NOW COME the Division and Ocwen, and stipulate and agree as follows:
- REMITTANCE. Ocwen shall remit one million dollars ($1,000,000.00) to the Commonwealth of Massachusetts Mortgage Education Trust upon execution of this Consent Order. The funds shall be payable by cashier’s check to the “Commonwealth of Massachusetts, Division of Banks Mortgage Loan Settlement Trust” and mailed to the Division of Banks, Attn: Enforcement and Investigation Unit, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118.
- MORTGAGE SERVICING RIGHTS RESTRICTION:
a. MORTGAGE SERVICING RIGHTS RESTRICTION. Ocwen shall not acquire any residential mortgage servicing rights (MSRs), except as set forth in paragraphs (b), (c) and (e) below. The restrictions on acquisitions for loans originated by Ocwen are not applicable to reverse mortgages originated by Liberty Home Equity Solutions, Inc.
i. Ocwen may only acquire MSRs for loans it originates according to the following restrictions:
1. Upon completion of the MSP Mapping Project,1 Ocwen may retain MSRs from its own originations equal to 5% of the Massachusetts loans originated by Ocwen in 2016 (i.e.,68 loans).2
2. Upon completion of a Mock Conversation,3 Ocwen may ratain MSRs from its own originations equal to an additional 10% of the Massachusetts loans originated by Ocwen in 2016 (i.e. an additional 136 loans).
3. Following completion of the MSP Mapping Project and a Mock Conversion and after Ocwen and the new system vendor have approved initiating the transfer of loans,4 Ocwen may retain MSRs from its own originations equal to an additional 15% of the Massachusetts loans originated by Ocwen in 2016 (i.e. an additional 204 loans).
4. Upon completion of the transfer of all active, residential Massachusetts loans to the new servicing platform,5 Ocwen can retain MSRs from its own originations equal to an additional 20% of the Massachusetts loans originated by Ocwen in 2016 (i.e. an additional 272 loans).
5. Upon completion of a data integrity audit of transferred data on Massachusetts loans, as described in Section IV below,6 Ocwen may originate and retain MSRs without further restrictions.
ii. Ocwen may only acquire MSRs for loans it acquires in bulk7 according to the following restrictions.
1. Upon completion of the MSP Mapping Project, Ocwen may acquire bulk MSR transfers where the Massachusetts MSRs equal no more than 5% of Ocwen’s Massachusetts servicing portfolio as of April 24, 2017 (i.e., 1,686 loans).8
2. Upon completion of a Mock Conversion, Ocwen may acquire bulk MSR transfers where the Massachusetts MSRs equal no more than an additional 5% of Ocwen’s Massachusetts servicing portfolio as of April 24, 2017 (i.e., an additional 1,686 loans).
3. Following completion of the MSP Mapping Project and a Mock Conversion and after Ocwen and the new system vendor have approved initiating the transfer of loans, Ocwen may acquire bulk MSR transfers where the Massachusetts MSRs equal no more than an additional 10% of Ocwen’s Massachusetts servicing portfolio as of April 24, 2017 (i.e., an additional 3,372 loans).
4. Upon completion of the transfer of all Massachusetts loans to the new servicing platform, Ocwen may acquire bulk MSR transfers where the Massachusetts MSRs equal no more than 10% of Ocwen’s Massachusetts servicing portfolio as of April 24, 2017 (i.e., 3,372 loans).
5. Upon completion of a data integrity audit of transferred data on Massachusetts loans, Ocwen may acquire bulk MSR transfers without further restrictions.
b. REALSERVICING RESTRICTION. Ocwen shall not board any new loans onto the REALServicing platform at any time. This restriction does not apply to loans that are (i) already serviced on the REALServicing platform, including those that are subsequently modified or those that are subsequently converted to an arrangement whereby Ocwen acts as sub-servicer, or (ii) required to be repurchased by Homeward Residential, Inc. or Ocwen.
c. NEW ORIGINATIONS. Ocwen may originate through broker, retail, or wholesale, or acquire through correspondent lender relationships, new residential mortgage loans, including, but not limited to, traditional mortgage loans, and reverse mortgages so long as they will not be boarded, even temporarily, to the REALServicing platform. Any such loans must, instead, be sub-serviced by an unaffiliated, licensed and/or exempt entity, although Ocwen may only retain the associated MSRs in accordance with paragraph (a) above.
d. NEW SERVICING PLATFORM. Ocwen shall develop a detailed Plan of Action and Milestones (POAM) for the transfer of all residential mortgages currently administered on the REALServicing platform to other servicing platform(s) that will enable Ocwen to comply with applicable mortgage servicing standards for its residential mortgage portfolios. The POAM shall include a timeline for accomplishing each milestone in the POAM in order to complete the transfer within a commercially reasonable time. The proposed POAM shall be submitted to the Division. Ocwen shall provide quarterly updates on the POAM until the transfer of all residential mortgages has been completed.
e. POTENTIAL MERGER OR ACQUISITION PROVISIONS. In the event that Ocwen chooses to merge with or acquire an unaffiliated company or its assets in order to effectuate a transfer of loans from the REALServicing platform, Ocwen must give the Division thirty (30) days prior notice to the signing of any final agreement and the opportunity to object within thirty (30) days from such notice.9 If no objection is received, the provisions of paragraph (a) above shall not prohibit the transaction, including the related transfer of MSRs or mortgage loans between the companies, or limit the transfer of loans from the REALServicing platform onto the merged or acquired company’s alternate servicing platform. In the event that an unaffiliated company merges with or acquires Ocwen or Ocwen’s assets, none of the above paragraphs within this Section II shall prohibit said transaction, including the related transfer of MSRs or mortgage loans between the companies, or limit the transfer of loans from the REALServicing platform onto the merging or acquiring company’s alternate servicing system.
- ESCROW REVIEW PROCESS:
a. SCOPE OF ESCROW REVIEW. Ocwen will employ an independent third-party auditor (“Auditor”) to review all escrow transactions on the REALServicing platform, in a representative sample of escrowed loans serviced by Ocwen in the signatory states (identified in Appendix A to the Audit Plan, as defined in Paragraph III.c.) between January 1, 2013 and June 30, 2017.
b. INDEPENDENT THIRD-PARTY AUDITOR. Ocwen has generated a request for proposal (“RFP”) setting forth information about the Auditor’s engagement and defining the specific escrow transactions to be reviewed. The Division had an opportunity to review and object to the RFP. Ocwen selected the Auditor and notified the Division of the proposed Auditor. Ocwen engaged the Auditor within ten (10) days of notification to the Division, and the Division did not object to the Auditor.
c. AUDIT PLAN. The Auditor’s testing methodology shall be consistent with the RFP and shall be set forth in a plan (“Audit Plan”)10 agreed to by Ocwen and the Auditor and not objected to by the Division. The Audit Plan was submitted to the Division within sixty (60) days of the Auditor’s engagement, and the states had ten (10) days after submission to provide any objections. The Audit Plan was completed on February 8, 2018, and the Auditor must begin testing by March 8, 2018. The Auditor may revise the Audit Plan to the extent revisions become necessary during its testing, provided it is consistent with the RFP and provided Ocwen agrees to the revision and the Division does not object to the revision.
d. SAMPLING METHODOLOGY
i. LENDER PLACED INSURANCE REVIEW. The Auditor will review 100% of written lender placed insurance complaints received by Ocwen from Massachusetts borrowers between April 30, 2015 and June 30, 2017 to ensure the response for each complaint was accurate and sufficient to respond to the specific issues raised in the complain1.
ii. REPRESENTATIVE REVIEW. The Auditor will review a random, statistically significant sample of escrowed loans. The population of escrowed loans is limited to those where the property is located in one of the signatory states. The statistically significant sample size shall be at a 95% confidence level, 5% expected margin of error, and 2% precision level. The sample of loans will be allocated on a pro-rata basis amongst the signatory states based on the percentage share for each state, with every signatory state having at least five (5) loans reviewed. If any state has less than five (5) loans sampled as a result of the pro-rata allocation, additional loans shall be sampled to ensure that each state has at least five (5) loans reviewed, but without a commensurate increase for a signatory state not subject to the minimums described above.
iii. STRATIFIED REVIEW. The Auditor will review a statistically significant sample of each of the identified strata at a 95% confidence level, 5% expected margin of error, and 2% precision level.
1. The identified strata are divided into two categories: 1) “Pro-Rata Allocation Only” and “Pro-Rata Allocation Plus."
2. The Pro-Rata Allocation Only strata are:
a. HOA Foreclosures,
b. second liens,
c. loans with biweekly payments, and
d. current loans with either positive or negative escrow balances greater than $10,000.
3. The Pro-Rata Allocation Plus strata are:
b. loans 60+ days past due,
c. HAMP modifications,
d. Shared Appreciation modifications (SAM loans),
e. non-HAMP modifications,
g. loans with PMI only,
h. loan with flood insurance,
i. condo master policy loans
j. loans with negative escrow balances when transferred,
k. loans with negative escrow balances for 3+ consecutive months, l. loans with complaints,
m. loans with capitalized escrow, and
n. loans with lender placed insurance.
4. The Pro-Rata Allocation Only strata, the Auditor will ensure the strata testing population is allocated on a pro-rata basis amongst the signatory states based on the percentage of Ocwen’s overall portfolio attributable to each state.
5. For the Pro-Rata Allocation Plus strata, the pro-rata allocation will be adjusted, as necessary, to ensure the Auditor reviews at least five (5) escrowed loans per strata for each signatory state.
6. To the extent the Auditor increases the Pro-Rata Allocation Plus sample to meet the minimums described above, the overall population will also increase, without a commensurate increase in the Pro-Rata Allocation Plus for a signatory state not subject to the minimums described above.
iv. MASSACHUSETTS REVIEW: In addition, the Auditor will identify and review an additional random sample of Massachusetts escrowed loans serviced by Ocwen on the REALServicing platform between January 1, 2013 and June 30, 2017. The sample size for this review will equal the difference between 1219 loans and the number of Massachusetts loans tested pursuant to the Representative Review and the Stratified Review described above. For the sake of clarity, the number of loans reviewed pursuant to the Representative Sample, Stratified Sample, and Massachusetts Review will equal at least 1219 loans.
e. TESTING METHODOLOGY. In accordance with the testing methodology provisions of the RFP, the Auditor will identify instances where Ocwen did not administer an escrow account for a sampled loan in compliance with laws governing escrow under the Real Estate Settlement Procedures Act, as implemented by Regulation X, Truth in Lending Act, as implemented by Regulation Z, the Homeowners Protection Act, or any applicable state law related to escrow (“Error”). For any Error found, the Auditor will, to the extent the information is reasonably accessible, set forth:
i. the name of the borrower,
ii. the state where the property is located,
iii. the nature of the Error,
iv. the date of the Error,
v. the date Ocwen first became aware of the Error,
vi. how the Error came to Ocwen’s attention (internal process, third-party notification, consumer complaint, regulatory agency, etc.),
vii. an analysis of whether the error caused financial harm, including
1. basis for determination, and
2. the amount of any harm.
viii. if the Error was remediated, and, if so, how and when it was remediated.
ix. For any unidentified or unremediated Errors, the Auditor must provide information regarding why the Error was not identified and/or remediated. During the review, the Auditor will also determine if the Error caused any financial harm to the borrower.f. CORRECTIVE ACTIONS. If the Auditor identifies Errors previously remediated by Ocwen, regardless of whether they resulted in financial harm as defined in the Audit Plan, the Auditor will confirm that the corrective actions were sufficient to: (1) remediate the Error, and any other similarly impacted borrowers, and (2) prevent the Error from recurring. Ocwen will provide Division representative with documentation of any corrective actions to address any previously remediated Errors. Should the Auditor determine that Ocwen did not fully remediate the Error(s) and/or that Ocwen has not taken sufficient corrective actions to prevent the Error(s) from recurring, then Ocwen shall submit within 60 days of Escrow Report a corrective action plan (including remediation if applicable) to be approved by the Division. If the Auditor identifies a non-remediated Error, Ocwen shall submit within 60 days of Escrow Report a corrective action plan to be approved by the Division that will remediate the Error, and remediate any other similarly impacted borrowers, including the provision of restitution to fully correct financial harm, and/or to prevent the Error from recurring. In the event Ocwen implements remediation to address a non-remediated Error, the Auditor will review a statistically valid sample of borrowers potentially impacted by each root cause to confirm the remediation efforts were successfully completed. In all instances, the Auditor will confirm that Ocwen’s corrective action plans and remediation efforts are sufficient and no loan shall be boarded onto a new system pursuant to the POAM with a known, unremediated error.
g. ESCROW REPORT: The Auditor will generate a report setting forth the results of its audit (“Escrow Report”),11 pursuant to the timeframes agreed upon in the Audit Plan. The Escrow Report will identify any information that, in the Auditor’s opinion, is relevant to its report. At a minimum, the Escrow Report will include the information described in Paragraphs III.(d)-III.(f) of this Agreement. The final report, and any drafts, shall be provide simultaneously to Ocwen and the signatory states. Ocwen shall have the right to submit written comments to the Auditor, which shall be appended to the final version of the Escrow Report.
4. DATA INTEGRITY AUDITS. Ocwen shall retain an independent third party (the “Firm”)12 to conduct three data integrity audits to ensure the accuracy of the following key data points for 1,000 randomly selected Massachusetts loans secured by residential property. Unless otherwise agreed to by the parties, the Division will have 15 days to object to Ocwen’s choice of Firm.
- a. Prior to initiating the first audit, the Firm will generate an Audit Plan setting forth its methodology. Ocwen will provide the Audit Plan to the Division and the Division will have 15 days to object to the plan. If the Division objects to the plan, Ocwen, the Firm, and the Division will take reasonable steps to resolve the Division’s objections within 30 days.
b. The Firm will complete the first audit before any Massachusetts loans transfer to the new servicing platform, initiate the second audit following the transfer of Massachusetts loans to the new servicing platform, and initiate the third audit two years after the last Massachusetts loan is transferred to the new servicing platform. Within 60 days of completing each audit, the Firm will provide a report setting forth the results of its work to the Division and Ocwen.
c. The Firm shall confirm the accuracy of the following data points:
i. Monthly payment amount,
ii. Property address.
iii. Principal balance,
iv. Interest rate,
v. Loan term,
vi. Escrow account balance,
vii. Suspense account balance,
viii. Delinquency status,
ix. Loss mitigation status,
x. Foreclosure status, and
xi. Mailing address.
5. COMPLAINT PLAN
- a. No later than sixty (60) days after this consent order is issued by the Division, Ocwen shall submit to the Division for review and determination of non-objection a comprehensive consumer complaint resolution plan (“Complaint Plan”) designed to ensure that the company will properly document, timely investigate and remediate consumer complaints as defined in 12 CFR 1024.35. The Complaint Plan shall include, at a minimum:
i. robust, board-approved policies and procedures to ensure that all consumer complaints are documented and timely investigated, any errors found as a result of a complaint are remediated, and errors found that may impact other accounts are escalated for further investigation and/or remediation;
ii. a formal internal review process to ensure all complaints are processed in accordance with the policies and procedures adopted under this Complaint Plan;
iii. training on revised complaint procedures for all employees no later than 180 days from the date of this order;
iv. a program establishing annual, mandatory complaint resolution training for employees who may receive any form of complaint from a consumer or are otherwise involved in the complaint resolution process; and
v. detailed steps for addressing each action required by the Complaint Plan.
6. FINANCIAL CONDITION
- a. ONE YEAR FINANCIAL CONDITION PLAN. Within thirty (30) business days, Ocwen will submit a written plan demonstrating how it will remain a going concern for a period of one (1) year from the Effective Date of this Order (“One-Year Financial Condition Plan”). The One-Year Financial Condition Plan, at a minimum, must take into account, in accordance with Generally Accepted Accounting Principles, all known and reasonably anticipated future liabilities including, but not limited to, costs of necessary audits and anticipated regulatory, law enforcement, or other litigation liabilities or costs exceeding one (1) million dollars arising from any final orders/judgments or settlements and must also demonstrate how Ocwen will comply with all applicable liquidity and capital requirements.
b. THREE YEAR FINANCIAL CONDITION PLAN. Ocwen previously submitted to the MMC a three (3) year financial condition plan (“Three-Year Financial Condition Plan”), which must be updated by Ocwen and the Division shall receive a copy of the updated report.
c. ONGOING FINANCIAL CONDITION REPORTING. Ocwen will provide additional updates every six (6) months going forward, with the last update due on or before March 31, 2021, unless the Division releases Ocwen from this requirement earlier. Ocwen shall notify the Division if and when any event occurs that could materially impact Ocwen’s financial condition, including, but not limited to, any actual or anticipated liabilities or costs exceeding five (5) million dollars or if Ocwen drops below or projects to drop below any applicable liquidity or capital requirement, within ten (10) business days of the occurrence of any such event(s). Ocwen will submit the following reports with the One-Year Financial Condition Plan, and Ocwen will continue to submit these reports until November 2020:
i. Monthly financial statements that track actual earnings compared to forecasted earnings during the same time period, to be submitted to the Division for each month on or before the last day of the following month;
ii. A monthly liquidity report that demonstrates daily liquidity tracking with forecasts on liquidity positions over thirty (30), sixty (60), and ninety (90) days, to be submitted to the Division on or before the fifteenth (15th) day of each month;
iii. A monthly report documenting compliance with internal policies and procedures governing limits on exposure to market risk, including, but not limited to, interest rate risk, to be submitted the Division for each month on or before the last day of the following month; and
iv. A quarterly going concern analysis, which shall include covenant and capital reporting that tracks any and all financial or regulatory covenants Ocwen is obligated to comply with and whether Ocwen remains in compliance with those covenants, to be submitted to the Division forty-five (45) days after the end of each calendar quarter, with the exception of the last quarterly report for each calendar year, which shall be submitted ninety (90) days after the end of such quarter.
d. ACKNOWLEDGEMENT OF RECEIPT. The Division shall designate a point of contact to whom Ocwen will submit the documents described in Section VI of this Agreement. Such person must acknowledge receipt of the documents within fifteen (15) calendar days of Ocwen’s submission. In addition, the Division shall identify any alleged deficiencies in the reports within sixty (60) calendar days of Ocwen’s submission. The parties will make a good faith effort to promptly resolve any alleged deficiencies.
e. RELEVANT ENTITY. Ocwen will submit the documents described in Section VI of this Agreement for Ocwen Financial Corporation.
- a. Nothing in this Consent Order shall be construed as permitting Ocwen to violate any law, rule, regulation, or regulatory bulletin to which the Company is subject.
b. The Division and Ocwen have entered into this Consent Order to resolve the Order dated April 20, 2017 in its entirety. Within seven (7) days after execution of this Consent Order, Ocwen will file or submit the appropriate paperwork to withdraw and/or dismiss its request for administrative hearing and any pending litigation regarding the Order dated April 20, 2017, including filing a stipulation of dismissal, with prejudice and waiving all rights of appeal, in the action styled Ocwen v. Commissioner of Banks, Civ. Action No. 1784CV01255-BLS2, now pending in Suffolk Superior Court.
c. Failure to comply with the terms of this Consent Order shall constitute grounds for license suspension and/or revocation, or other formal regulatory action pursuant to applicable provisions of the General Laws of the Commonwealth of Massachusetts.
d. This Consent Order shall become effective immediately upon the date of its issuance.
e. This Consent Order and the Consent Agreement are the complete documents representing the resolution of this matter. There are no other agreements between the Division and Ocwen.
f. The provisions of this Consent Order shall not limit, estop, or otherwise prevent any other state agency or department, from taking any other action affecting Ocwen and/or any of its officers, directors, or managers. Provided Ocwen complies with the terms of the Consent Order, the Division agrees that it will not seek additional penalties related to the allegations contained in the Order or the escrow review process described in Section III above. However, nothing in the Consent Order prohibits the Division from taking administrative action on new issues discovered during the pendency of the Consent Order, or thereafter.
g. The provisions of this Consent Order shall be binding upon Ocwen and its directors, officers, employees, agents, and their successors and assigns.
h. In accordance with the terms of this Consent Agreement entered into by Ocwen and the Commissioner, Ocwen has waived all rights of appeal that it may have.
i. The provisions of this Consent Order shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this Consent Order shall have been modified, terminated, suspended, or set aside by the Commissioner or upon an order of a court of competent jurisdiction.
j. For purposes of the Consent Order, the designated representatives for the Division will be in the Enforcement and Investigations Unit. The designated representative of Ocwen will be Michael Hollerich, email@example.com.
BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS:
Dated at Boston, Massachusetts, this 21 day of March, 2018.
Terence A. McGinnis
Commissioner of Banks
Commonwealth of Massachusetts