Ocwen Pulling Out of Correspondent Lending

More than 20 state business regulators issued regulatory enforcement orders in April of 2017 to auxiliaries of Ocwen Financial Corp to address “misusing of buyer escrow accounts and a lacking financial condition,” as indicated by an April news discharge from the North Carolina Office of the Commissioner of Banks. With the recent addition of Alabama and Minnesota resolutions, the mortgage servicing giant, Ocwen, declared its procurement of 17 settlements with multiple states. Furthermore, Ocwen declared under the “Discount Forward Lending” area of the 8K recording that they have chosen to leave the mortgage correspondent lending, or “forward lending” business, consenting to offer certain advantages identified with the business to an undisclosed purchaser.

So far, Ocwen has settled primarily mortgage escrow related suits with Georgia, Idaho, Illinois, Maine, Michigan, Mississippi, Montana, Rhode Island, South Carolina, Wisconsin, New Mexico, Virginia, and West Virginia, with Thursday’s expansion of Alabama and Minnesota. State regulatory organizations in Indiana and Nevada either pulled back or permitted their separate restraining orders to terminate.

Per the 8k filing, “The buyer is expected to assume a facilities lease and to offer positions to certain Ocwen employees in the business. Ocwen estimates that it will recognize a loss of approximately $7 million related to the divestiture in its third quarter 2017 results.” Also per the 8k filing, the loss is primarily believed to be due to the company writing off the capitalized balance of internally developed software for the portion of the business that Ocwen has agreed to exit. The company expects an additional $1 to $2 million of severance expense following the closing of the transaction, anticipated for the next quarter.

The terms of the agreements include several details like: Ocwen shall not obtain any new residential mortgage servicing rights until April 30, 2018, must develop transition plans to a new servicing system may not engage an auditor to perform an escrow review of 8,000 to 10,000 mortgages. Nonetheless, the release likewise notes that Ocwen did not concede or deny liability in these settlements and none of the understandings contain any pecuniary fines or penalties.

Future agreements with the remaining states, could be similar, but there is no guarantee. As Owen Spokesman, John Lovallo stated, “we keep on working helpfully with the rest of the 14 state regulatory organizations and two state lawyers general to achieve satisfactory resolutions.”

The exact list from the 8k filing follows:

  • Ocwen will not acquire any new residential mortgage servicing rights until April 30, 2018.
  • Ocwen will develop a plan of action and milestones regarding its transition from the servicing system it currently uses, REALServicing®, to an alternate servicing system and will not board any new loans onto the REALServicing systems. This restriction on boarding new loans do not apply to loans that are already serviced on the REALServicing system, including those that are subsequently modified or those that are subsequently converted to an arrangement whereby Ocwen acts as sub-servicer.
  • In the event that Ocwen chooses to merge with or acquire an unaffiliated company or its assets in order to effectuate a transfer of loans from the REALServicing system, Ocwen must give the applicable regulatory agency prior notice to the signing of any final agree-
    ment and the opportunity to object. If no objection is received, the provisions of the first bullet point above shall not prohibit the transaction, or limit the transfer of loans from the REALServicing system onto the merged or acquired company’s alternate servicing system. In the event that an unaffiliated company merges with or acquires Ocwen or Ocwen’s assets, the provisions of the first bullet point above shall not prohibit the transaction, or limit the transfer of loans from the REALServicing system onto the merging or acquiring company’s alternate servicing system.
  • Ocwen will engage a third party auditor to perform an analysis with respect to its compliance with certain federal and state laws relating to escrow by testing approximately 9,000 loan files relating to loans secured by residential real property in various states and the District of Columbia.
  • Ocwen will develop and submit for review corrective action plans for any errors that are identified by the third party auditor and will remediate any individual accounts impacted by such errors. Ocwen will develop and submit for review a plan to enhance its consumer complaint handling processes.
  • Ocwen will provide financial condition reporting on a confidential basis as part of each state’s supervisory framework for the next three years.
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