On April 20, 2017, the CFPB sued nonbank mortgage loan servicer Ocwen Financial Corporation and its subsidiaries (collectively, “Ocwen”) in the U.S. District Court for the Southern District of Florida. The Bureau’s complaint alleges violations of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Debt Collection Practices Act, the Real Estate Settlement Procedures Act, the Truth in Lending Act, and the Homeowners Protection Act of 1998.

In a strongly worded press release, the CFPB alleged that Ocwen engaged in “significant and systemic misconduct at nearly every stage of the mortgage servicing process.”  CFPB Director Richard Cordray stated that “Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes.”  In its own statement, Ocwen vigorously denied any wrongdoing and accused the CFPB of bringing a “politically-motivated” lawsuit in an attempt to divert attention from mounting public criticism of the Bureau.

The CFPB’s new complaint was accompanied by a separate case brought by the State of Florida against Ocwen for similar allegations.  In addition, 20 states filed cease-and-desist orders alleging escrow management issues and seeking to prohibit Ocwen from originating or acquiring any new loans.

Notably, Ocwen is already subject to a $2.1 billion settlement approved in 2014 for similar allegations in a case brought by the CFPB, 49 states, and the District of Columbia.  The Bureau’s allegations largely relate to Ocwen’s conduct since January 2014 when the CFPB’s mortgage servicing and other mortgage rules became effective, although the Bureau’s allegations relating to Ocwen’s marketing and billing of add-on products date to July 2011.

The Bureau’s allegations, which Ocwen has vigorously denied, are summarized below.

• Use of Inaccurate and Incomplete Information to Service Loans. According to the CFPB, Ocwen entered inaccurate and incomplete data in its proprietary servicing system and failed to manage known error-causing problems with the system itself.  These alleged practices may have contributed to alleged improper foreclosures, mishandling of loss mitigation applications, misapplication of borrowers’ payments, inaccurate billing amounts and fees and charges, incorrect delinquency statuses, and inaccurate negative credit reporting.

• Improper Foreclosures. The Bureau alleges that Ocwen brought foreclosure proceedings against at least 1,000 individuals in cases where Ocwen did not review borrowers’ loss mitigation applications, where borrowers were complying with a loss mitigation agreement, and where time remained in periods that Ocwen had granted to borrowers for them to provide additional information.  Allegedly, some of these proceedings involved foreclosure sales.

• Improper Billing and Misapplication of Payments. According to the CFPB, Ocwen repeatedly misapplied borrowers’ payments and failed to correct billing and payment errors.  The Bureau also alleges that Ocwen repeatedly failed to send statements including accurate amounts owed and information regarding how payments were received and applied.

• Escrow Account Mismanagement. The CFPB alleges that Ocwen mismanaged the escrow accounts for borrowers’ accounts by failing to conduct escrow analyses and send escrow statements, misapplying borrower payments, and subjecting borrowers to inaccurate costs.  According to the CFPB, Ocwen also failed to make timely insurance payments as required for accounts managed with an escrow account, which caused 10,000 borrowers’ homeowners’ insurance to lapse, in some cases necessitating force-placed insurance.

• Subjecting Borrowers to Excess PMI Premiums. The Bureau alleges that Ocwen failed to cancel borrowers’ private mortgage insurance plans as required, which resulted in charging borrowers for $1.2 million in excess PMI premiums.  Ocwen refunded these charges.

• Improper Enrollment of Borrowers in Add-On Products. The CFPB alleges that Ocwen enrolled some borrowers into add-on products—such as identity theft protection and credit monitoring—through misleading solicitations and charged borrowers for these products without proper consent.

• Mishandling of Successors to Deceased Borrowers. The Bureau alleges that Ocwen failed to identify and communicate with successors-in-interest of deceased borrowers, which may have impeded their ability to pursue loan modifications or other loss mitigation options.  According to the Bureau, some of these instances reached the point of foreclosure sales.

• Inadequate Steps for Resolving Complaints. The Bureau alleges that Ocwen failed to reasonably investigate and make corrections in response to borrower complaints and notices of errors.

• Failure to Properly Transfer Information to New Servicers. According to the CFPB, Ocwen sold hundreds of thousands of mortgage servicing rights to other entities but allegedly failed to provide complete and accurate loan information to the new servicers or to notify new servicers of known errors.