|Organization:||Division of Banks|
|Location:||West palm Beach, FLA|
Temporary Order to Cease and Desist Ocwen Loan Servicing, LLC
Table of Contents
Ocwen Loan Servicing, LLC
COMMONWEALTH OF MASSACHUSETTS
DIVISION OF BANKS
IN THE MATTER OF:
OCWEN LOAN SERVICING, LLC
Debt Collector License No: DC0861
Mortgage Lender License No: ML1852
NMLS No. 1852
1661 Worthington Rd., Suite 100
West Palm Beach, FL 33409
Docket No. 2017-001
FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST AND
ORDER TO SHOW CAUSE AND NOTICE OF RIGHT TO A HEARING
The Division of Banks (“Division”) has determined that Ocwen Loan Servicing, LLC (“Ocwen” or “Company”), with its headquarter office located at 1661 Worthington Rd., Suite 100, West Palm Beach, Florida 33409, has engaged in, or is engaging in, residential mortgage loan servicing practices which violate State and Federal laws and fails to meet the requirements for a Massachusetts residential mortgage lender and debt collector. Therefore, the Division hereby issues these FINDING OF FACTS AND TEMPORARY ORDER TO CEASE AND DESIST AND ORDER TO SHOW CAUSE AND NOTICE OF RIGHT TO A HEARING (“Order”) pursuant to General Laws chapter 255E section 6, and General Laws chapter 93, sections 24J and 24I.
WHEREFORE, the Division has jurisdiction over the licensing and regulation of persons and entities engaged in the business of debt collection and servicing residential mortgage loans in Massachusetts pursuant to General Laws chapter 93, sections 24-28 and implementing regulation 209 CMR 18 et seq.
WHEREFORE, the Division has jurisdiction over the licensing and regulation of persons and entities engaged in the business of residential mortgage lending pursuant to General Laws chapter 255E and implementing regulation 209 CMR 42 et seq.
WHEREFORE, Ocwen, at all relevant times herein was a wholly-owned subsidiary of Ocwen Mortgage Servicing, Inc., which was a wholly-owned subsidiary of Ocwen Financial Corporation, has engaged in the business of servicing residential mortgage loans in Massachusetts. These activities generally include collecting or remitting for any lender, noteowner, noteholder, or itself, payments, interest, principal, and trust items on a residential mortgage loan in accordance with the terms of the residential mortgage loan, as well as the additional servicing activities further described below. Ocwen has also engaged in the business of residential mortgage lending.
WHEREFORE, the Division has issued to Ocwen a debt collector license, License Number DC0861, for the servicing of loans and collection of debts relating to residential mortgage loans in Massachusetts and a mortgage lender license ML1852.
MMC EXAMINATION AND SUPPLEMENTAL COLLECTION OF INFORMATION
The state mortgage regulators, as coordinated by the Multi-State Mortgage Committee (“MMC”), conducted a limited-scope multi-state examination (“MMC Examination”) of Ocwen in order to determine Ocwen’s compliance with applicable State and Federal laws and regulations. The MMC Examination covered the period of January 1, 2013, to February 28, 2015. The participating States in the MMC Examination consisted of Florida, Maryland, Massachusetts, Mississippi, Montana, and Washington. Florida served as the lead State.
The MMC Examination was conducted pursuant to the participating States’ respective statutory authorities, and in accordance with the protocols established by the Conference of State Bank Supervisors (CSBS)/American Association of Residential Mortgage Regulators (AARMR) Nationwide Cooperative Protocol for Mortgage Supervision as well as the Nationwide Cooperative Agreement for Mortgage Supervision.
Pursuant to the MMC Examination, the participating States identified compliance violations of both State and Federal laws, a deteriorating financial condition, and systemic operational limitations under present management, all of which resulted in substantial harm to consumers and presented grave risk regarding the overall viability of Ocwen as a going concern.
In December 2015, the MMC issued to Ocwen the written Report of Examination.
In January 2016, Ocwen submitted a written Response to the Report of Examination (Examination Response).
Subsequently, the MMC has engaged in the collection of additional information from Ocwen, the status of which is ongoing. The Division is issuing this Order due to the deficient nature of the Examination Response and level of corrective action.
The following sets forth specific facts as determined by the MMC Examination and supplemental collection of information.
STATEMENT OF FACTS
1. The MMC Examination found that Ocwen’s overall condition is deficient due to the failure to identify, measure, monitor, and control risk associated with rapid growth. Beginning in late 2012, Ocwen began making large acquisitions of mortgage servicing rights (MSRs). Over a nine-month period from December 2012 through August 2013, Ocwen acquired the MSRs to over 2.6 million consumer mortgage loans with over $347 billion in unpaid principal balance (UPB). MSR purchases from 2012 through year-end 2014 more than doubled the size of Ocwen’s servicing portfolio from $204 billion to $465 billion. The rapid growth beginning in 2012 doubled Ocwen’s net income from $181 million for 2012 to $282 million for 2013. However, through September 30, 2016, Ocwen lost $819 million as operational deficiencies due to rapid growth and increased operational complexity resulted in increased operating costs. The MMC Examination found that the effectiveness of Ocwen’s Management Control Systems (MCSs) failed to keep pace with growth leading to a material increase in operational deficiencies including the failure to timely date borrower correspondence, the failure to timely pay borrower escrow items, the failure to ensure the accuracy of escrow statements, the failure to timely reconcile consumer custodial accounts and the failure to ensure licensure of an affiliate that provides servicing related activities. The MMC Examination review of these operational deficiencies revealed that as Ocwen attempted to assimilate MSR purchases, deficient MCSs caused consumer harm, led to violations of federal and state regulations and resulted in non-compliance with servicing standards required by the 2012 National Mortgage Settlement (NMS).
2. Earnings: Ocwen lost $472 million in 2014, $247 million in 2015 and $200 million in 2016. Ocwen’s losses stem from declines in loan servicing income as a result of Ocwen’s sale in 2015 of $88 billion of its servicing portfolio and continued high operating costs including the costs of regulatory fines, industry litigation and ongoing monitoring required by regulatory settlements.
3. Capital: Ocwen has lost $919 million since the beginning of 2014, that when combined with $320 million in stock repurchases during that same period, have reduced capital by $1.2 billion, or 63 percent. Additionally, Ocwen’s stock value has declined from a high of $59.97 on October 25, 2013 to a range of $1.50 to $7 dollars per share in 2016, which impedes Ocwen’s ability to raise additional capital. Ocwen has failed to put forth realistic plans to address its declining level of capital.
4. Liquidity: Ocwen’s liquidity is less than satisfactory due to uncertainty surrounding Ocwen’s ability to maintain and refinance borrowing facilities at competitive rates in light of Ocwen’s deteriorated condition. The MMC Examination revealed that Ocwen did not have the current liquidity to fund required servicing advances should it be unsuccessful in renewing borrowing facilities in the future. Although Ocwen did subsequently renew its borrowing facilities, there is no guaranty that the facilities will continue to be renewed in light of Ocwen’s overall deficient financial condition.
5. Budget: The MMC Examination found that Ocwen’s 2014 budget did not account for increasing levels of uncollectable servicing advances which resulted in an increase of $50 million in reserves for bad debt to a total of $127 million, an increase of nearly 65 percent over 2013’s reserve for bad debt. The increase in uncollectible servicing advances was the result of operating deficiencies related to servicing acquisition integrations.
6. Sensitivity to Market Risk: The MMC Examination found that Ocwen had not adopted limits on exposure to Interest Rate Risk (IRR). Ocwen reserved $1.6 million during the MMC Examination period against declines in the value of its MSRs due to changes in interest rates. Additional declines in the value of MSRs from exposure to IRR occurred after the MMC Examination and negatively affected earnings.
7. Sale of GSE MSRs: Ocwen sold the MSRs to loans totaling approximately $92 billion in 2015. Although the MSR sales provided significant liquidity that Ocwen primarily used to reduce debt, the MSR sales significantly reduced income and contribute to ongoing losses that have eroded capital.
SYSTEM OF RECORD DEFICIENCIES
8. REALServicing: The problems with Ocwen’s system of record REALServicing have been extensive. By way of example, the 2014 Consent Order that Ocwen entered with the New York State Department of Financial Services (NYSDFS) provided the following: “Ocwen’s core servicing functions rely on its inadequate systems. Specifically, Ocwen uses comment codes entered either manually or automatically to service its portfolio; each code initiates a process, such as sending a delinquency letter to a borrower, or referring a loan to foreclosure counsel. With Ocwen’s rapid growth and acquisitions of other servicers, the number of Ocwen’s comment codes has ballooned to more than 8,400 such codes. Often, due to insufficient integration following acquisitions of other servicers, there are duplicate codes that perform the same function. The result is an unnecessarily complex system of comment codes, including, for example, 50 different codes for the single function of assigning a struggling borrower a designated customer care representative.”
9. Letter dating deficiencies: The dates on Ocwen’s letters to borrowers are automatically inserted onto the letterhead based on events in the system of record REALServicing. Ocwen relies on third party vendors to actually print and mail the letters. Going as far back as 2012, large scale delays occurred between the time of the event that triggered the need for a letter versus the time the letters were actually mailed by the vendors. The dates on many letters were often several days or even weeks before the letters were actually mailed. For example, borrowers received letters providing for 30 days to appeal the denial of a loan modification, but the 30-day appeal period had already lapsed. Disturbingly, when an Ocwen employee first brought the problem to the attention of Ocwen management, Ocwen ignored the problem for another 5 months before even starting corrective measures. In April 2015, Ocwen submitted a Global Corrective Action Plan (CAP) to the Monitor for the NMS to address letter dating deficiencies. The Global CAP encompassed 7 different types of letters that were part of the letter dating problem. The Monitor has required that the metric testing under the Global CAP be extended for a year beyond the termination date of the NMS to February 2018. An external review of Ocwen’s letter dating deficiencies concluded that Ocwen was aware of the deficiencies from at least 2012. The external review also concluded that, the problems were prevalent in all correspondence platforms, the deficiencies were technology related and Ocwen’s systems and processes did not evolve with growth and Ocwen’s regulatory responsibilities. Ocwen has reserved $15 million for the cost of remediating letter dating deficiencies.
LENDER PLACED INSURANCE
10. Lender Placed Insurance: The MMC Examination found that Ocwen has engaged in a pattern and practice of unsafe and unsound loan servicing by manipulating the lender-placed force-placed insurance market and artificially inflating the premiums and then passing the improperly inflated amounts onto consumers. Generally, the terms and conditions of the mortgage loan documents require consumers to maintain insurance coverage on the properties securing their loans. If a consumer does not maintain the required insurance, the loan documents permit a lender to obtain insurance to cover its interest in the property and the loan. Permitting a lender to forcibly place insurance on a mortgaged property and charge the borrower for the cost of the premium is commonly referred to as forced-place insurance or lender-placed insurance. Lender-placed insurance (LPI) is a well-established practice in the mortgage industry and is uniformly disclosed in loan documents; however, the MMC Examination revealed that Ocwen has exclusive arrangements with one of the major participants in the LPI market that allowed Ocwen and its affiliates to collect unearned commissions and other benefits that artificially inflate LPI premium rates.
11. In 2009, Ocwen entered into a five-year agreement with Assurant that required Assurant to pay Ocwen $16.8 million per year for Ocwen supplying 611 Full Time Equivalent resources to perform various services for Assurant including image verification, outbound telemarketing, insurance customer service, and exception processing. A review of LPI practices showed that Ocwen and other third-parties involved in administering LPI for Ocwen had little, if any, financial incentive to explore options that would have resulted in lower LPI premiums for borrowers.
12. To manipulate the LPI market and reap the benefits of artificially inflated LPI premium rates, Ocwen purchases master or “umbrella” insurance policies that cover its entire portfolio of mortgage loans. In exchange, the insurer is given the exclusive right to force insurance on property securing a loan within the portfolio when the borrower’s insurance lapses or the lender determines the borrower’s existing insurance is inadequate. Once it is determined that the insurance covering the mortgage property has lapsed, the borrower receives a notice that insurance will be “purchased” and force-placed if the voluntary coverage is not continued. If a lapse continues, the insurer notifies the borrower that insurance is being force-placed at the borrower’s expense. When the forced-place coverage is imposed, Ocwen pays the insurer for the premium and then charges the borrower for the payment, which is either deducted from the borrower’s mortgage escrow account or added to the balance of the borrower’s loan.
13. LPI litigation: Several lawsuits have been filed around the country against Ocwen regarding LPI programs, and Ocwen has set aside $16.7 million in a reserve through June 30, 2015 to pay for claims related to the lawsuit. These suits principally allege that Ocwen and insurers colluded to create a scheme of “kickbacks” in the form of unearned commissions and other benefits that artificially inflate LPI premium rates. Ocwen settled a Federal, class-action law suit (0:14-cv-60649-JAL) in the Southern District of Florida on December 18, 2014 that alleged Ocwen derived improper financial benefits through LPI policies imposed on borrower properties. The settlement included provisions prohibiting Ocwen, or any Ocwen affiliated vendor, from charging and collecting LPI premiums. These facts illustrate how Ocwen’s policies and practices undermine requirements that loan servicers act in a safe and sound manner.
LOAN TRANSFERS AND BOARDING
14. Transfer Notices: Federal law requires that Ocwen send a Notice to borrowers at least 15 days prior to any transfer. Ocwen transferred a bulk of loans on April 15, 2015. Ocwen used a third party vendor to process the Notices. However, Ocwen failed to provide the vendor usable data to process the Notices until April 1, 2015, and the vendor took two or more days to complete the generation of the Notices. As a result, the Notices were not actually sent to the borrowers until April 2, 2015, or later. These Notices were sent in less than 15 days before the bulk transfer and were therefore in violation of the federal law. Moreover, the examiners determined that the face of the Notices were deceptively back-dated to reflect a date of March 27, 2015. This violation occurred on a substantial scale. For example, the Washington Department of Financial Institutions (WA DFI) found the violation in 31% of the loans reviewed.
15. Boarding loans: Under both state and federal law, Ocwen is required to board new loans into its system of record with accurate servicing data on the loans. However, the MMC Examination loan review found that for 2 of the 29 loans reviewed by the WA DFI, Ocwen boarded the loans to incorrectly require an escrow account.
BORROWER ESCROW ACCOUNTS
16. Untimely escrow payments: Federal law requires that Ocwen make disbursements from escrow accounts to the taxing authorities and insurance companies in a timely manner (within 30 days) to avoid the borrowers incurring penalties. The MMC Examination showed that Ocwen failed to make timely disbursements from escrow accounts on at least 56 loans. This violation occurred on a substantial scale, as it was found by 5 out of the 6 participating exam States. Moreover, the borrowers on these loans filed consumer complaints to the respective participating exam States.
17. Inaccurate Escrow Statements: The MMC Examination revealed that Ocwen routinely sent borrowers inaccurate escrow statements as a result of entries made to Ocwen’s escrow accounting system to effectuate an Ocwen proprietary Shared Appreciation Modification (SAM). One escrow statement reviewed listed approximately 60 actual escrow payments when in fact they were non-cash items used to account for the SAM. Ocwen later identified over 7,200 borrowers who received escrow statements containing SAM accounting entries listed as actual escrow payments. The MMC Examination found that Ocwen’s inability to accurately monitor the Ocwen SAM program caused Ocwen to send confusing and misleading escrow statements to consumers. The MMC Examination findings support the conclusion that Ocwen did not have any procedures in place to detect escrow statements that contained SAM accounting entries.
18. Loss Mitigation: As prior referenced, the MMC Examination revealed that Ocwen was unaware that it had routinely mailed inaccurate escrow statements to borrowers who had obtained an Ocwen SAM that contained numerous SAM accounting entries that appeared as actual escrow payments, when in fact they were not.
19. Failure to provide accurate loss mitigation option information to borrowers: During the MMC Examination, examiners evaluated the nature of Ocwen’s operations; the adequacy of its internal controls, and its compliance with laws and regulations to determine whether Ocwen was operating in a safe and sound manner with respect to its third-party loss mitigation policies and procedures. The MMC Examination findings support the conclusion that Ocwen lacked the internal controls necessary to ensure that consumers received accurate loss mitigation information.
20. Property Inspections: Borrowers were overcharged $6.2 million in 2014 for property inspections carried out by vendor Altisource Portfolio Solutions, S.A. (Altisource) when it mistakenly increased inspection fees to the maximum GSE allowable amount, which in some cases exceeded the amounts that were contractually agreed upon in the statement of work. Ocwen has agreed to refund borrowers the overcharges. Ocwen agreed to pay 30 percent ($1.9 million) of the $6.2 million refund and Altisource will pay the remaining 70 percent ($4.3 million).
LOAN PAY OFFS
21. The MMC loan review revealed an instance where Ocwen failed to issue a satisfaction of a mortgage loan. As of the MMC Examination date of February 28, 2015, Ocwen had not issued a satisfaction of mortgage on a loan that was paid off on August 25, 2014, or 187 days prior. Ocwen management responded to the MMC Examination finding stating that the vendor that processes mortgage satisfactions could not find a recorded mortgage in the county of record. Ocwen further responded that if the borrower provided a copy of the recorded mortgage, Ocwen would promptly issue a release noting that no further actions were possible or required. Further review by MMC examiners revealed that the county of record does not provide online information and that formal requests for recording information are required. Ocwen was made aware of this requirement by MMC examiners, after which, Ocwen formally requested and received the required information and issued a satisfaction of mortgage. The MMC Examination revealed that Ocwen’s procedures for issuing satisfactions of mortgage, including vendor oversight, were deficient.
22. Failure to communicate with successor in interest: Section 1024.38(b)(1)(vi) of the Real Estate Settlement Procedures Act (12 CFR 1024) requires the servicer upon death of a borrower to promptly identify and facilitate communication with the successor in interest of the deceased borrower with respect to the property secured by the deceased borrower’s mortgage loan. The MMC loan review revealed an instance where Ocwen failed to promptly identify and facilitate communication with the successor interest of a deceased borrower after Ocwen obtained credit reports indicating that the borrower was deceased.
NEGATIVE EFFECTS OF RELATED PARTY TRANSACTIONS
23. Switch to Southwest Business Corporation (SWBC) for LPI policies: Beginning in 2009, Ocwen entered into a series of vendor agreements with Assurant that provided Ocwen significant income related to LPI. Later in 2009, Ocwen spun off one of its business units, Altisource, in a manner which provided Altisource, not Ocwen, entitlement to the income related to LPI. In 2014, Ocwen switched vendors from Assurant to SWBC. This switch allowed Altisource to receive income related to LPI in amounts beyond the limits set by Fannie Mae December 2013 and effective in June 2014. The matters involving Altisource and SWBC were approved by William Erbey, the former Ocwen Chairman and Altisource’s single largest shareholder. The Altisource-SWBC arrangement was essentially a captive pool of LPI which gave Ocwen little incentive to explore other potentially less costly options for borrowers. In December 2014, Ocwen settled a federal class action law suit involving allegations that Ocwen derived improper financial benefits through LPI policies. One month later, Altisource announced that it was exiting the LPI business. The MMC Examination found that the 2014 switch from Assurant to SWBC was a root cause of Ocwen’s failure to timely pay escrow amounts for borrower insurance.
24. Hubzu: Ocwen requires certain borrowers that are interested in a short sale to list their property at the Hubzu.com website, an online marketing, sales and auction site for real-estate owned properties and short sales. Hubzu is the registered name of Altisource Online Auction, Inc., a Delaware corporation owned by Altisource, which is a publicly traded company based in Luxembourg. In 2012, Altisource and Ocwen amended their 2009 servicing agreement to include a section covering “Assisted Short Sale Services.” Under the 2012 amended agreement, Ocwen agreed to retain Altisource to oversee pending borrower requests for short sale approvals. Ocwen maintains that the Hubzu requirement is designed to meet the following objectives:
- Increase the pool of interested and relevant buyers of a short sale property,
- Increase the likelihood that the borrower and investor receive a market price for the short sale,
- Increase the speed at which a successful short sale can be completed, and
- Decrease the likelihood of fraud against any stakeholder in the transaction.
25. As part of the MMC Examination an in-depth investigation of Hubzu was conducted. Analysis of data for loans that have been listed on Hubzu website supports the conclusion that the Hubzu short sale program increases fees for a once-affiliated company with common ownership ties to the Ocwen parent company and has resulted in diminished benefits for the borrowers or increased the likelihood of harm to borrowers seeking short sale approval from Ocwen.
26. The service agreement provides that Ocwen agrees to pay Altisource on a fee-for-service basis as set forth on a fee schedule. The buyer’s premium is 3.5% of the purchase price, and the technology fee is $299. The buyer’s premium and technology fee are not charged to the buyer if the offer accepted by Ocwen is the same offer amount by the same buyer as originally brought to Ocwen by the listing agent. If the offer accepted by Ocwen is lower than the original offer, but is made by the original buyer, then the buyer’s premium and technology fee are charged to the original buyer. The buyer’s premium and technology fee are paid to Altisource in all other circumstances, including where the winning offer is from someone other than the original bidder and the sales prices is the same as or lower than the original offer. The buyer’s premium for short sale properties has been increased to 4.5% in an amendment to the service agreement dated June 2015 (amended service agreement).
27. Review of the Hubzu data showed that listing property on the Hubzu website did not increase the pool of interested buyers (e.g., 33 out of 71 loan files or 47 percent showed that borrowers received zero bids when they listed their properties on Hubzu). The data also showed that properties listed on Hubzu did not increase the amount of the purchase price of the home (e.g. only 5 out of 71 loan files resulted in a consummated short sale with a higher purchase price than the original, pre-Hubzu, offer). Additionally, examiners found that listing property on the Hubzu website did not increase the speed for short sale approvals (e.g. prior to June 2015, Altisource retained the discretion to list the property for an unlimited number of auction cycles up to 30 calendar days prior to a scheduled foreclosure). While the file remained with Altisource, the borrower was precluded from pursuing other loss mitigation options such as a Home Affordable Foreclosure Alternatives short sale or deed in lieu of foreclosure.
28. The MMC Examination also revealed that there was a lack of transparency regarding program requirements for Ocwen borrowers who were required to utilize Hubzu. For example, the Ocwen website does not inform borrowers that before they will be approved for a short sale, they will be required to list their property at Hubzu., the types of loans that are required to be listed at Hubzu, or the maximum number of auction cycles.
29. The MMC Examination further revealed that Ocwen’s requirement that borrowers list their short-sale properties on the Hubzu website left consumers at risk for higher deficiency debts after the sale of the property because the Hubzu listing requirement reduced the amount of money paid to mortgage holders and investors. Of the consummated short sales through Hubzu, almost twice as many loans closed with the same or a lower purchase price than the original offer. The deficiency amount was also greater for borrowers that fell out of the Hubzu program and were subsequently offered a traditional short sale.
30. Thus, one can conclude from the MMC Examination findings that Ocwen’s short sale program using the Hubzu website has contributed to the organizational deficiencies that prevent Ocwen from operating in a safe and sound manner. Like the policies and practices that allowed Ocwen and its affiliates to manipulate the LPI market and reap the benefits of artificially inflated LPI premium rates, the harm to borrowers described above is the by-product of an affiliate relationship between Ocwen and Altisource.
CONSUMER CUSTODIAL ACCOUNTS
31. Failure to timely reconcile consumer custodial accounts: Ocwen internal audits identified several high priority findings that revealed significant deficiencies related to the failure to timely reconcile consumer custodial accounts. Similarly, a Fannie Mae review in late 2014 resulted in a CAP to address concerns over Ocwen’s failure to timely reconcile consumer custodial accounts. The MMC Examination identified further instances of Ocwen’s failure to timely reconcile consumer custodial accounts of which management was unaware in spite of Ocwen’s own internal audits and the Fannie Mae review. Ocwen engaged in a pattern and practice of failing to timely reconcile aged consumer custodial account items. The MMC Examination revealed that four of the seven consumer custodial accounts reviewed had not been timely reconciled. Unreconciled aged items from around the country were 64,139, totaling $83 million at the end of 2014. Further, the MMC Examination revealed that Ocwen was forced to create a special team to handle the high number of unreconciled items, and that it was subject to the mandates of a Fannie Mae action plan to increase reconciliation timeliness. The MMC examiners’ review of consumer custodial account reconciliations showed that an error in REALServicing’s custodial account software had caused the untimely reconciliation of consumer custodial account items. In this instance, Ocwen did not realize that accounts were not being reconciled in a timely manner, and that the accounting software system was not functioning properly until MMC examiners brought the matter to Ocwen’s attention. Thus, the MMC Examination findings support the conclusion that Ocwen’s internal controls are insufficient to meet its loan servicing duties under state and Federal laws; enforcement orders; and consent decrees. Ocwen’s response to these deficiencies is that they are not a material violation of the American Bankers Association Uniform Standard Attestation Program concerning timely reconciliations of consumer custodial accounts because the unreconciled items were less than five percent of all reconciled items; however, the failure to timely reconcile consumer custodial accounts demonstrates that Ocwen does not have effective policies and procedures in place to ensure that it operates in a safe and sound manner. The MMC Examination findings concerning the failure to timely reconcile consumer custodial accounts and Ocwen’s lack of awareness about the untimeliness of account reconciliations support the conclusion that Ocwen’s practices undermine the safety and soundness of its internal operations.
32. Failure to ensure an effective Risk Management Program: The MMC Examination found that Ocwen’s Board of Directors failed in its responsibility to oversee and ensure that Ocwen had an effective Risk Management Program (RMP) with MCSs that kept pace with increased operational complexity that arose from rapid growth. Ocwen was cited for failure to have a comprehensive RMP in place with MCSs capable of effectively identifying, measuring, monitoring, and controlling its growth-related risks. The MMC Examination provided specific examples showing that Ocwen’s lack of an effective RMP resulted in operational deficiencies, including untimely borrower letter dating, untimely payment of escrow items, inaccurate escrow statements, the use of an unlicensed affiliate for servicing related activities, and untimely reconciliation of consumer custodial accounts.
33. Failure to review and approve key strategic initiatives: The MMC Examination confirmed that it was not Ocwen’s Board of Directors, but former Chairman Erbey and two members of Ocwen’s Credit Committee, who approved a key strategic initiative to switch Ocwen’s LPI vendors. The switch in LPI vendors allowed Altisource, an Ocwen related entity in which Chairman Erbey has a financial interest, to continue to earn LPI premiums beyond the June 2014 general prohibition imposed by Fannie Mae on loan servicers earning LPI related income. Former Chairman Erbey resigned his position at Ocwen and four other Ocwen related entities as part of a settlement with the NYDFS, in part, over allegations of conflicts of interest regarding Ocwen related entities. Former Chairman Erbey’s financial interest in Altisource is a conflict of interest that should have precluded him from voting on the switch in LPI vendors. Additionally, the MMC Examination found that the switch in LPI vendors was a root cause of Ocwen’s failure to timely pay borrower escrow insurance items leading to instances of consumer harm through increased borrower premiums and heightened borrower confusion.
34. Similarly, the MMC Examination found no evidence that the Board of Directors reviewed and approved Ocwen management’s actions surrounding the lack of state licensure of Ocwen affiliate Ocwen Business Solutions, Inc. (OBS). OBS performs servicing related activities for Ocwen and is located in the Philippines as part of Ocwen’s strategy to reduce servicing costs and minimize taxes. Information was requested during the MMC Examination about Ocwen’s internal deliberations over the need for state licensure of OBS. Ocwen management indicated that no such information existed. However, the MMC obtained information after the MMC Examination that contradicted management’s assertion that no such information existed. Internal e-mails obtained by the MMC revealed management was fully aware that OBS lacked proper licensure when it began operations, but felt that the risk was “minimal” according to one internal e-mail. The MMC met with the Board of Directors again and presented the e-mails as evidence that management knew that OBS was not properly licensed and that it continued to be non-responsive to requests for information made during the MMC Examination. After the Board of Directors meeting with the MMC, Ocwen produced a large amount of internal deliberations regarding OBS licensure that had not been produced when originally requested. The use of unlicensed affiliate OBS for servicing related activities was cited as a violation of Washington State law in the MMC Examination and resulted in a fine of $900,000. To date, Ocwen has not confirmed if Massachusetts consumers were serviced by OBS or affected by its operations.
35. Over-reliance on senior management for Board responsibilities: The failure to review and approve key strategic initiatives suggests that the Board became over-reliant on members of senior management to carry out traditional Board functions such as corporate planning, personnel administration, and the oversight of compliance with applicable laws and regulations. Senior management did not include the Board in deliberations over the initiative to use OBS for servicing-related activities and did not present the Board important information, such as the need for licensure of OBS.
36. Turnover and vacancies in senior management: The MMC Examination set forth the Board of Directors’ responsibility to have regulatory compliance personnel with adequate access to information necessary to properly respond to regulator requests for information, including during the MMC Examination, and an effective understanding of the information being supplied. However, the MMC Examination found high levels of turnover and vacancies in Ocwen’s regulatory compliance department. Ocwen’s Chief Compliance Officer, Vice President of Compliance and Senior Manager of Examinations all resigned during the MMC Examination. Moreover, the positions of Director of Examinations, Licensing and Analytics, Senior Manager of Licensing and Senior Manager of Analytics were all vacant at the outset of the MMC Examination. Since then, positions have been filled in some areas, but turnover and consistency continue to be issues for the licensee.
37. Approval of actions with conflict of interest: As prior-referenced, the MMC Examination confirmed instances of senior management, and not the Board, approving key strategic initiatives where potential conflicts of interest should have precluded management from participating in the approval process. The MMC Examination confirmed that it was former Chairman Erbey and two other members of Ocwen’s Credit Committee, and not the Board, who approved Ocwen’s switch in LPI vendors, a transaction in which Mr. Erbey held a financial interest.
38. Failure to implement an effective RMP: As prior-referenced, the MMC Examination found that Ocwen failed in its responsibility to have an effective RMP with adequate MCSs, which resulted in operational deficiencies. The MMC Examination traced Ocwen’s lack of an effective RMP to instances of consumer harm, violations of federal and state regulations, non-compliance with servicing standards required by the NMS, and Ocwen’s overall deficient condition.
39. Deficient internal audit structure: The MMC Examination found that Ocwen’s Internal Audit Department (IAD) had been realigned to report operationally to its Chief Risk Officer, and functionally to its Vice President and General Auditor. The MMC Examination cited concerns that such a reporting structure might hamper the IAD’s ability to provide Ocwen’s Board of Directors with independent and objective assurances that major business risks are being managed appropriately and that Ocwen’s risk management and internal control framework is operating effectively.
40. Deficient reporting channels: Senior management failed to provide adequate information to the Board regarding the need for licensure of affiliate OBS. Additionally, Ocwen’s IAD revealed Ocwen had inadequate procedures for escalation and tracking of deficiencies to ultimate resolution.
41. Failure to notify State Regulators of significant events: The MMC Examination revealed that Ocwen failed to report as required by Massachusetts regulation several regulatory actions against Ocwen involving significant events and proposed changes in ownership or personnel, including the 2014 settlement with the NYSDFS.
42. Timely Filing of Financial Reports: The MMC Examination found that Ocwen failed to file its 2015 annual financial audit within the required timeframes for the States of Florida and Massachusetts. Ocwen delayed filing its 2015 annual financial audit until May 11, 2015 in order to resolve questions surrounding its ability to remain a going concern, which allowed Ocwen to receive an unqualified audit opinion. Concerns remain about Ocwen’s overall deficient financial condition and Ocwen’s ability to continue as a going concern and there is no assurance that Ocwen will receive an unqualified audit opinion in the future.
FAILURE TO COOPERATE WITH EXAMINATION ACTIVITIES
43. Delay in producing information during the MMC Examination and multiple other State specific examinations: During the MMC Examination, Ocwen management consistently failed to provide MMC examiners with access to books and records requested. Ocwen failed to timely provide MMC examiners with access to books and records and/or failed to provide comprehensive records of all documents requested.
44. Ocwen’s responses during the MMC Examination to information requests were often slow, and or, non-responsive requiring numerous follow-up requests for additional information. Ocwen paid a fine of $2.5 million as part of a settlement with the CA DBO during the MMC Examination review period that was based, in part, on concerns over responsiveness to regulatory information requests.
45. Ocwen’s failure to provide the books and records requested severely limited the MMC Examination team from conducting a comprehensive evaluation of the Company’s operations.
46. On or about February 28, 2015, the MMC Examination team notified Ocwen that it would be conducting a review of the Company’s books and records to ensure compliance with each participating state’s statutes and regulations.
47. Ocwen was notified that the MMC Examination would commence on or around April 6, 2015. Ocwen was notified through an Initial Information Request sent to Ocwen’s management team on or about March 27, 2015 that the MMC Examination would include at a minimum; a review of Ocwen’s failure to timely pay escrow items.
48. Although, Ocwen was made aware of the MMC Examination team’s concerns, during the onsite portion of the MMC Examination, Ocwen’s management failed to prepare any responses about the scope and root causes of the Company’s failure to timely pay consumer escrow funds and furthermore, management failed to notify the MMC Examination team what remedial action had been taken to ensure that consumers escrow funds were safeguarded.
49. During the MMC Examination, several requests for information were made regarding the status of the failure to timely pay escrow items and meetings were held with Ocwen’s management to underscore to the Company’s representatives that a thorough response about Ocwen’s failure to appropriately manage consumer escrow funds would be required.
50. On August 19, 2015, as a result of Ocwen’s pattern of failure to produce requested books and records, the MMC held a meeting with Ocwen Financial Corporation’s Board of Directors. During the August 19, 2015 meeting, the Board of Directors committed to resolve deficiencies surrounding MMC Examination requests for information that had been outstanding since the commencement of the MMC Examination. The Board of Directors was receptive to concerns about untimely and inadequate responses to requests for information and made a commitment to the MMC to resolve the identified concerns. However, although Ocwen management appeared to have improved its responsiveness to requests for information after the meeting with the Board of Directors, The MMC Examination team later learned that Ocwen management continued its pattern of withholding requested information as evidenced by its failure to produce information concerning internal deliberations over the need for licensure of Ocwen affiliate OBS when originally requested.
51. Ocwen’s lack of responsiveness to regulatory requests during the MMC Examination raises significant concerns about the Company’s receptiveness to regulatory oversight.
UNLICENSED SERVICING ACTIVITY
52. During the MMC Examination, the MMC examiners became aware that Ocwen utilized its affiliate OBS for services related to debt collection, loan modifications, and its servicing related business.
53. The MMC Examination revealed that OBS was not properly licensed in all jurisdictions in which it has been operating. In addition, the MMC Examination found that Ocwen’s Board of Directors was not involved in approving the use OBS for servicing related activities and that Ocwen’s management team had failed to discuss the need for licensure with the Board of Directors even though Ocwen management knew OBS was not properly licensed.
54. From discussions with Ocwen management, the MMC Examination team learned that the Philippine location for OBS was originally intended to be a branch location of Ocwen. However, OBS’s parent company was ultimately formed as an independent, wholly-owned subsidiary of Ocwen’s parent, Ocwen Financial Corporation for tax purposes.
55. Information received during the MMC Examination indicates that OBS began servicing consumer accounts in late 2012. The MMC Examination team’s review of the Master Agreement for Services (Master Agreement) between Ocwen and OBS revealed that, although the Master Agreement was signed in December of 2014, the effective date is as of January 1, 2014.
56. A further review of the Company’s books and records revealed that OBS billed Ocwen over $10 million for servicing related activities in 2014 in the absence of both a written agreement and a statement of work.
57. The MMC Examination revealed that OBS has processed consumer loan payments in excess of $445 million since 2013. Ocwen’s Management also notified the MMC Examination team that there are no written policies and procedures for reviewing any charges imposed by OBS bills for reasonableness.
58. Additionally, the MMC Examination team was unable to gather comprehensive information regarding OBS’s business activities as Ocwen’s management failed to respond to requests for information in a timely manner.
59. As of the date of this Order, Ocwen is in the process of applying for the requisite licenses for OBS, but has not applied in Massachusetts.
60. Unlicensed affiliate Ocwen Financial Solutions Private Limited: During the MMC Examination, the MMC examiners became aware that Ocwen utilized its affiliate Ocwen Financial Solutions Private Limited in Washington State to service consumer loan accounts without obtaining the required license.
61. During the MMC Examination, the MMC Examination team also became aware that Ocwen had outsourced a large portion of its servicing related business by hiring employees located in both the Philippine’s and India. The MMC Examination revealed that approximately seventy (70) percent of Ocwen’s employees are located offshore.
OTHER REGULATORY ENFORCEMENT ACTIONS (DISCIPLINE)
62. National Mortgage Settlement: On February 9, 2012, the attorneys general of 49 states and the District of Columbia the federal government and five banks and mortgage servicers reached agreement on the NMS that created new servicing standards, provided for relief to distressed homeowners and provided funding for state and federal governments. The NMS was formalized on April 5, 2012, when the United States District Court of the District of Columbia (Court) entered the consent judgments containing the Settlement terms.
63. The NMS established nationwide reforms to mortgage servicing. These standards required at a minimum: better communication with borrowers; a single point of contact; adequate staffing levels and training; and appropriate standards for executing documents in foreclosure cases.
64. The servicers’ performance in meeting the standards was required to be tested by a designated Monitor through a series of metrics. The NMS created 29 original metrics, and the designated Monitor established four more in 2013 for a total of 33 metrics.
65. On February 24, 2014, Ocwen entered into a new consent judgment (Agreement) with the Consumer Financial Protection Bureau (CFPB) and 49 states which required the Company to comply with the NMS servicing standards for its entire loan portfolio. The provisions of Ocwen’s Agreement required the designated Monitor to conduct a quarterly testing of the metrics and issue reports outlining the results of the testing.
66. The MMC Examination team reviewed the reports filed by the Monitor and Ocwen’s overall compliance with the metrics which revealed that in 2014 Ocwen failed four metrics and seven additional metrics were also deemed failures.
67. The MMC Examination revealed that Ocwen in addition to entering into the NMS whereby the Company was required to provide approximately 2.1 billion in consumer relief also entered into several subsequent settlement agreements with State Mortgage Regulators which required Ocwen to pay either monetary penalties and/or provide consumer restitution.
68. New York: The MMC Examination revealed that on December 22, 2014, Ocwen entered into a $150 million settlement with the NYSDFS. The settlement included allegations of: Inadequate and Ineffective Information Technology Systems and Personnel; and Widespread Conflicts of Interest with Related Parties regarding Chairman William Erbey, (and other members of Ocwen Management) arising from their ownership interests in, and positions held at related companies.)
69. The NYSDFS settlement also placed restrictions on MSR growth in New York and required the election of two additional independent directors to the Board of Ocwen’s parent OFC.
70. The terms of the NYSDFS settlement required OFC to pay $100 million as a civil monetary penalty and $50 million as borrower restitution.
71. California: The MMC Examination revealed that on January 23, 2015, Ocwen entered into a settlement with the California Department of Business Oversight (CA DBO). The settlement included allegations that Ocwen repeatedly failed to timely and fully comply with the CA DBO’s requests for information and documentation.
72. The terms of the settlement prohibited Ocwen from acquiring additional California MSRs until the CA DBO was satisfied that Ocwen could satisfactorily respond to requests for information and documentation made in the course of a regulatory examination.
73. The CA DBO settlement also required Ocwen to engage a third-party auditor who was required to report directly to the CA DBO for 24 months to assess Ocwen’s compliance with state and federal laws and regulations. The CA DBO settlement required Ocwen to pay a monetary penalty of $2.5 million.
74. WA DFI: On August 24, 2016, Ocwen entered into a settlement with the WA DFI. The settlement included allegations that Ocwen engaged the services of two unlicensed companies, Ocwen Financial Solutions Private Limited, operating out of a location in India, and Ocwen Business Solutions, operating out of a location in the Philippines, to engage in the servicing business in Washington State.
75. The WA DFI alleged that Ocwen Financial Solutions Private Limited engaged in unlicensed servicing activities dating back to August 1, 2010 and Ocwen Business Solutions’ unlicensed activity took place between June 2013 and August 2015.
76. The terms of the settlement prohibited Ocwen from engaging in the servicing business in Washington State from any location and/or by any person that was not appropriately licensed by the State.
77. The WA DFI settlement further noted that Ocwen would be subject to an examination to evaluate the Company’s compliance with the provisions of the settlement agreement between 12-18 months.
78. The WA DFI settlement required Ocwen to pay a monetary penalty of $900,000.
79. It is the Division’s understanding that there are other pending regulatory enforcement and legal matters that are likely to negatively impact Ocwen’s financial condition.
FAILURE TO COMPLY WITH THE MEMORANDUM OF UNDERSTANDING
80. Based on the findings of the examination and subsequent communications, the state regulators, Ocwen Financial Corporation, Ocwen Mortgage Servicing, and Ocwen entered into a Memorandum of Understanding (MOU) on December 7, 2016. The MOU outlined various steps that Ocwen and its parent companies would take to help alleviate certain regulatory concerns. As outlined below, Ocwen materially failed to comply with the terms of the MOU.
81. The MOU required Ocwen to retain an independent auditing firm (Auditor) to perform a comprehensive audit and reconciliation of all consumer escrow accounts, with a report to be furnished by the Auditor to Ocwen and the MMC within five business days thereafter. The audit plan was to be submitted to, and approved by, the MMC no later than January 13, 2017.
82. Ocwen’s response to the state regulators on January 13, 2017, was that the reconciliation of escrow accounts, which is paramount in ensuring the appropriate management of consumer funds, would cost $1.5 billion and well beyond Ocwen’s financial capacity. Ocwen has suggested instead that a sample of 457 escrow accounts nationwide be reconciled out of 2.5 million active first lien escrow accounts that Ocwen has serviced since January 2013. This proposal is entirely deficient as the sample size is such a small percentage of Ocwen’s total portfolio.
83. The MOU required Ocwen to provide, among other things, a viable going forward business plan that encompassed an analysis of its financial condition going forward. The purpose of the plan was to analyze Ocwen’s future financial condition incorporating and encompassing all known or reasonably certain liabilities. Ocwen’s going forward plan submitted in response to the MOU was deficient because it did not provide a complete assessment of its financial condition because it excluded significant liabilities. The Division has reason to believe that if the going forward plan had accurately accounted for known or anticipated regulatory penalties and other operational costs, including, but not limited to, the expenses of moving to a new servicing platform and complete reconciliation of consumer escrow accounts with restitution to impacted borrowers, it would indicate the company would not continue as a going concern.
CONCLUSIONS OF LAW
Based upon the aforementioned Statement of Facts, Ocwen has failed to demonstrate the financial responsibility, character, reputation, integrity, and general fitness that would warrant the belief that the business will be operated honestly, fairly, and soundly in the public interest in violation of General Laws chapter 93, sections 24G, 24I, General Laws chapter 255E, section 4, 209 CRM 42.03, and 209 CMR 18.03.
ORDER TO CEASE AND DESIST
After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
ORDERED that Ocwen and any and all officers, directors, managers, employees, independent contractors or agents operating on behalf of Ocwen, and their successors or assigns, shall initiate a process as set forth below to transfer the entire portfolio of Massachusetts residential mortgage loans for which it provides mortgage servicing and debt collection services as defined under Massachusetts General Laws chapter 93, sections 24-28 to one or more appropriately licensed loan servicer(s) as approved by the Division.
- ) Within 30 days of this order, Ocwen shall seek the Division’s approval by submitting in writing the licensed loan servicer(s) to which Ocwen intends to transfer all of its mortgage servicing and debt collection activities. Ocwen may transfer its mortgage servicing rights or may engage sub-servicer(s).
- ) Within 120 days after the Division’s approval of transferee loan servicer(s), Ocwen will effectuate the transfer all of its mortgage servicing and debt collection activities.
- ) Until the mortgage servicing and debt collection activities for each loan is transferred, Ocwen will continue to act as servicer. This includes, but is not limited to accepting, processing and applying payments, as well as making appropriate escrow disbursements.
- ) Ocwen will transfer all of its mortgage servicing and debt collection activities in a manner compliant with all federal and state regulations, including but not limited to the Real Estate Settlement Procedures Act (RESPA).
- ) Ocwen shall ensure the transfer is made with no harm to any Massachusetts consumers.
As soon as possible, but not later than 48 hours after the effective date of this ORDER, Ocwen shall submit to the Commissioner a list identifying all of the Massachusetts residential mortgage loans which are to be transferred on or after the effective date of this ORDER. The list shall contain all identifying information for the loan, including but not limited to the following: the property address, the borrower’s name, addresses and telephone numbers; the loan number; and the name of the new loan servicer. The record should include telephone numbers of contact persons at each new loan servicer who is familiar with the Company’s transferred loans;
IT IS FURTHER ORDERED that Ocwen shall immediately cease soliciting or accepting, either directly or indirectly, any new residential mortgage loan applications from consumers for residential property located in Massachusetts.
IT IS FURTHER ORDERED that Ocwen shall place with one or more qualified or lender(s), with no loss to applicants, the following: (a) Ocwen’s entire portfolio of Massachusetts residential mortgage loans which were closed by Ocwen, and remain unfunded within 15 days after the issuance of this Order; and (b) Ocwen’s entire pending application list of Massachusetts residential mortgage loans. It being understood that “no loss to the applicant” shall mean that any loan which was closed by Ocwen, as well as any application which was approved by Ocwen, shall be placed to a lender willing to fund, or close, the mortgage loan under the same terms and conditions extended by Ocwen. In the event that no such placement can be made, Ocwen shall either independently fund the mortgage loan under such terms and conditions or buy down the mortgage loan offered by the lender so that the applicant does not incur a loss as a result of such placement. Ocwen shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s). Ocwen shall continue to maintain its present pipeline of loan applications until the transfer for each application has been completed.
IT IS FURTHER ORDERED that Ocwen shall immediately place any fees previously collected from Massachusetts consumers relative to any pending mortgage loan applications in a separate escrow account maintained at a federally insured bank.
IT IS FURTHER ORDERED that Ocwen shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all of the Company’s pending residential mortgage loan applications on property located in Massachusetts. The records to be produced shall include all information on file regarding the Company’s Massachusetts mortgage loan portfolio, including but not necessarily limited to, the following:
- ) Within sixteen (16) days of the effective date of this Order, Ocwen shall submit to the Commissioner all information on file as of the date of submission regarding the Company’s portfolio of mortgage loans that were closed by Ocwen prior to the effective date of this Order, but remain as yet unfunded. Such information shall include, but is not limited to, the following: The names of all individuals from whom Ocwen processed an application and closed the residential mortgage loan, but failed to fund; the applicants’ addresses and telephone numbers; the loan number; the amount of all prepaid loan fees submitted by the customer; the amount of each loan; the loan terms; the current funding status; the actual closing dates; the loan purpose (i.e. purchase or refinance); and identification of the applicable lender with whom each application will be placed. The record should include telephone numbers of contact persons at each lender who is familiar with the Company’s submitted loans;
- ) As soon as possible, but not later than forty eight hours after the effective date of this Order, Ocwen shall submit to the Commissioner all information on file as of the date of submission regarding the Company’s pipeline of pending mortgage loan applications including but not limited to, the following: The names of all individuals from whom Ocwen has accepted an application for a residential mortgage loan; the applicants’ addresses and telephone numbers; the loan number; the amount of all prepaid loan fees submitted by the customer; rate lock status; the amount of each loan; application status (i.e. filed, submitted to lenders, cleared to close, etc.); loan terms, if approved; scheduled closing dates; the loan purpose (i.e. purchase or refinance); and identification of the applicable lender with whom each application will be placed. The record should include telephone numbers of contact persons at each lender who is familiar with the Company’s submitted loans;
IT IS FURTHER ORDERED that Ocwen shall immediately secure all pending mortgage loan application files and, to the extent that any original documents must be forwarded to the relevant mortgage lender(s) pursuant to this Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in Ocwen’s books and records and shall be available to the Commissioner, in their entirety, upon request.
IT IS FURTHER ORDERED that within five (5) days of the effective date of this Order, Ocwen shall submit to the Commissioner Ocwen’s balance sheet and year-to-date income statement, prepared as of the date of submission, and attested by a duly authorized officer of the Company. The balance sheet shall indicate Ocwen’s cash position at each of its depository banks as well as Ocwen’s bank account numbers.
IT IS FURTHER ORDERED that this Order shall become effective immediately and shall remain in effect unless set aside, limited or suspended by the Commissioner or upon court order after review under Massachusetts General Laws chapter 30A.
ORDER TO SHOW CAUSE
The Division hereby re-alleges and incorporates by reference FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein as though fully set forth. WHEREAS, finding it necessary and appropriate and in the public interest, and consistent with the purposes of the laws governing mortgage brokers and loan originators in the Commonwealth;
IT IS HEREBY ORDERED that Ocwen shall show cause why its mortgage lender license, ML1852 should not be revoked pursuant to General Laws chapter 255E, section 6.
IT IS FURTHER ORDERED that Ocwen shall show cause why its debt collector license, DC0861 should not be revoked pursuant to General Laws chapter 93, section 24I.
PRAYER FOR RELIEF
WHEREFORE, the Division, by and through the Commissioner, prays for a final decision as follows:
- For a final Agency decision in favor of the Division and against Ocwen for each Charge set forth in this Order;
- For a final Agency decision revoking Ocwen’s mortgage lender license, numbers ML1852 to conduct business as a mortgage lender in Massachusetts;
- For a final Agency decision revoking Ocwen’s mortgage lender license, numbers DC0861 to conduct business as a debt collector and residential mortgage loan servicer in Massachusetts;
- For a final Agency decision ordering Ocwen to cease and desist from transacting business in Massachusetts as a mortgage lender;
- For a final Agency decision ordering Ocwen to cease and desist from transacting business in Massachusetts as a debt collector or loan servicer;
- For a final Agency decision ordering Ocwen to immediately place any pending residential mortgage loan applications and related files, if it has not already done so in accordance with the provisions of this Order, with qualified mortgage lender(s), with no costs to the applicant;
- For a final Agency decision ordering Ocwen to immediately place any residential mortgage loans, if it has not already done so in accordance with the provisions of this Order, with qualified mortgage servicer(s), with no costs to the consumer;
- For costs and fees of the Division's investigation of this matter; and
- For such additional equitable relief as the Presiding Officer may deem just and proper.
NOTICE OF RIGHT TO A HEARING
Ocwen is required to file an Answer or otherwise respond to the Charges contained in this Order within twenty-one (21) days of its effective date, pursuant to the Standard Adjudicatory Rules of Practices and Procedures, 801 CMR 1.01(6)(d). Ocwen may request that a hearing be held within 20 days of the Division’s receiving of Ocwen’s request for a hearing. If Ocwen fails to respond to this Order within the twenty-one (21) day period, the FINDING OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST AND ORDER TO SHOW CAUSE AND NOTICE OF RIGHT TO A HEARING shall become permanent and final until it is modified or vacated by the Commissioner. Failure to file an Answer may also result in a default judgment against Ocwen in the matter of the revocation of the Company’s mortgage lender and debt collector licenses. The Answer, and any subsequent filings that are made in conjunction with this proceeding, shall be directed to the Division, with a copy to Prosecuting Counsel. All papers filed with the Division shall be addressed to the attention of:
Administrative Hearings Officer
Massachusetts Division of Banks
1000 Washington Street, 10th Floor
Boston, Massachusetts 02118
Prosecuting Counsel for this matter is:
Amanda B. Loring, Esq.
Massachusetts Division of Banks
1000 Washington Street, 10th Floor
Boston, Massachusetts 02118
You are further advised that Ocwen has the right to be represented by counsel or other representative, to call and examine witnesses, to introduce exhibits, to cross-examine witnesses who testify against Ocwen and to present oral arguments. The hearing will be held at a date and time to be determined and will be conducted according to Massachusetts General Laws, chapter 30A, sections 10 and 11, and the Standard Adjudicatory Rules of Practice and Procedure, 801 C.M.R. 1.01 and 1.03.
Ocwen may examine any and all discoverable Division records relative to this case prior to the date of the hearing, during normal business hours, at the office of the Prosecuting Counsel. If you elect to undertake such an examination, please contact the Prosecuting Counsel, Amanda B. Loring, Esq. at 617-956-1500 in advance to schedule a time that is mutually convenient.
 The MMC Examination findings also showed that Ocwen violated Federal and various state laws governing loss mitigation procedures by failing to process and address the application as required under 12 CFR 1024.41(b). As a loan servicer of federally related mortgage loans are governed under Federal Regulation X, Ocwen is required to review the loss mitigation application and to notify the borrower within 5 days of the outcome, 12 CFR 1024.41(b); is required to evaluate the plaintiff for all loss mitigation options, 12 CFR 1024.41(c); is prohibited from engaging in “dual tracking” after having received the application for loss mitigation and responding by scheduling the foreclosure sale, 12 CFR 1024.41(g); and is required to comply with various state laws that make it a violation to act contrary to Regulation X requirements.
 According to Ocwen, loans owned by the following investors are excluded from the requirement to list the property at Hubzu: the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and FHA or VA insured loans. In addition, E*TRADE has stated to Ocwen that they do not wish to participate in the Hubzu program.
BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.
Dated at Boston, Massachusetts, this 20th day of April, 2017
Cynthia A. Begin
Chief Risk Officer
Commonwealth of Massachusetts