The servicing issues at Ocwen Financial are allegedly so widespread that some states are placing stricter restrictions on the nonbank, beyond freezing the company’s ability to acquire new mortgage servicing rights.
On Thursday, a group of state business regulators issued joint cease-and-desist orders to Ocwen. The main announcement from the states shows that an examination into Ocwen’s servicing shows “several violations of state and federal law, including, but not limited to, consumer escrow accounts that could not be reconciled and willful and ongoing unlicensed activity in certain states.”
The orders also showed that the regulators are concerned with Ocwen’s ability to continue operating due to financial constraints, an issue that Ocwen denies.
The orders prohibit the acquisition of new mortgage servicing rights and the origination of mortgage loans by Ocwen Loan Servicing, a subsidiary of Ocwen, until the company is “able to prove it can appropriately manage its consumer mortgage escrow accounts.”
However, HousingWire analysis of each state’s cease-and-desist order or accompanying press release, show that some states’ regulators are restricting Ocwen’s business much further than that.
In fact, in one state, Ocwen has basically been put of out business entirely.
All in all, Arkansas, Connecticut, District of Columbia, Florida, Hawaii, Idaho, Illinois, Maine, Massachusetts, Mississippi, Montana, Nebraska, Nevada, North Carolina, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, West Virginia, Wisconsin, and Wyoming each placed restrictions on Ocwen’s business, according to the Conference of State Bank Supervisors.
But several states’ restrictions were not equal to the others– namely Massachusetts, South Dakota, and Montana.
According to the announcement from the Massachusetts Office of Consumer Affairs & Business Regulation’s Division of Banks, Ocwen is not only no longer allowed to acquire new mortgage servicing rights, the company is also no longer allowed to service mortgages in the state, at all.
Here’s how Massachusetts describes its reasoning for restricting Ocwen’s business:
Of paramount concern is the company’s deteriorating financial condition, in which the company has lost nearly $1 billion since 2014, and will not be profitable by its own estimations for at least two years. The company has not developed or implemented an effective plan to curb these losses.
The examinations and monitoring noted the company has shown ineffective management of consumer escrow accounts and their internal servicing systems.
Therefore, Massachusetts is requiring Ocwen to “develop and implement a plan to transfer its loan servicing activities for Massachusetts consumer mortgage loans to a Division-approved licensed loan servicer(s).”
That means Ocwen can no longer service any mortgages in the state and must work to transfer all current mortgages it services to other servicers.
According to the Massachusetts Division of Banks, Ocwen services approximately 34,472 loans in Massachusetts, representing 3.5% of Ocwen’s portfolio – all of which must be transferred away.
Massachusetts’ order also requires Ocwen to “either fund or place mortgage loan applications in process with other lenders at no loss to applicants, and to cease accepting new applications,” which means no new loans for Ocwen in Massachusetts either.
“The Division will be closely monitoring Ocwen’s compliance with the Order,” the Division of Banks’ order states. “During this time, consumers with mortgage loans serviced by Ocwen should continue to submit loan payments to Ocwen in normal course in accordance with their loan terms. Ocwen will continue to service these loans until an orderly transfer of the servicing is completed in accordance with the Order. Any current mortgage loan applications should continue to be processed.”
South Dakota also placed its own serious restrictions on Ocwen’s business in the state, in the form of halting all foreclosures in the state until the escrow issues are addressed.
Here’s how the South Dakota Department of Labor and Regulation’s Division of Banking described it:
Ocwen does not possess the competence, experience, character, or general fitness required to permit Ocwen to continue to acquire new business as a mortgage lender in South Dakota.
The public interest will be irreperably harmed if Ocwen’s mortgage lending liscense is not conditioned immediately.
Therefore, Ocwen is required to “immediately cease acquiring new mortgage servicing rights, and acquiring or originating new residential mortgages serviced by Ocwen, until Ocwen can show it is a going concern by providing a financial analysis that encompasses all of the liabilities Ocwen currently maintains, as well as liabilities it has knowledge it will incur in the course of its business.”
Ocwen is also required to “immediately cease from acquiring new mortgage servicing rights, and acquiring or originating new residential mortgages serviced by Ocwen, until Ocwen can provide a third-party audit of its South Dakota escrow accounts showing that borrower funds are appropriately collected, properly calculated, and disbursed accurately and timely, and make any corrections of whatever type necessary to remedy all mistake, errors, and improprieties occurring due to Ocwen’s actions.”
Ocwen is also required to “immediately cease any and all foreclosures in the state of South Dakota until all South Dakota escrow accounts have been correctly and properly balanced and all corrections due to mismanagement of the escrow accounts have been effected.”
An additional review of the Montana Department of Administration, Division of Banking and Financial Institutions order against Ocwen showed that Montana is also putting a freeze on Ocwen’s foreclosure activities.
According to Montana’s order, “Ocwen shall immediately cease and desist from any and all foreclosures in the state of Montana until all Montana escrow accounts have been correctly and properly balance and all corrections due to mismanagement of the escrow accounts have been effected.
A previous review showed that Montana also prohibited Ocwen from acquiring new mortgage servicing rights until the company is “able to establish that it can appropriately manage its Montana escrow accounts.”
Nearly all of the other states list the same restrictions: no new mortgage servicing rights and no new loans to be serviced by Ocwen Loan Servicing, except for Nebraska and Rhode Island, which each expect Ocwen to provide detailed reports on its servicing activity on a frequent basis going forward.
The Nebraska Department of Banking and Finance states that Ocwen is prohibited from “the acquisition of mortgage servicing rights and the origination of mortgage loans until they are able to prove they can appropriately manage their consumer mortgage escrow accounts.”
Beyond that, Nebraska’s order requires Ocwen to provide a list of all the residential mortgages it services in the state, including the name, address, telephone number, and state of residence of the borrower; as well as the loan number; the owner of the loan; the account balance; and the location of any escrow funds.
Ocwen is then required to provide a report on the status of every Nebraska loan it services to the Nebraska Department of Banking and Finance every 10 days.
Ocwen is also required to provide written notice of all servicing transfers within 72 hours of execution.
And in Rhode Island, Ocwen “shall immediately cease from acquiring new mortgage servicing rights and acquiring or originating new residential mortgages serviced by Ocwen, which mortgage loans are secured by Rhode Island property, until Ocwen can provide the Department of Business Regulation with a reconcilement of its escrow accounts showing that consumer funds are appropriately collected, properly calculated, and disbursed accurately and timely.”
Ocwen is also required to “immediately cease acquiring mortgage servicing rights and acquiring or originating new residential mortgages serviced by Ocwen, which mortgage loans are secured by Rhode Island property, until Ocwen can show it is a going concern by providing a financial analysis that encompasses all of the liabilities it currently maintains, as well as liabilities it has knowledge it will incur in the course of its business.”
Additionally, Ocwen is required to file written confirmation by 4 p.m. on May 22, 2017, stating that the company has stopped acquiring new mortgage servicing rights and acquiring or originating new residential mortgages serviced by Ocwen for properties in Rhode Island.
Ocwen is also required to provide the Rhode Island’s Department of Business Regulation with the following information: a list of all loans secured by Rhode Island property presently serviced by Ocwen, including the date such loans were originated; a list of all loans secured by Rhode Island property as to which Respondents are acting as a third party servicer, including the date such loans were originated; and a list of all pending acquisitions of servicing rights and applications for mortgage loans that would be secured by Rhode Island property that are in the pipeline.
Below is a list of the remaining states with relevant passages about each state’s restrictions on Ocwen:
Arkansas – Arkansas Securities Commissioner, B. Edmond Waters, issued a press release in connection with a cease and desist order issued against Ocwen Loan Servicing, LLC and Ocwen Mortgage Servicing, Inc. Ocwen Loan Servicing, LLC and Ocwen Mortgage Servicing, Inc. are ordered to cease and desist from acquiring new mortgage servicing rights and originating new mortgage loans. The order prohibits the acquisition of mortgage servicing rights and the origination of mortgage loans until the company is able to prove it can appropriately manage its borrower mortgage escrow accounts.
Connecticut – The Commissioner finds that the public welfare requires immediate action in order to prevent irreparable and immediate harm to Connecticut borrowers and the necessity of a temporary order requiring Ocwen to cease and desist from violating the laws cited herein, pursuant to Section 36a-52(b) of the Connecticut General Statutes in that, since December 2013, State Mortgage Regulators, including this Department, have been concerned about Ocwen’s mortgage servicing practices including, but not limited to, the misapplication of borrower payments and inaccurate escrow accounting and statements, and that the recent Multi-State Examination and CT Examination indicate that these issues have not been resolved, but rather may be exacerbated. In addition, Connecticut borrowers have no ability to select a different mortgage servicer to remedy such persistent and pervasive errors by Ocwen. Considering the potential harm to Connecticut borrowers and Ocwen’s inability to provide sufficient information concerning its existing borrower escrow accounts, the Commissioner finds it imperative that Ocwen cease from acquiring new mortgage servicing rights in connection with Connecticut residential mortgage loans for which it would have to maintain escrow accounts, and acquiring or originating new Connecticut residential mortgage loans serviced by Ocwen for which it would have to maintain escrow accounts, until it can ensure that the escrow accounts of its existing residential mortgage loan servicing portfolio in Connecticut are properly reconciled and that all Connecticut borrowers’ monies are maintained in segregated deposit or trust accounts for the benefit of such Connecticut borrowers.
District of Columbia – The majority of the orders prohibit the acquisition of new mortgage servicing rights and the origination of new mortgage loans until the company is able to prove it can appropriately manage its existing mortgage escrow accounts and not further harm consumers. Some orders also require Ocwen to cease any ongoing unlicensed activity.
Florida – Filed a separate lawsuit over Ocwen’s servicing practices.
Hawaii – The Notice of Charges and Proposed Order prohibits the acquisition of mortgage servicing rights and the origination of mortgage loans until the company is able to prove it can appropriately manage its consumer mortgage escrow accounts. The Notice of Charges and Proposed Order also demands Ocwen to cease illegal unlicensed activity that is believed to be occurring in Hawaii.
Idaho – The department’s order prohibits Ocwen from violating Idaho law in the handling of consumer escrow accounts. Managing the money that borrowers remit as part of their monthly mortgage payments is critical to the business of a mortgage servicer, and the department’s order requires Ocwen to accurately and lawfully fulfill that function when dealing with Idaho borrowers’ mortgage payments.
Illinois – State of Illinois Department of Financial and Professional Regulation Division of Banking order affects Ocwen Loan Servicing, Homeward Residential, and Liberty Home Equity Solutions.
OLS, Homeward Residential, and LHES shall immediately cease acquiring new mortgage servicing rights, and acquiring or originating new residential mortgage loans until they can demonstrate to the Department’s satisfaction pursuant to the Act and Rules that:
OLS, Homeward Residential, and LHES are a going concern by providing a financial analysis that encompasses OLS, Homeward Residential, LHES, OFC, and OMS as to all of the liabilities currently maintained and for which they have knowledge they will incur in the course of their business
Provide the state regulators with a full and complete reconciliation of their escrow accounts showing that consumer funds are appropriately collected, properly calculated, and disbursed accurately and timely; and
The Department places the Illinois Residential Mortgage Licenses of OLS, Homeward Residential, and LHES on Probation pursuant to Section 4-5(h)(3) of the Act until such time they are in compliance with this Order. During the period of Probation, OLS, Homeward Residential, and LHES shall submit to the Department reports on a monthly basis on financial condition and reconciliation of escrow accounts.
Maine – Ocwen shall immediately cease acquiring new mortgage servicing rights, and acquiring or originating new residential mortgages serviced by Ocwen, until Ocwen can show it is a going concern by providing a financial analysis that encompasses all of the liabilities Ocwen currently maintains, as well as liabilities it has knowledge it will incur in the course of its business; Ocwen shall immediately cease from acquiring new mortgage servicing rights, and acquiring or originating new residential mortgages serviced by Ocwen, until Ocwen can provide the state regulators with a reconcilement of its escrow accounts showing that consumer funds are appropriately collected, properly calculated, and disbursed accurately and timely.
Mississippi – OLS shall immediately cease acquiring new mortgage servicing rights, and acquiring or originating new residential mortgages serviced by OLS, until Ocwen can show it is a going concern by providing a financial analysis that encompasses all of the liabilities Ocwen currently maintains, as well as liabilities it has knowledge it will incur in the course of its business; OLS shall immediately cease from acquiring new mortgage servicing rights, and acquiring or originating new Mississippi residential mortgages serviced by OLS, until OLS can provide the DBCF with a third party audit of its escrow accounts associated with any Mississippi residential mortgage loans demonstrating that consumer escrow funds are appropriately collected, properly calculated, and disbursed accurately and timely; and make any and all corrections of whatever type necessary to remedy all mistakes, errors, and improprieties occurring in the past due to OLS’s Actions.
Nevada – The majority of orders, including the order issued by the Nevada Division of Mortgage Lending, prohibit the acquisition of mortgage servicing rights and the origination of mortgage loans until the company is able to prove it can appropriately manage its existing mortgage escrow accounts and prevent harm to consumers.
North Carolina – Lead state in announcing restrictions.
South Carolina – A search of the South Carolina State Board of Financial Institutions – Consumer Finance Division did not show record of South Carolina’s actions against Ocwen.
Tennessee – The Tennessee Department of Financial Institutions (“Department”) issued today an enforcement action against Ocwen Loan Servicing to prohibit the company from acquiring new mortgage servicing rights or originating mortgage loans in Tennessee until it provides the Department with a plan to demonstrate an ability to operate in a sound manner.
Texas – UPDATE: Ordered Cease and Desist in late April.
West Virginia – A search of the West Virginia Division of Finance did not show record of West Virginia’s actions against Ocwen.
Wisconsin – The majority of orders prohibit the acquisition of new mortgage servicing rights and the origination of mortgage loans until the company is able to prove it can appropriately manage its existing mortgage escrow accounts and not further harm consumers. Ocwen conducts mortgage loan servicing for approximately 1.5 million consumers nationwide, including about 13,500 in Wisconsin.
Wyoming – A search of the Wyoming Division of Banking did not show record of Wyoming’s actions against Ocwen.
(Editor’s note: If any of HousingWire’s readers can assist in locating the missing states’ orders against Ocwen, please contact Ben Lane at blane@housingwire.com. This article will be updated as appropriate.)
[Updates: This article is updated with additional sanctions from Montana.This article is also updated with the state of Illinois' actions against Ocwen.]
