman Sachs, Royal Bank of Scotland, Citigroup, JPMorgan Chase, Countrywide, Fremont Investment & Loan, Option One, Ditech, and others on behalf of Massachusetts homeowners.
The matter is being handled by staff in the Attorney General’s Public Protection and Advocacy Bureau, including Shennan Kavanagh, Tim Hoitink, Michael Lecaroz, Sarah Petrie, Arwen Thoman, Ivy Yan and Glenn Kaplan.