Similar to the $25 billion mortgage settlement announced in
2012, the nation's largest non-bank mortgage servicer,
Ocwen Financial Corp.
) announced a settlement with the Consumer Financial Protection
Bureau (CFPB) and other regulators, along with 49 states and the
District of Columbia.
The settlement pertains to resolution of the alleged charges
against the company's handling of mortgages. However, Oklahoma is
not a part of the settlement. Ocwen will pay nearly $2.1 billion
in relief to distressed homeowners.
BANK OF AMER CP (BAC): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
OCWEN FINL CORP (OCN): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
To read this article on Zacks.com click here.
Of the total amount, Ocwen will utilize roughly $2 billion in
offering principal reduction programs to underwater and
delinquent borrowers over the next three years. Being just a
mortgage servicer, the company collects payments from borrowers
and offers customer services on behalf of loan originators.
Hence, it will incur only operating expenses for arranging
The balance of $127.5 million will be paid to a consumer relief
fund to be disbursed to eligible distressed borrowers by the
independent monitoring body. The money will be provided to those
who lost their homes between 2009 and 2012 and whose mortgages
were serviced by Ocwen, Homeward Residential Holdings or Litton
Loan Servicing. The company had acquired Litton Loan Servicing in
2011 and Homeward Residential in 2012.
Notably, Ocwen will pay $66.9 million to the above-mentioned
fund, while the remaining amount will be paid by the previous
owners of servicing portfolios, which were acquired and
integrated to Ocwen's servicing platform. Further, the company
had created a reserve of $66.4 million in the second quarter of
2013 for the same.
Going by the allegations, Ocwen used deceptive and unfair means
while working with borrowers who were delinquent and underwater.
The company was accused of misrepresenting facts while filing
foreclosure documents, charging unjustified fees for
default-related services and forcing borrowers to buy unnecessary
insurance policies, among others.
The terms of the settlement are similar to the 2012 mortgage
settlement announced between
Bank of America Corp.
JPMorgan Chase & Co.
Wells Fargo & Co.
), Ally Financial Inc. and
) and 49 states as well as other mortgage regulators. Ocwen is
required to inform distressed homeowners about the various
options available to prevent foreclosures. Moreover, the company
will have to wait for 60 days after acquiring a loan before it
can proceed with foreclosure process.
The settlement now awaits consent of the US District Court of the
District of Columbia. Ocwen will also have to follow explicit
guidelines on servicing mortgages and its progress will be
overseen by Joseph Smith Jr - the same person who monitors the
We believe as Ocwen is fully prepared to meet additional expenses
related to the settlement, there will not be significant rise in
operating expenses going forward.
Currently, Ocwen carries a Zacks Rank #5 (Strong Sell).