National mortgage servicer sued for errors on 1.4 million mortgages

CHARLENE CROWELL | 5/15/2017, 12:16 a.m.
Families who have assembled the necessary financial resources to apply, qualify and purchase a home understandably value that key investment ...

Center for Responsible Lending

Families who have assembled the necessary financial resources to apply, qualify and purchase a home understandably value that key investment and its accompanying opportunity to build wealth. But buying the home is just the first step of securing the American Dream of homeownership.

What many homeowners soon discover is that faithfully paying a monthly mortgage is, in some cases, just not enough. Although homebuyers choose their lender, they do not choose who services their loan – the company that accepts and processes their monthly payments. Nowadays, very few lenders also service loans made. Instead, a third party receives payments, maintains account records and serves as the first point of contact should questions arise.

Borrowers can also be caught in errors created by servicers whose records may not have been complete, incorrectly posted to accounts and more. Over the life of a loan, multiple servicers from different firms may manage a single mortgage loan. If a borrower discovers that something is amiss on their loan records, they can soon find themselves in a financial maze, trying to decipher who did what and when with their faithful payments. Moreover, while these consumers seek to find out what exactly happened, both fines and fees can be assessed, or even foreclosures filed.

In late April, the Consumer Financial Protection Bureau, along with the Florida Attorney General and the state’s Office of Financial Regulation, filed lawsuits alleging Ocwen Financial Corporation with a litany of ills affecting virtually every phase of mortgage servicing. The lawsuit affects more than 125,000 Ocwen borrowers.

“Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” said CFPB Director Richard Cordray. “Borrowers have no say over who services their mortgage, so the Bureau will remain vigilant to ensure they get fair treatment.”

The lengthy new allegations include:

• Failure to credit multiple borrowers’ payments, or to correct billing and payment errors.

• Mishandled hazard insurance that led to the lapse of 10,000 borrowers’ homeowners’ insurance.

• Illegally foreclosing on at least 1,000 people – even though borrowers had been given 30 days to submit information to servicers, servicers instead initiated foreclosure proceedings and sales.

• Deceptive enrollment and charges to borrowers for add-on products.

Readers may recall that many of the foreclosures that affected Black and Latino neighborhoods during the housing crisis were high-cost, unsustainable adjustable-rate-mortgage loans. As mortgage brokers were paid financial kickbacks called “yield spread premiums” for selling these loans, borrowers were often steered into these higher-cost loans, not knowing that the broker had an additional financial incentive.

“In 2013, the $2.1 billion joint state and national foreclosure settlement intended to provide compensation to mortgage borrowers who were harmed during the housing crisis,” said Nikitra Bailey, an EVP with the Center for Responsible Lending. “Dodd-Frank’s Wall Street Reform Act imposed new requirements for mortgage servicers, and authorized the Consumer Financial Protection Bureau to implement requirements and adopt new rules, which the Bureau did in 2013.”