If you were to ask us to name the two worst mortgage loan servicers in America, our answer would be Ocwen Financial and PHH Corp. Both have horrendous track records and seem to always get caught putting profits before homeowners. Until today, I would say that things in the loan servicing world couldn’t get any worse.
They just did.
Out of nowhere, Ocwen announced that it was buying rival PHH for $360 million in cash. Cash that it probably plucked from the purses of struggling homeowners. The combined new company will be bigger, scarier and more powerful.
Here is what we know about the shotgun wedding.
Ocwen Financial Corp.
Ocwen is a never ending source of blog fodder. We have been on the forefront of class action investigations of Ocwen. With tons of political muscle and lots of big hedge fund money behind it, Ocwen is hard to keep down. Just when you think the company is finally going under, someone invests more money and Ocwen’s legions of lobbyists promise regulators that they have learned their lesson and are finally ready to behave.
In April of last year, 20 states blocked the company from handling any new loans within their state. In just a few months, that number swelled to 30. That meant in over half the states in the United States, Ocwen was prohibited from servicing any new mortgages. Not even a year later and Ocwen is full of cash, back in good graces with the states and now buying out one of its biggest rivals.
The same month that 20 states came down on Ocwen so did the feds. The Consumer Financial Protection Bureau (CFPB) announced that it was suing Ocwen for “failing borrowers at every stage of the mortgage servicing process.”
In the words of the CFPB,
- Serviced loans using error-riddled information: 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… In 2014, Ocwen’s head of servicing described its system as “ridiculous” and a “train wreck.”
- Illegally foreclosed on homeowners: Ocwen has long touted its ability to service and modify loans for troubled borrowers. But allegedly, Ocwen has failed to deliver required foreclosure protections. As a result, the Bureau alleges that Ocwen has wrongfully initiated foreclosure proceedings on at least 1,000 people and has wrongfully held foreclosure sales. Among other illegal practices, Ocwen has initiated the foreclosure process before completing a review of borrowers’ loss mitigation applications. Ocwen has also foreclosed on borrowers who were fulfilling their obligations under a loss mitigation agreement.
- Failed to credit borrowers’ payments: Ocwen has allegedly failed to appropriately credit payments made by numerous borrowers. Ocwen has also failed to send borrowers accurate periodic statements detailing the amount due, how payments were applied, total payments received, and other information. Ocwen has also failed to correct billing and payment errors.
- Botched escrow accounts: Ocwen manages escrow accounts for over 75% of the loans it services. Ocwen has allegedly botched basic tasks in managing these borrower accounts.
- Mishandled hazard insurance: If a servicer administers an escrow account for a borrower, a servicer must make timely insurance and/or tax payments on behalf of the borrower. Ocwen, however, has allegedly failed to make timely insurance payments to pay for borrowers’ home insurance premiums. Ocwen’s failures led to the lapse of homeowners’ insurance coverage for more than 10,000 borrowers. Some borrowers were pushed into force-placed insurance.
- Bungled borrowers’ private mortgage insurance: Ocwen allegedly failed to cancel borrowers’ private mortgage insurance, or PMI, in a timely way, causing consumers to overpay. Generally, borrowers must purchase PMI when they obtain a mortgage with a down payment of less than 20%, or when they refinance their mortgage with less than 20% equity in their property. Servicers must end a borrower’s requirement to pay PMI when the principal balance of the mortgage reaches 78% of the property’s original value.
- Deceptively signed up and charged borrowers for add-on products: When servicing borrowers’ mortgage loans, Ocwen allegedly enrolled some consumers in add-on products through deceptive solicitations and without their consent. Ocwen then billed and collected payments from these consumers.
- Failed to assist heirs seeking foreclosure alternatives: Ocwen allegedly mishandled accounts for successors-in-interest, or heirs, to a deceased borrower. These consumers included widows, children, and other relatives. As a result, Ocwen failed to properly recognize individuals as heirs, and thereby denied assistance to help avoid foreclosure. In some instances, Ocwen foreclosed on individuals who may have been eligible to save these homes through a loan modification or other loss mitigation option.
- Failed to adequately investigate and respond to borrower complaints: If an error is made in the servicing of a mortgage loan, a servicer must generally either correct the error identified by the borrower, called a notice of error, or investigate the alleged error. Since 2014, Ocwen has allegedly routinely failed to properly acknowledge and investigate complaints or make necessary corrections. Ocwen changed its policy in April 2015 to address the difficulty its call center had in recognizing and escalating complaints… Under its new policy, borrowers still have to complain at least five times in nine days before Ocwen automatically escalates their complaint to be resolved. Since April 2015, Ocwen has received more than 580,000 notices of error. [Name one other company that requires customers to scream at least 5 times in 9 days before listening?]
- Failed to provide complete and accurate loan information to new servicers: Ocwen has allegedly failed to include complete and accurate borrower information when it sold its rights to service thousands of loans to new mortgage servicers. This has hampered the new servicers’ efforts to comply with laws and investor guidelines.
Ocwen didn’t exactly apologize and attempt to fix these problems. Instead, it claimed the government’s lawsuit was politically motivated and inaccurate. In fact, Ocwen claims that homeowners who have Ocwen as their servicer have a much better chance of avoiding foreclosure than if their loan is serviced by someone else.
In the words of the company, “Ocwen strongly disputes the CFPB’s claim that Ocwen’s mortgage loan servicing practices have caused substantial consumer harm. In fact, just the opposite is true…”
So where is the truth? In this day and age of “fake news”, many are caught wondering who they should believe. Ocwen has left such a shameful trail of unhappy homeowners that Joe Q. Public solidly sides with the homeowners. We don’t think that many outside Congress and the 50 state capitols believe their nonsense.
As part of our class action investigation, we spoke with over 200 Ocwen serviced homeowners and several former employees. Our loyalties to homeowners are unshakeable. We believe that every one of the government’s claims are true.
Unfortunately, politicians often live in a bubble or have problems focusing beyond those who made campaign contributions. The Wall Street big boys have the ear of Congress and that includes neutering the CFPB and taking down its consumer complaint database. Ocwen, Bank of America, Wells Fargo and others of their ilk simply don’t like their dirty laundry aired on a government website!
There is plenty more bad ink about Ocwen…. Last year the company paid $56 million to settle an investor lawsuit, the State of New York fined issued a hefty fine to the company, the list goes on. Use the search tool on our blog and you will find plenty of Ocwen horror stories.
What is Ocwen doing to fix the problem? It is buying a company with a track record that rivals its own. In fact, if there was ever a race to the bottom, these two rivals are both spinning in the vortex at the very bottom of the bowl.
PHH Mortgage and PHH Home Loans Settle NY Fraud Charges
In November of 2016, PHH Corp affiliates PHH Mortgage and PHH Home Loans LLC agreed to pay New York State $28 million to settle a wide range of claims brought by the New York Department of Financial Services.
In accepting the settlement, the state found:
- PHH Mortgage lacked formal and comprehensive policies and processes for executing foreclosure-related documents. Examiners found certain employees who executed foreclosure documents conducted little more than perfunctory reviews of materials prior to execution. Some employees lacked personal knowledge of facts to which they had sworn.
- PHH Mortgage did not adequately monitor the operations of outside vendors it engaged to perform mortgage servicing related tasks, including foreclosure attorneys whose actions on behalf of the company had a direct impact on borrowers in financial distress.
- PHH Home Loans failed to establish adequate controls to prevent mortgage loan originators employed by one PHH entity from originating loans in another PHH entity’s name, or to prevent employees whose mortgage loan originator licenses had expired or been withdrawn from taking loan applications.
- PHH Home Loans had inadequate controls to ensure that electronic signatures appearing on loan applications were those of the mortgage loan originators who actually took the application from the borrower.
- PHH Home Loans’ mortgage loan originator compensation plan failed to prevent against steering borrowers into risky or unnecessarily high-cost loans or basing a mortgage loan originator’s compensation on the terms of the particular loan brokered.
The allegations against PHH and Ocwen may sound like legalese but just about anyone who has had the misfortune of facing a foreclosure or attempting a loan modification now understands this legalese better than most judges!
For example, the CFPB charged Ocwen with initiating foreclosures before completing a review of borrowers’ loss mitigation applications. In simple terms, that meant Ocwen failed to properly process loan modification applications and often foreclosed even though the homeowner was current on their modification payments.
Sound familiar? Many homeowners reading this are certainly shaking their heads in agreement. [Note: Ocwen denied all charges brought by the CFPB.]
In another example, New York said PHH Home Loans failed to follow loan originator compensation rules. Those rules are meant to protect buyers and say that a loan officer’s commission can’t be based on the terms of the loan. If you pay loan officers based on the amount of points charges or the interest rate the borrower pays there becomes no incentive to do right by the customer.
Instead of putting the borrower in something she can afford, the loan officer has a different motive. To make the highest commission possible. Who cares if the borrower defaults in a year? By that point, a greedy loan officer will have made his money and may have ripped off 100 more borrowers since then.
In announcing the settlement between the state and PHH, Governor Cuomo said, “New Yorkers deserve peace of mind when shopping for a mortgage and this administration has zero tolerance for lenders who seek to cut corners and disregard the law at the expense of those seeking the American Dream in the Empire State.”
Justice Department Settles with PHH Corp in Whistleblower Action
PHH didn’t learn it’s lesson. Nine months later in August of 2017 the U.S. Department of Justice fined PHH $74.5 million dollars. The fine was a negotiated settlement between the Justice Department, HUD, the VA and the Federal Housing Finance Administration (FHFA). The FHFA oversees mortgage guaranty agencies Fannie Mae and Freddie Mac.
PHH may be one of the last settlements by HUD. Since Secretary Ben Carson has become the agency head, he has expressed reservations about going after big lenders. The federal government’s seeming reluctance to pursue underwriting and servicing fraud certainly doesn’t stop the states and homeowners from doing so, however.
The case against PHH was started by a whistleblower, Mary Bozzelli. A former PHH underwriter, Ms. Bozzelli was awarded $9 million for blowing the whistle. In settling the charges, PHH was allowed to pay without any admission of wrongdoing.
[Ed. Note: MahanyLaw is the leading bank and mortgage fraud whistleblower law firm. While HUD today appears to have some reservations about pursuing whistleblower cases against loan servicers and big lenders, the Justice Department can still prosecute and in particularly egregious situations, we believe that public pressure will force HUD to also act. If you have inside information about fraud by a lender involving residential loans or by an FDIC insured bank, contact us immediately. You may be entitled to a large cash award.]
The States Charge PHH
The feds, a whistleblower, New York State… who is left to go after PHH? In January 2018, the other 49 states settled with PHH Mortgage. The states accused PHH of fraud in how they handled long modifications and applied payments.
The consolidated state cases were settled for $45 million. Over $30 million of that money is available for homeowners hurt by the company.
CFPB and PHH
How it can it possibly get worse for PHH? Besides getting acquired by Ocwen, there is the little scuffle the company had with the CFPB last year. The agency originally settled with PHH for $6 million and then tried to levy another $103 million fine. In that complaint, the CFPB said the company was taking kickbacks from mortgage insurers. While that doesn’t sound bad, someone winds up paying for those kickbacks. You guessed, the homeowner winds up paying more money so that the insurer can pay a kickback to PHH.
PHH never admitted guilt and challenged the huge fine. A federal appeals court in Washington DC tossed the CFPB’s fine on technical grounds earlier this year. That is the only bullet that PHH has dodged so far.
The Marriage of Ocwen and PHH
Now you understand why we call this a marriage from Hell. Companies like Ocwen and PHH shouldn’t be allowed to stay in business, let alone combine forces.
With their regulatory woes in abeyance for the immediate future, Ocwen says its acquisition of PHH Corp should be complete by the fall of this year. Ocwen’s CEO Ron Farris says of the deal,
“The combination of Ocwen and PHH will result in a strong non-bank mortgage servicer with a robust servicing capability. Ocwen will significantly benefit from PHH’s experienced workforce and their expertise on the MSP servicing platform. We look forward to the opportunity to provide our industry leading capabilities to PHH’s customers and servicing clients.”
Hang on homeowners.
What Can be Done to Hold PHH and Ocwen Accountable?
Glad you asked! As the leading financial services whistleblower law firm, we are looking to speak with insiders from both Ocwen and PHH or their affiliates.
Admittedly, going after either company is a bit tougher in this political climate. There is no sugarcoating that. We still think it is possible, especially if we have great evidence.
To see if you have a whistleblower claim, give us a call. All inquiries are protected by the attorney – client privilege and kept completely confidential.
Even if we can’t bring a claim through HUD, we may be able to bring a whistleblower award claim under the FIRREA or Office of the Comptroller of the Currency’s whistleblower law. We may also be able to bring new state claims.
We also need and want your help – even if off the record – to assist struggling homeowners. If you know of illegal activity that results in homeowners and their families facing illegal foreclosures or getting tossed on the street, we want to hear from you. Remember, we will speak with you confidentially.
For more information, contact attorney Brian Mahany online, by email or by phone . This contact information is for insiders only (primarily present or former employees). Are you an Ocwen or PHH homeowner? Keep reading.
Important Info for Homeowners with Ocwen or PHH Loans
If Ocwen is your loan servicer and you have a story to tell, please contact attorney Anthony Dietz online or at . We cannot take homeowner telephone calls or provide legal advice to nonclients. [Please understand that we receive over 30 calls per day from homeowners seeking personal legal advice. Unfortunately, those calls will most likely not be returned.]
We also invite to you read our Ocwen Fraud Investigations page. That page details our Ocwen class action lawsuit and some of the ways we believe that the company is defrauding homeowners.
Is PHH your servicer? Were they your lender?
We are currently investigating PHH Corp, PHH Mortgage and PHH Home Loans for a wide variety of suspected illegal activity. The highlights of our investigation include:
- Predatory loans,
- Using of incorrect loan data,
- Illegal foreclosures,
- Failing to properly process loan modifications,
- Failure to properly credit borrowers’ payments,
- Mismanagement of escrow accounts (taxes and insurance),
- Unnecessarily putting homeowners in force-placed insurance,
- Delayed termination of private mortgage insurance, and
- Failure to correct errors identified by the borrower.
There are probably more bad things going on than what is on the list.
If you believe that PHH illegally foreclosed on your home, overcharged you or engaged in other illegal activity, contact us immediately.
We haven’t filed any class action as of the date of this post, but we are actively investigating and want to hear your story.
For more information, please contact us online or at . (Please accept our apologies in advance. We cannot take homeowner telephone calls or provide legal advice to people who are not clients.)
Homeowners have a right to be treated fairly and with due process. Ocwen and PHH may have been able to settle without admitting any liability, but we know the truth.
The political pendulum has swung in favor of banks and will not likely swing back for the next few years, but juries know the truth. And the truth (at least in our humble opinion) is that Ocwen and PHH have done a horrendous job of servicing loans.
That thousands of homeowners may have been victim to predatory servicing practices and illegal foreclosure sickens us. We think it will sicken jurors too.
Homeowner or insider, we hope to hear from you.
MahanyLaw – Protecting Homeowners through Whistleblower and Class Action Lawsuits
Note: If you have been served with a foreclosure complaint or have a pending sale date, you should immediately seek counsel. We still want to hear your story, but your immediate priority must be protecting your home