Judge Tosses Shareholder Lawsuits Against Mortgage Servicer Ocwen

Posted by Patrick Barnard on September 09, 2015 No Comments
Categories : Mortgage Servicing

A federal judge on Friday dismissed two securities class-action lawsuits against Ocwen Financial Corp. that arose from alleged compliance issues that were brought up when the mortgage servicer agreed to a $150 million settlement with the New York Department of Financial Services (NYDFS) last December.

The suits were brought by shareholders seeking to recover losses they incurred due to alleged false statements Ocwen made about its business practices and regulatory compliance leading up to its settlement, Reuters reports.

U.S. Judge William Dimitrouleas dismissed the lawsuits, which were filed in a federal district court in Southern Florida.

‘We are pleased that the Court has dismissed these two separate actions against the company,’ Ocwen officials say in a statement. ‘We agree with the court's rulings, and will continue to vigorously defend ourselves as necessary.’

As per the settlement with NYDFS in December, Ocwen agreed to pay a $100 million civil penalty to settle allegations that the company violated numerous mortgage servicing rules designed to protect consumers. In addition, Ocwen was to pay another $50 million directly to borrowers in New York who were impacted by the violations, including borrowers who were wrongly foreclosed upon due to the firm's improper handling of their mortgages.

As a part of the settlement with NYDFS, William C. Erbey, the company's founder, stepped down as executive chairman

The alleged violations – including the erroneous backdating of letters informing borrowers that they had been denied loan modifications, thus preventing them from being able to appeal – occurred between January 2009 and December 2014.

In addition, the NYDFS has installed its own monitor to assess Ocwen's operations. The monitor, to be in place for a minimum of two years, will recommend and oversee implementation of corrections and establish progress benchmarks when it identifies weaknesses. This monitor is in addition to the one working with the company in connection with the national mortgage settlement of 2012, monitored by Joseph Smith.

In related news, Smith announced in August that the problems he had previously uncovered with Ocwen's internal review group (IRG) have largely been resolved.

In May 2014, an Ocwen employee reported issues that called into question the independence of the IRG. The employee, according to an earlier report from Smith, ‘contacted a member of the monitoring committee and alleged serious deficiencies in [Ocwen's IRG] process, which called into question the IRG's independence and the integrity of the IRG's operations.’

A subsequent investigation revealed that the internal IRG – which was to select loan files for review, independent of management – may have been unduly influenced as to which loan files to submit for review.

Smith then launched an investigation into these claims and determined that he could not rely on a portion of Ocwen's work for the first quarter of 2014. He then directed independent auditing firm McGladrey to retest Ocwen's performance on certain at-risk metrics. That audit revealed that Ocwen's ‘global corrective action plan’ to address its letter-dating issues was effective.

‘After a review of the issues I found with Ocwen's [IRG] integrity and subsequent review of its work to address these problems, I have reported to the Court that I now have a measure of assurance that the issues with Ocwen's IRG's independence, competency and capacity have been sufficiently addressed,’ Smith wrote in his August report.

Register here to receive our Latest Headlines email newsletter

Leave a Comment