www.baltimoresun.com/business/real-estate/wonk/bs-bz-mortgage-settlement-20131219,0,3141174.story

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Maryland to receive $88 million of $2.1 billion national settlement

CFPB and state officials accuse Ocwen Financial Corp. of systematic misconduct in handling of loans

By Natalie Sherman, The Baltimore Sun

7:39 PM EST, December 19, 2013

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Maryland expects to receive about $88 million of a $2.1 billion national settlement reached with Ocwen Financial Corp. over "systematic misconduct" in the mortgage servicer's handling of loans.

Announced Thursday, the deal settles a federal complaint brought by the Consumer Financial Protection Bureau and officials from Washington, D.C., and every state except Oklahoma. It alleged Ocwen, the largest non-bank servicer of home mortgages, committed a range of unlawful acts, including improperly rejecting loan modifications, charging customers inappropriate fees and failing to maintain accurate account statements.

The agreement brings a non-bank servicer under federal oversight and requires Ocwen, which specializes in servicing subprime and delinquent loans, to provide $2 billion toward principal reductions and $125 million in cash payments to about 185,000 borrowers nationwide who lost their homes to foreclosure between 2009 and 2012.

"This will bring relief to Ocwen victims and it will improve conditions in the mortgage market by reducing the number of foreclosures," said Richard Cordray, director of the Consumer Financial Protection Bureau, in a conference call announcing the deal.

In November, Maryland had the third-highest foreclosure rate in the nation, according to RealtyTrac, a real estate data firm.

Under the proposed court order, which must be approved by a federal judge, Maryland is expected to receive about $86 million for principal reduction, the sixth-highest amount among the states, or 4.3 percent of the relief available, according to Maryland Attorney General Douglas F. Gansler. There also are 2,461 borrowers in Maryland who lost homes to foreclosure who are eligible for cash payments, with disbursements expected to be more than $1,000 each.

The complaint concerns loans serviced by Atlanta-based Ocwen, subsidiary Ocwen Loan Servicing, and two companies acquired by Ocwen, Homeward Residential Inc. and Litton Loan Servicing LP.

The settlement is the biggest since the $25 billion agreement reached in 2012 with the nation's five largest bank servicers: Ally/GMAC, Bank of America/Countrywide, Citi, JPMorgan Chase/WaMu and Wells Fargo/Wachovia. To date, that settlement has provided about $1.5 billion in relief for more than 27,000 families in Maryland, Gansler said.

"At the time we made the settlement, we talked about how in the future we were going to continue to work with our federal partners to go after other companies that participated in the subprime [lending] and insidious conduct of the banks at that time," Gansler said. "This is one of them."

In addition to financial penalties, the order imposes new standards on Ocwen for communicating with customers and processing modification requests. It also forbids business policies that "disfavor" particular places or classes of borrowers.

In a statement, Ocwen said it is pleased with the agreement and the requirements bring "welcome clarity and certainty concerning best industry practices."

"The agreement, which is subject to court approval, is in alignment with the same ultimate goals that we share with the regulators — to prevent foreclosures and help struggling families keep their homes," it said.

Joseph A. Smith, who was appointed to monitor bank compliance with the 2012 settlement, also will monitor implementation of this agreement. Smith's most recent report found that Bank of America, JPMorgan Chase and Citigroup continued to violate terms of that agreement.

Marceline White, executive director of the Maryland Consumer Rights Coalition, praised the Ocwen settlement for its focus on principal reduction, and for not protecting the company from other criminal or civil suits. But she said she wants to have access to data showing which customers are receiving help to ensure the relief is not used on a smaller number of high-figure reductions.

"It's very positive," White said. "We really do believe that with this settlement they should go a step farther and make sure that you can see how the relief is being distributed."

nsherman@baltsun.com