Ocwen Financial announced late Friday that it reached a $223 million settlement with the California Department of Business Oversight, ridding itself of the restrictions that hampered its mortgage business in California for more than two years.
The settlement includes a cash payment of $25 million. As part of the settlement, Ocwen is also required to provide an additional $198 million in debt forgiveness through loan modifications to existing California borrowers over a three-year period.
The terms of the new settlement are a far cry from Ocwen’s original California settlement.
In January 2015, Ocwen reached a settlement with the California Department of Business Oversight, which initially threatened to suspend Ocwen’s mortgage license because the company failed to turn over documentation showing that it complies with the state’s laws.
That settlement called for Ocwen to pay a $2.5 million fine. But more significantly, the settlement prohibited Ocwen from acquiring any additional mortgage servicing rights for loans in California until the CDBO is “satisfied that Ocwen Loan Servicing can satisfactorily respond to the requests for information and documentation made in the course of a regulatory exam.”
The settlement also placed a monitor inside of Ocwen’s operations to ensure the company’s compliance with the settlement’s terms, at Ocwen’s expense.
Then, in July 2016, Ocwen revealed that it was trying to buy its way out of the settlement. At the time, the company cited its mounting monitor costs, which totaled $147.5 million from Jan. 1, 2014 through June 30, 2016 from its various settlements with regulators, as a reason for attempting to reach a settlement buyout.
At the time, Ocwen disclosed that the CDBO monitor believed that “certain onboarding activities” relating to new California originations in 2015 were prohibited by the terms of the consent order, and represented a material breach of the settlement.
The company also went so far as to set aside $25 million for a potential settlement payment.
Late Friday, the company revealed that it is indeed paying $25 million to the CDBO as part of the new settlement. Ocwen is also forgiving $198 million in debt to California borrowers.
But in exchange for the $223 million settlement, the company extinguishes all the restrictions on its business.
As a result of the settlement, Ocwen is now allowed to acquire new mortgage servicing rights in California.
Ocwen also rids itself of the independent monitor that had been embedded in the company’s operations for 18 months.
The company also noted that it did not admit any wrongdoing in the settlement.
“Ocwen is pleased to have reached a comprehensive settlement with the DBO related to matters the agency raised, and we will quickly move forward to implement all terms associated with this agreement,” Ron Faris, president and CEO of Ocwen, said in a statement.
“The settlement resolves claims between Ocwen and the DBO without the company admitting to any wrongdoing, and will allow us to focus on our business going forward, while reducing a significant expense by terminating the engagement of the independent auditor,” Faris added.