There has been much talk about Ocwen lately. Unfortunately, none of it is good. The sloppy servicer of subprime mortgage loans has made too many mistakes, which have cost many homeowners their homes, causing stress and suffering to thousands of Americans.
Bombarded with individual lawsuits and class actions from everywhere, including the federal government and dozens of states, the company is still trying to fight back. One of its more recent strategies was contesting the constitutionality of the Consumer Financial Protection Bureau, which has been after Ocwen for a long time now.
Last month, Southern District of Florida’s Judge Kenneth Marra blocked Ocwen Financial Corporation’s bid to test the CFPB’s constitutionality. Ocwen’s bid was nothing but a pathetic attempt to save face after the CFPB sued it for numerous violations of consumer protection laws.
Ocwen wanted the constitutionality issue to get in the way of that lawsuit, but the Judge argued that letting the mortgage loan servicer to go forward would only cause delays to the case, and that Ocwen would be free to bring forward the constitutionality issue at a later date.
Ocwen had also requested the intervention of Attorney General Jeff Sessions, but Judge Marra called the request premature and denied it. “Until a motion is filed setting forth the exact basis for the challenge, the Attorney General will not have sufficient information to determine whether he should intervene,” the judge said in a statement.
Meanwhile, Ocwen sources have called the CFPB’s lawsuit “unjustified,” and tried to present Marra’s negative resolution as a minor setback based on a mere technicality. However, the signs are clear; Ocwen has little leverage, and it keeps losing more of it by the minute.
If Marra had allowed Ocwen to put the CFPB’s constitutionality in question, this would have encouraged other violators to do the same. The judge has honored his position in keeping the American people’s interests at heart.
While Ocwen’s attorneys keep busy with massive lawsuits and courtroom defeats, business is not as usual in the corporation’s headquarters. Moody’s Investors Service, a leading provider of credit ratings, research, and risk analysis, has just downgraded several of Ocwen’s ratings.
In a report, Moody said that the outlook of the company was “negative.” On the one hand, ratings for Ocwen Financial Corporation’s senior secured and unsecured debt ratings have gone down from Caa1(substantial risks) to Caa2 (extremely speculative). On the other hand, Ocwen’s corporate family rating went from B3 (highly speculative, level 2) to Caa1. Moody has also downgraded Ocwen Loan Servicing’s rating from B2(highly speculative, level1) to B3.
In spite of the CFPB suit, Ocwen has seen a spike in stock prices in early May. The surge was due to the announcement of a deal with New Residential Corp., which would fuel $425 million into Ocwen, besides an equity stake. But although Ocwen stock may partially recover after the big blow of the CFPB suit announcement, in the long term, the company will have to pay heavily for its mistakes, and this will reflect on its finances.
Moody’s ratings are certainly a reflection of the increased risk that the CFPB’s lawsuit represents for Ocwen. The CFPB has abundant reason to believe that the company’s poor loan servicing practices have led to untimely foreclosures, disregard for countless customer complaints, and the systematic sale of MSRs without the appropriate disclosures.
Besides the CFPB’s suit, Ocwen is facing cease and desist orders from North Carolina’s Commissioner of Banks and over 20 state regulators, who want to ban Ocwen from acquiring new mortgage servicing rights in their states. This would have a direct impact on Ocwen’s business and credit worthiness, and it is certainly one of the factors Moody’s experts have considered when determining Ocwen’s ratings.
The experts have also looked at Ocwen’s proposed deal with New Residential Corporation. In essence, the deal involves the conversion of $117 billion in New Residential’s existing Rights-to-MSRs to fully-owned MSRs. Although the upfront $425 million Ocwen is set to receive may look substantial, Moody believes the company will continue to incur legal costs and very likely hefty settlements, which greatly puts its long-term profitability at risk.
In a statement, CFPB Director Richard Cordray said, “Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes.” For the people who have lost their homes and are now seeking justice, the current price of the Ocwen share is of little consequence.
It is companies like Ocwen that catalyzed the 2008 financial crisis. Ocwen will need to pay, to show American consumers that their rights are protected, that they are not helpless in front of massive corporations that can take their homes without a warning, after years and years of timely mortgage payments.
Ocwen’s loan servicing is, in fact, so deficient that even their employees complain about it. One Ocwen employee recently commented, “I know there’s no shot in hell, but if I could change systems tomorrow I would. I can’t tell you the number of hours I and others spend on basic servicing technology blocking and tackling. I’m not talking about differentiators here. I’m talking about getting system to stay online, escrow analysis to work, letters to print, etc. It’s ridiculous.”
Here is the CFPB’s take on the matter:
“Ocwen uses a proprietary system called REALServicing to process and apply borrower payments, communicate payment information to borrowers, and maintain loan balance information. Ocwen allegedly loaded inaccurate and incomplete information into its REALServicing system. And even when data was accurate, REALServicing generated errors because of system failures and deficient programming. To manage this risk, Ocwen tried manual workarounds, but they often failed to correct inaccuracies and produced still more errors. Ocwen then used this faulty information to service borrowers’ loans. In 2014, Ocwen’s head of servicing described its system as “ridiculous” and a “train wreck.”
That is only the tip of the iceberg. To Ocwen’s wealthy executives, these are only minor glitches. To homeowners across America, these technical mistakes often translated into massive losses, unlawful foreclosures, and tremendous stress.
Hopefully, Judge Marra’s decision and the investor markets’ negative reactions to Ocwen will contribute to make it increasingly difficult for this corrupt corporation to stay afloat amid its very own, self-inflicted train wreck.
Why is Ocwen Still in Business?
We get asked this question a lot. In fact, Google tells us that is has become a popular search term! Anyone who has dealt with Ocwen has probably asked this question. We have teamed up with lawyers across the country to curb the Ocwen beast once and for all.
To learn about our current Ocwen class action investigation, visit our Ocwen fraud page. You can also see what we had to say about Ocwen and how they abuse struggling homeowners on our Lender Liability site by clicking here. Finally, we have 10 other articles on this site. Just type in the word Ocwen on our searchable Due Dilgence blog.
If you are an Ocwen insider call attorney Anthony Dietz at 248-789-5551 or email You may be entitled to a whistleblower award. Homeowner? For the quickest response email Anthony at the address above.
MahanyLaw – Dedicated to Cleaning up America’s Housing and Lending Markets.