We have had much to say about Ocwen these days. Not a week goes by without a new complaint or investigation. Today we learned the company was hit last week with a multimillion-dollar class action lawsuit. The suit accuses the loan servicing giant of deceiving homeowners, who are behind on their mortgage payments, into paying thousands of dollars of unlawfully marked up fees.
The case was filed in a Sacramento, California federal court.
The complaint charges that Ocwen uses its affiliate, Altisource Portfolio Solutions, to disguise the marked up fees. Altisource and Ocwen share the same chairman, William Erbey. Until 2009, Altisource was a subsidiary of Ocwen. Erbey is also the largest shareholder of both companies.
The complaint states that when a borrower falls behind on their payments, Ocwen contracts for a variety of services designed to protect the lender’s interest in the property. Ocwen obtains these services from Altisource who in turn obtains them from third party vendors. Although Ocwen can’t mark up the bill for these services, Altisource marks up the bills from the vendors then passes along the marked up bill to Ocwen. The net result is that Ocwen profits from these services “at the expense of distressed homeowners — a particularly vulnerable class of consumers who are struggling to keep their homes.”
The lawsuit also claims that Ocwen misapplies payments from homeowners in such a way to generate higher fees and profits. According to the complaint, “Ocwen’s unlawful loan servicing practices exemplify how America’s lending industry has run off the rails.”
Prior to the securitization of residential mortgages, banks serviced the loans they wrote. That gave the bank a vested interest in helping borrowers get back on their feet. When banks held their own loans, the bank’s profitability was directly tied to their borrowers’ ability to pay. Today, however, servicers don’t have an interest in the loans they administer. In fact, they earn more fees the longer a loan is in trouble.
In the words of one member of the Federal Reserve System, “The broad grant of delegated authority that servicers enjoy …, combined with an effective lack of choice on the part of consumers, creates an environment ripe for abuse.”
All of this, of course, makes for a great class action case. We think it also presents great whistleblower opportunities for present and past employees of Ocwen. Although Ocwen is one of the largest loan servicers in the United States, there are many other bad players in the industry. That means there are probably great whistleblower opportunities for folks with original source knowledge of fraud and illegal mark ups at other servicers.
The federal False Claims Act allows whistleblowers to earn up to 30% of whatever the government collects from wrongdoers. With triple damages available, awards can be staggering. (Bradley Birkenfeld, a former UBS Bank whistleblower, collected $104 million for his information and cooperation.)
Most whistleblowers we represent don’t come forward because of the money. They want to stop fraud and corruption and do the right thing. There certainly are plenty of opportunities today in the lending and servicing industries.
Need more information? Contact a whistleblower lawyer at Mahany & Ertl today. We have brought several, billion dollar cases on behalf of HUD and the U.S. government. For more information, contact attorney Brian Mahany at or by telephone at (direct). All inquiries are kept in strict confidence.
May 2017 – Good news for customers with Ocwen serviced loans. You may be entitled to substantial monetary relief. Please visit our Ocwen lawsuit page.