Ocwen May Have Dodged A Bullet From California But More Trouble Is In Sight
On Friday, California’s Department of Business Oversight said Friday that it will drop its effort to suspend Ocwen Loan Servicing’s mortgage license in California because Ocwen Financial has agreed to pay $2.5 million for failing to prove its compliance with state mortgage lending laws. Ocwen had failed for more than a year to provide its California regulator with requested information.
As part of the settlement, Ocwen has also agreed to pay for an independent, third-party auditor, chosen by the state agency and Ocwen will be prohibited from taking on any new California customers until CDBO determines that the servicer can respond to information requests in a timely manner.
Because of regulatory issues in New York and California over the past three months, the value of servicer’s stock has now dropped nearly 85%
The California settlement is meager compared to the $150 million that the mortgage servicer had to pay in New York.
The servicer now faces more trouble. This time from share holders including BlackRock, MetLife and Pimco, who on Friday took the first steps toward suing the servicer accusing it of having failed to properly collect payments on $82 billion of home loans,
These three groups sent a formal notice of non-performance to the servicer and trustees for 119 residential mortgage-backed securities trusts, alleging improper loan modification practices, wrongfully recouped advances, and a failure to account for cash flows.
To understand how mortgage servicers get paid, here is an article I wrote about five years ago: