There are a plethora of articles to link celebrating the Ocwen settlement and how much each state will supposedly receive. But in this author's opinion, I can't understand why anyone other than the CEO of Ocwen and its stockholders would celebrate. This settlement is chump change, if you know anything at all about Ocwen and its lengthy history preying upon low-income and credit-impaired homeowners throughout the United States.
Yet despite its history, Ocwen is now the largest non-bank mortgage servicer in the United States. And, most frighteningly if you owe a mortgage, Ocwen is poised to grow even bigger. Given this, the Ocwen settlement, despite the many celebratory stories, is a sad testament to this Main Street reality: The worse a financial actor has been (even if it remains so) the less likely that it will ever face any meaningful consequence for its behavior. Instead, it will become more powerful, and influential, and basically too big to fail.
Follow me below the fold for a brief discussion of the settlement and just a snippet of the convoluted, lengthy history of Ocwen in all its various disguises. A history that makes crystal clear that this particular bad actor just bought a rosy financial future for itself and that this settlement is just a whimper, not a bang, of consumer rights enforcement.
What about Ocwen Financial?
Perhaps you have heard of Ocwen Technology Xchange?
What about Ocwen Realty Advisors?
Or, even, Ocwen Federal Bank FSB?
Perhaps not that many.
Maybe you have heard instead about Altisource Portfolio Solutions? Litton Loan Servicing or Saxon Mortgage Services? How about Select Portfolio Servicing (SPS) formerly known as Fairbanks Capital? Maybe H&R Block Mortgage Company aka Option One later known as American Home Mortgage Servicing (AHMSI) later known as Homeward Residential? What about Ally Bank/GMAC aka Residential Capital LLC? How about OneWest?
No? That's okay. Comparatively few people have unless you follow the subject of predatory underwriting, predatory lending and predatory mortgage servicing (as I have since the 1990s.)
Yet all of these companies are connected to, previously and, more frighteningly, currently (since Ocwen is on a subprime buying spree), Ocwen Loan Servicing.
Unfortunately, most people who have some familiarity with some or all of these names rue the day they first heard the name "Ocwen". (Just to show you how "cute" its CEO David Erbey is, Ocwen means "NewCo," spelled backwards.) Because too often direct involvement with Ocwen, unless you are a bank or an investor trying to make a handsome profit, represented the beginning of a nightmare as it related to your home.
There are precious few actors in the mortgage servicing (previously, mortgage lending) world that can match Ocwen's abysmal track record as it relates to homeowners. Ocwen's story of bad behavior when it comes to mortgages is (sadly) not unique. It is an object lesson in how a predator can not only evade legal and financial consequences but get richer doing it to applause. Since the 1990's Ocwen has been associated over and over again with the worst of the worst of predatory lending and mortgage servicing, both when it was itself a bank and subsequent (after being effectively run out of the business of lending by state government scrutiny) now that it focuses only on mortgage servicing. There is simply too much to write about in a single diary. Those who really want to get a flavor of Ocwen, however, can start by going to the Government Printing Office's list of 1300 federal court decisions involving Ocwen
Or, if you want to hear the voices of Main Street on the subject of Ocwen, just Google "Ocwen Complaints".
Today, the Better Business Bureau (not exactly known for its aggressive assistance to consumers) has given Ocwen the stellar rating of "F" in its own home state of Florida. Search other states, and some of the other names I've listed above, you will find the same thing. Over and over again.
There is a good reason for this: Ocwen's long-term success at making the lives of homeowners miserable is so thorough, so comprehensive, and so unpunished that some Americans have reached the point of fruitless desperation, and publicly written to President Obama pleading for help, or at least a serious investigation into Ocwen's practices.
To give you a sense of the scope of Ocwen's bad conduct in the 1990's and up to the mid 2000's, in 2004 the Judicial Panel on Multidistrict Litigation (MDL) for the federal courts granted Ocwen's motion to consolidate the federal class actions pending against it into a single action, In re Ocwen Federal Bank FSB Mortgage Servicing Litigation located in the Northern District of Illinois. As the Panel noted in deciding to consolidate 9 class actions (from Illinois, Connecticut, and California) that had been filed at that point:
All actions share factual questions arising out of allegations that Ocwen and/or other defendants engaged in unfair loan servicing and/or debt collection practices i) in violation of the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Truth-in-Lending Act, the Fair Credit Billing Act, the Racketeer Influenced and Corrupt Organizations Act and/or state consumer protection/unfair trade practices statutes, as well as ii) based upon various common law theories of liability. . .At that time Ocwen was NOT just a servicer--it was also a direct lender (a lender that, ironically, transferred much of its servicing to a then-separate company called Litton Loan Servicing--which Ocwen purchased from Goldman Sachs in 2011.
Given the geographic dispersal of constituent actions and potential tag-along actions, no district stands out as the focal point for this nationwide litigation.
Ocwen's success in getting MDL status for litigation brought against it began a tortuous path of litigation that resulted in 67 individual and class actions filed before 2007 against Ocwen in federal districts nationwide being consolidated into the MDL. That path did not end until 2011, when Ocwen finally settled the litigation. The ultimate settlement was underwhelming, to say the least. (It certainly did not appear to reflect the thinking of the MDL judge who, in 2006, denied Ocwen summary judgment on the state-based consumer fraud and tort claims asserted through the MDL.) As described in Ocwen's own words in 2011:
Ocwen’s portion of the proposed settlement payment is $5,163 plus certain other non-cash consideration and administrative costs.And there was much rejoicing:
Well here is some more recent news - a client of mine expecting $1300 plus got a check for $52!Fortunately, not every homeowner was governed by the MDL. In some cases, homeowners abandoned their federal claims entirely in an effort to avoid being stuck in federal court. In others, smart plaintiffs' lawyers knew that federal courts generally favor large litigants such as Ocwen and successfully fought Ocwen's motions to remove their cases from state court and include them in the MDL. Some of these cases ultimately went to trial and, surprise surprise surprise, some juries that evaluated those cases were left with a very different impression of Ocwen's behavior than the federal district and appellate courts usually have had (the majority of which have granted or upheld summary judgment and/or 12(b)(6) motions to dismiss in Ocwen's favor before a trial).
Perhaps it is because in many state cases, like Sealy v. Ocwen FSB, Main Street judges and juries actually were treated to evidence that all was not right in Denmark. Some of this evidence even confirmed what many of us dealing with predatory lending and servicing back then always knew (we were, of course, routinely pooh-poohed by the so-called serious people, including courts and many so-called liberals, none of who could accept that a lender might have an incentive NOT to avoid foreclosing on a loan).
As this testimony by a former Ocwen loan collector confirmed, during the real estate bubble, at least one goal of the mortgage servicing industry was to force homeowners with significant equity remaining in their home into foreclosure, allowing the home could be resold at a profit (but only after the servicer had generated thousands of dollars in fees, penalties, inflated costs, and forbearance charges over months of taking the homeowner down the primrose path believing that he or she could save the home). Here's just a snippet of this testimony from Sealy about how Ocwen affirmatively misled borrowers with meaningful home equity about the company's desire for a successful resolution of their mortgage delinquency:
Q. Do you have any information about whether Ocwen would send payments back to customers, reject payments after they requested the payments be sent to them?. . .Reading the pleadings filed in just one of the MDL cases, Hanson et. al v. Ocwen FSB et al., gives you a sense of the type of conduct that Ocwen engaged in with its borrowers. [Important ego-based personal note: Dear Kossack lawyers reading this: I do not endorse either Kweku Hanson, who ended up being disbarred for some scurrilous shit in 2007, or the complaint in the Hanson v. Ocwen case as a model of pleading; I link to it because his story about his battle with Ocwen is reflective of so many others.]
A. Yes, we did. Sometimes --
Q. Could you explain that to the jury?
A. Well, the foreclosure department needed a minimum of three payments. If they wanted to send one to us, it was our discretion to take it or send it back. We could put them on foreclosure hold for that one payment and they would send us two more later on or whatever. But we would send it back to them.
We looked in the system and seen there was equity in the home, we would reject the payment and it was in foreclosure anyway and there was not time to put them on a forbearance plan, and we sent it back. Or if we didn't receive the payment, got lost or sent back, that's what we did. . .
Q. So, Mr. Davis, at Ocwen were you allowed to -- were you allowed to modify loans regardless of a servicing agreement's terms?
A. That's correct. If it met the -- how do I say it?
Q. Just "yes" or "no." Were you allowed to?
A. Yes, we were.
Q. In answering Mr. Madole's question, you also said that if there was equity, we would chose not to modify. Can you explain that answer? . . .
(BY MR. HILLIARD) Can you explain to the folks what you meant when you explained to Mr. Madole if there was equity in the house, you would choose not to modify a customer's loan?
A. That's correct. Because if there was equity, and this is based upon all the LRCs, and there's 30 of us, and we would get a bump if it went to foreclosure. We didn't have to do modification. If they didn't come up with payments to put them on forbearance, we would not do that either. We would let it go to foreclosure, get a buyer for the home. . .
Q. (BY MR. HILLIARD) Are you aware of a policy in telling customers about forbearance?
Q. Could you explain to the jury what the policy was in regards to representing forbearance as a possibility and foreclosure?
A. Again, our system allowed us to go in there and plug in the numbers for percentages of the house, what the loan to value was, what Ocwen got for the home, or if it was even being serviced by another lender. It was up to us. And we did it to let it go to foreclosure or come up with the money we were asking for, including attorneys' fees and costs for our bumps, extra money in our pocket. . .
Q. (BY MR. HILLIARD) Are you familiar with whether or not there was a policy at Ocwen to make representations that forbearance was a possibility while unbeknownst to the customer proceeding to foreclosure?. . .
A. (CONTINUING) Yes.
Q. (BY MR. HILLIARD) There was a policy?
Indeed, sometimes Ocwen's conduct as it relates to homeowners was truly bottom of the barrel, such as when it was discovered in 2009 that Ocwen was levying improper fees and threatening foreclosure against borrowers while they were in bankruptcy to the point where a judge finally got sick of it and bought out the Ugly Stick. Or even earlier, in 2005, when it was forced to stop fucking with homeowners who had lost everything in Katrina by charging them prepayment penalties for using insurance proceeds to pay off their mortgages, thanks to the little-poor-people's-engine-that-could: ACORN.
Just to put things in perspective, the MDL was just one of many cases. Indeed, in just the past 10 years (2003 to 2013, the limit of docket searches available on the public Internet), the various faces of Ocwen—Ocwen Financial, Ocwen FSB (before its voluntary dissolution in 2005) and/or Ocwen Loan Servicing—has been sued in federal courts 2,332 times. This figure does not include the thousands-more cases brought in each state that were never litigated in, nor removed to, federal court.
But that's not all. In addition to the thousands of state and federal court lawsuits involving Ocwen and its origination and servicing practices, most of which Ocwen has won, Ocwen has been repeatedly called on the carpet by the federal government in the past 2 decades. Each time, it has been permitted to wiggle out of any serious consequence and at least several times has been rewarded with government contracts.
For example, in 1999 (after the serious problems with its loan origination and its management of its deposit accounts became undeniable) Ocwen was the recipient of a comparatively rare gift: a threat of supervision by the Office of Thrift Supervision (OTS). Fast forward several years. What you find is that, in exchange for Ocwen agreeing to relinquish its status as a bank (a move that in its annual reports Ocwen stated was consistent with its new business strategy of acquiring assets with low capital investment and moving away from capital-intensive investments, such as making mortgage loans), OTS ultimately agreed to settle in 2004. As part of that Supervision Agreement, in addition to giving up lending (which Ocwen was going to do anyway) Ocwen promised to change its ways and stop being a predatory mortgage servicer.
That was a decade ago.
Were the OTS actions against Ocwen taken more than a decade ago the only government effort to reign in an undisputed predator, one could perhaps make excuses for why the CFPB was willing to settle this most recent case. But OTS is NOT the only federal regulator to have had issues with Ocwen and its so-far-quite successful business strategy.
So, in 2011, the Federal Trade Commission (FTC) opened its second investigation. In the early 2003 Ocwen managed to land a lucrative contract servicing mortgages and REO property for the Veterans' Administration. It only took the VA a little while to figure out that it was dealing with a shady financial actor. In 2005, Ocwen ended up paying $1.5 billion in penalties to the VA for nonperformance on its contract. The VA cancelled its REO contract with Ocwen in 2006, and allowed its other contract to expire in 2008 but not before the GAO issued a scathing report about Ocwen with the VA in 2007. (The VA then outsourced to another famous predator, Countrywide, but that is a different story for a different time.)
Alas, memories are short at the federal government. Since, after Ocwen supposedly had "changed its ways," the VA hired Ocwen AGAIN for REO property management services in 2009. (This resulted in living proof of that well-known saying "Fool me once shame on you; fool me twice shame on me": several of Ocwen's employees and its captive home improvement contractors were recently convicted of wire fraud and other crimes in 3 separate cases.
(For those who don't click links, before you conclude this was just a couple of bad apples who happened to roll with Ocwen this one time, this criminal case was only the most recent):
This is the third case involving properties managed by Ocwen under contract with the VA. On Dec. 3, 2010, Benjamin K. Graves, also a former Ocwen employee, pleaded guilty in U.S. District Court in Orlando, Fla., to wire fraud in connection with the VA contract. On Jan. 25, 2012, Joshua R. Nusbaum, another former Ocwen employee, and Andrew J. Nusbaum, a former Ocwen contractor, pleaded guilty in U.S. District Court in Orlando, Fla., to wire fraud in connection with the same VA contract. Piana pleaded guilty to the same counts as Carbonell and Hurst on July 16, 2013, in U.S. District Court in Orlando, Fla. Piana was sentenced on Sept. 30, 2013, to serve 24 months in prison and to pay $147,285 in restitution to the VA.And Freddie Mac, one of the GSE's, trusted Ocwen enough despite the never-ending litigation and complaints, to contract it to service a portion of its loan portfolio.
Not be left out, several states have also threatened or engaged in enforcement actions against Ocwen since 2000, most notably New York. In 2011, concerned about Ocwen's "same old same old" practices in mortgage servicing, entered into what the state's oversight arm, the Department of Financial Services thought was a binding "Agreement to Servicing Practices" in which Ocwen promised to (AGAIN) be a good egg when it came to mortgage servicing (including as it related to foreclosures) in exchange for the state not dropping the hammer under its fairly stringent banking laws. So much for promises: less a year later, New York ultimately insisted on a stipulated court order for appointment of a "compliance monitor" effectively compelling Ocwen to do what it said it would, based on its noncompliance pretty much across-the-board with the earlier 2011 agreement.
With a business track record like Ocwen's, were this a rational business world its name would have been consigned to the dust bin of history long before the subprime mortgage crisis began. Indeed, Ocwen actually may have actually come close to folding in 2008, where Ocwen was contemplating letting itself get bought out for just $7/share.
But it didn't.
Instead, today Ocwen is trading on the NYSE at over $55/share, with market capitalization at $7.5 billion. But that's not all. Ocwen also has quite a few well-known related companies that are also publicly traded, with market capitalization of $14 billion, all combined. In addition, some of Ocwen's greatest assets today include Altisource (the company that owns the lovely computer program that uses algorithms to generate canned customer service responses down there in India when an Ocwen hostage calls yet again to raise hell about their mortgage servicing) even though on paper at least, Ocwen and Altisource are not related at all. Altisource alone brings another $3.7 billion to the party in terms of market capitalization. By the time you finish drawing all the lines, Ocwen and all the spider web lines that flow from or through Ocwen approach $20B of value.
That love tap by the CFPB and the states of $2.1 billion liability (on paper--see below) that Ocwen just received doesn't seem to hurt quite as much, when you put it back in context, now does it?
One has to ask how on earth, if Ocwen was known as a predatory mortgage servicer long before the CFPB was created, long before the bubble burst and long the country was roiled by millions and millions of foreclosures and threatened foreclosures, it was ever allowed to do business again. Yet it has been.
Today, Ocwen is bigger and badder than ever. Its success appears to flow from a combination of an admittedly entrepreneurial (albeit greedy and and cynical as hell IMO about the American Dream) CEO with a long-term view of business and the help of the government, including the courts that have long-failed to drop the hammer on Ocwen in its various forms except in one-off ways.
Notably, there has been no ongoing, comprehensive investigation into Ocwen and all of the companies related to it thanks through Bill Erbey's involvement with each despite the formalities of separate corporate existence.
This has left Ocwen still riding high in the financial saddle--with its future so bright, it's gotta wear shades. Indeed, things are so rosy that Ocwen has contemplated getting back into lending, a business it basically got run out of by the OTS in 2005 when it voluntarily shuttered Ocwen Federal Bank FSB. But spend as much time learning about Ocwen as I have since the late 1990's, and it becomes clear that every single effort to reign Ocwen in is merely a minor cost of continuing doing its business in the same predatory (as it relates to homeowners, anyway) manner that it has for the last 15 years.
Certainly, the CFPB settlement isn't going to hurt. Hell, it won't even phase the man in charge all that much. Bill Erbey, the evil genius behind Ocwen since its creation, had as of this year made $2.8 billion personally from Ocwen.
In other words: Erbey could have written a personal check to cover the inflated face value of the settlement in full and still had $700,000,000 in change left over. (In terms of actual expense, I suspect that the $135K won't even make a dent in Erbey's back-up checkbook.) The company itself would not have had to pay a dime in that scenario (and doesn't have to pay most of the CFPB settlement either, since it will pass through the expenses to the "true owners" of all these loans that are promised to be modified.)
Same as it ever was.
The Ocwen story is a depressing one, for those who (like me) believe that the failure to punish those most responsible for the crisis has merely enabled further wrongdoing by those who have operated with impunity not just on behalf of the big banks who at one time or another all had involvement with Ocwen, but first and foremost itself. Largely under the radar, unless you like me have taken interest in Ocwen specifically and have followed it throughout the decades. Fortunately, Ocwen's aggressive growth means that its name is finally coming above the mainstream radar. Unfortunately, it's name is being celebrated by the titans of industry for having grown so big, so fast and so far, despite all the "regulatory headaches" it has had to endure.
How has it been allowed to get away with so much, for so long? Well, it isn't just that Ocwen has benefitted from having done so much wrong as it relates to servicing loans that its largest litigation threats keep getting consolidated into federal court actions (where Ocwen has reaped the benefit of the combination of white shoe counsel, low-income homeowner-skeptical judges and laws that already make it very hard to get relief from a mortgage lender or servicer for their bad acts, such that most cases against these types of defendants get dismissed out of hand, or ultimately settled for pennies.) It isn't just that Ocwen readily changes its skin and its public face, creating new shell companies to transfer old business assets to, ceasing to use business names once they become too recognized for shadiness, stuff like that.
(Frankly, it also doesn't help that even so-called progressives buy, and repeat, hook, line and sinker, the convenient lie that the mortgage crisis was a result of folks buying "more home than they could afford." Spend some time looking at the actual lawsuits, the complaints, and notice that the same allegations (missing payments, false accounting, misrepresentations regarding forbearance and modifications) occur over and over and OVER again in cases against Ocwen and many many other companies where folks ultimately lost their homes, then ask yourself whether you still believe that lie.)
It is also because Ocwen is quite happy to clean up its act temporarily when the heat gets to be too much. Usually, it has been just long enough to gain allies amongst those most committed to preserving homes. It effectively co-opts its detractors through this on-again, off-again, compliance. A good example is Ocwen's decision, in 2011 when regulatory scrutiny was again heating up, to fashion itself as the white knight everyone had been waiting for in two areas: permanent loan modifications under HAMP, and launching a new, a program to write down mortgage principal on some of its loans, launching a new, completely discretionary loan-by-loan mind you, program called the Shared Appreciation Modification Program (SAM.)
These programs sound great - until you realize that (a) even though Ocwen was responsible for nearly 1/2 of all permanent loan modifications under HAMP in 2011, this benefitted a whopping 1,700 people, and had the potential to affect only 3% of the entire mortgage servicing market, so we're not talking about a major investment by Ocwen; and (b) Ocwen and its investors not only face no greater risk (since 12% of folks who modified through SAM re-defaulted anyway, turning all of the equity in their homes over to Ocwen in the process) but also poised to make a handsome profit when they collect their required 25% of any profits on sale/refinance now that home values are again bubbling, including in those markets previously devastated by the housing/mortgage crisis and (c) complaints and lawsuits still abound about Ocwen's treatment of borrowers --and fraud on the government, sometimes.
Ocwen has also managed to succeed because it is a master of PR. Even as it was getting sued over and over again for borrower abuse, and threatened with regulatory consequence, Ocwen's PR machine has projected a public face of respectability and community friendliness. It has succeeded in that to the point where it has been nominated for business awards for being a "socially responsible business", even having been given the key to the City of West Palm Beach, where Ocwen is headquartered.
It also appears to have adopted a strategy of finding allies with credibility in the consumer markets to undermine what otherwise has been since 2000 or so a steady drumbeat of outrage about its behavior. One need look no further for an example of this than Ocwen's efforts to build relationships with nonprofit organizations that had loud and proud histories (or at least, used to) of being the most relentless and aggressive when it came to protecting homeowners from mortgage servicing and foreclosure misconduct.
One is a well-known-in-the industry community preservation nonprofit called ESOP. ESOP was founded by an elder in Cleveland, Ohio, in 1993 as an organization called the East Side Organizing Project. Beginning in the late 1990s, as the underhanded behavior of mortgage lenders and servicers in low income, largely historically Black, communities became increasingly apparent and severe, ESOP shifted its focus to combating predatory lending and mortgage servicing and providing foreclosure defense advice to distressed homeowners. In 2008, however, ESOP changed. It rebranded as "Empowering and Strengthening Ohio's People" went, almost overnight (as nonprofits go, anyhow) from a 3-man shop to a 10-office statewide nonprofit. (2008 was also the last year that any "milestones" are highlighted by ESOP on its own website; go figure.) This transformation of a grassroots foreclosure prevention and defense organization to a major nonprofit player came just a few years after ESOP negotiated a "partnership" with Ocwen to "help homeowners"—a "partnership" initiated not by ESOP, but by Ocwen itself during the tenure of its executive director since 1999, Mark Seifert. Today, Mark Seifert—the man who was in charge of ESOP through its transformation —is Vice President, community relations housing authority at ... you guessed it ... Ocwen Financial Corporation.
Ocwen has also become a financial supporter of a number of other nonprofits who have enjoyed serious credibility because they have historically been neighborhood activists fighting for communities and homeowners. It has reaped the PR benefits of that investment, and definitely makes sure that we know that its supported nonprofits just love Ocwen for being such a great company to work with when it comes to homeowners.
Not content with merely becoming a benefactor to otherwise legitimate nonprofits and using their brand to untarnish its own, a few years ago Ocwen went so far as to create, and hide behind, an "alliance" of those who say they only want to help homeowners: an organization called "Hope Now." (You gotta love branding; this one is right up there with Bush's "Clean Skies Initiative".) Hope Now is an admittedly mortgage-industry created "alliance" (created by Ocwen) whose mission is, supposedly, to keep people in their homes and avoiding foreclosure. Hope Now is not a nonprofit. While today, there are some nonprofits of national statute—most notably, Catholic Charities and La Raza—that call themselves part of the "Hope Now" alliance, at its founding it was clear that Hope Now was created by some of the absolute worst of the predatory lending/servicing industry (if you have a few days, Google the name of each and every one of the mortgage companies listed—but bring a punching bag because that's how angry you will get). And, until earlier this year, Hope Now was headed up by a woman, Faith Schwartz, whose mortgage industry bona fides far predated Hope Now's creation in 2007 and whose willingness to do PR for Ocwen was well known.
Just in case you think that what Ocwen does, has done, and will no doubt to continue to do is limited to its mortgage customers, think again. It seems that Ocwen can't even stay on the right side of labor and employment law having just laid off 800 folks without bothering to comply with WARN. (Having the vast majority of your employees in India and Uruguay call centers makes one forget, I guess, that it technically still operates in America - but maybe not.)
There are a couple of "silver linings" in the Ocwen settlement, I guess: a) Ocwen has waived its right to assert immunity from prosecution as it relates to any criminal prosecutions and (b) securities/investor claims are not included in this settlement (eventually, I will hopefully get to write the diary I've not had a chance to about the fact that to date the ONLY meaningful relief the law has provided as it relates to the mortgage crisis has not been to homeowners, but to investors playing with their spare change who—despite investing previously been acknowledged as carrying inherent risk—lost some of their money.
Combine this utter failure of the courts and regulators to drop the hammer on a known bad actor like Ocwen with the reality that, today, the traditional mortgage lenders—Bank of America, OneWest, Wells Fargo, Citibank, Deutsche Bank, you name it—are all trying to get out of mortgage servicing after loans are made (which would allow them to reap the full benefit of the CFPB's decision to provide a complete safe-harbor from litigation exposure for predatory lending tactics so long as the mortgage is deemed "qualified," while simultaneously creating a definition of "qualified mortgage" that covers basically all new residential mortgages as long as the paperwork "looks okay.") When they look for a servicing company, who is going to be there for them, as the largest, and most "innovative"?
You already know the answer—and thus the not-unlikely future. (There is another company, Nationstar Mortgage Holdings, that is in fierce competition with Ocwen and thus an alternative—but not a very good one.) IMO, the problem has been the direct result of misdirection and a lack of understanding about how and why the foreclosure crisis really happened. So, while public ire has been (not without reason) focused on sending someone, ANYONE in authority at JP Morgan Chase and Citibank and Wells Fargo and all the others to jail for their role in the "subprime mortgage crisis," few have actually paid any attention to the most direct players, the ones whose predatory servicing conduct most directly forced millions of people whose homes could have been saved with reasonable forbearance and/or loan modification agreements.
Certainly, almost nobody has been paying attention to Ocwen, and its name is close to, if not at the top of, the list of the worst.
This is why I feel that despite all the celebration, the CFPB settlement with an unrepentant actor like Ocwen is not even going to slow it down. I say this even as I admit that the settlement is probably the best that government could have gotten. That is the saddest part about it all. We're not talking about settlement with a company that made a few mistakes. When we're talking about Ocwen, we're talking about a predator. As Richard Cordray noted when announcing the consent deal:
We believe that Ocwen violated federal consumer financial laws at every stage of the mortgage servicing process.This settlement resolves just four years (from 2009-2013) of complaints about abusive practices that Ocwen promises that it has, or will, clean up the edges of. Promises again.. For $2.2 billion--on paper, at least:
Speaking of lawsuits, yesterday Ocwen announced that it had entered into an agreement with the Consumer Finance Protection Board (CFPB) and other regulators related to its servicing practices - or perhaps pertaining more to the practices of companies Ocwen has acquired. Ocwen is required to make a cash payment of $127.3 million, which includes a payment for administrative expenses, to a consumer relief fund. The cash will be distributed to borrowers by an independent administrator. As a result of indemnification and loss sharing agreements, about half the cost will be shifted to sellers of the servicing portfolios. . . Ocwen also committed to continue its principal forgiveness modification program for delinquent and underwater borrowers in an aggregate amount of $2 billion over the next three years. This will not involve an expense to Ocwen. Since principal reduction modifications are net present value (NPV) positive, they benefit investors as well as Ocwen since re-default risk is reduced and therefore extends the life of the loan which helps offset the impact of the principal reduction. Lastly, Ocwen will also commit to meeting specified servicing guidelines and will be subject to oversight by a national monitor. . .Stated plainly, Ocwen is getting credit for settling for "2.2 billion" (on paper) when in fact it has to come out of pocket just $127M and a promise to continue a discretionary program, the Shared Appreciation Mortgage that Ocwen was already happily undertaking since 2011.
All while it continues its PR offensive, about what a good guy Ocwen is. With an increasingly able assist from nonprofits formerly known for their fight on behalf of distressed homeowners whose objectivity must now sadly be questioned, given their close financial relationship to Ocwen.
Meanwhile, the never-ending stream of complaints about the nightmare for homeowners that is Ocwen continue unabated. Here's just a couple of Ocwen lawsuits handled in just the last couple of years:
Yarney v. Ocwen Loan Servicing LLC (Illinois)
The trouble has always been, from the perspective of the 99 percent who actually have to pay a mortgage, it's not all that easy to avoid Ocwen, or even know when Ocwen has entered into your life. A borrower cannot control who services his or her mortgage and increasingly, banks are turning their servicing rights to Ocwen. Even if he or she could, as you can tell from the above lists of names Ocwen has operated in connection with/under/as so many companies, and has now acquired so many others, whose names don't look anything like the word "Ocwen" that even if you try to run, you probably cannot hide if you are a borrower.
So, despite it's now $2.1 billion lighter (on paper) "wallet" we have not seen the last of Ocwen. The vastness of the company's current operations, and its unbridled success in avoiding meaningful liability for practices which nobody can argue caused real pain on Main Streets prove that. The CFPB settlement does nothing to stop it; it merely allows Ocwen to make the same promises it has made before, over and over again, only to break them. Thus, the Ocwens of the world which will continue to cause that real pain, if Ocwen's behavior in the 20+ years before the CFPB settlement is any indication of its future.
[Let's be honest: why should Ocwen (or any other business like it) stop? Even adding Ocwen's $2.1 billion (on paper) to the $25 billion (on paper) settlement that the "Big 5" lenders entered into nearly 2 years ago for their predatory mortgage lending and the $13 billion that 13 major mortgage servicers paid just a few months ago to STOP the "independent file review" (independent in name only) they previously agreed to that was absolutely necessary to prove exactly how bad things had been and how many laws and regulations might have been violated, Main Street has managed to recover precious little of the money lost by consumers. No doubt, this is why the same abusive mortgage servicing and foreclosure practices that led to the settlement 2 years ago continue.
Frighteningly, with most of the industry's potential liability for predatory practices now put firmly behind it, we may only be seeing the beginning not just of Ocwen, but every other company like it. Especially following the omnibus settlements of still-largely-unknown civil liability (with no indication that there will ever be any criminal liability imposed even though it is still technically possible); "ability to repay" mortgage rule as it relates to underwriting; nearly-a-year late implementation of CFPB's "new servicing rules" for mortgage rules that are basically a joke (as proven by CFPB's own "official interpretation" of them); and the particularly frightening protections from predatory lending liability granted last year by CFPB. (Oh, BTW: nothing in Dodd-Frank required such a safe harbor) for "qualified residential mortgages" (conveniently defined such that nearly every mortgage no matter how bad henceforth will be legally deemed "qualified" as long as a lender's files suggest that the lender has done a minimum of due diligence).
Through this settlement, and the surrounding retreat from providing meaningful relief to more than a handful of the 4 million people who lost their homes, and the millions more who suffered through the potential loss thanks to exotic loan products and the "irrational exuberance" of the lending and securities markets fed through questionable lending and predatory servicing practices going all the way back to the 1990's, Ocwen has bought itself out of its (most recent) past yet again. And it has now done something remarkable: it has gone in the court of public opinion from an unquestionably bad actor, predatory lender and servicer that consumers and folks whose mission has been to protect homeowners from predation have complained about for nearly 2 decades and which the government itself has tried to reign in over and over again, to a company where folks are actually engaged in debate about whether it is really not so bad.
In other words, for less than $130K out of pocket, far less than the 2.8 billion it has earned for its CEO alone, Ocwen's settlement pretty much guarantees that it can continue business as usual.
Same as it ever was.