Ocwen and the New York State Consent Order: Backdating Letters, Broken Systems, Scripts With Feeling

Ocwen Financial Services, LLC, the company that millions of Americans are forced to deal with when handling their mortgage loan transaction, welcomed the New Year by admitting, once and for all, that its records on countless home mortgage transactions simply could not be trusted. As part of a settlement agreement with the New York State Department of Finance, Owen and its related companies admitted that they had been, for years, backdating notice letters, mishandling loan modification applications, failing to honor loan modification agreements, and when customer called to complain, they were simply training people to read the scripts… with feeling.

The order has the force of law in New York, and because Ocwen stipulated to it, may be considered an admission of wrongdoing by other courts. The settlement itself only directly benefits New Yorkers—for example, the payments for borrowers under the settlement only go to New York borrowers—but the detailed descriptions of Ocwen’s wrongdoing may serve as possible defenses or even grounds for potential lawsuit by borrowers in Florida and other states.

Each of our clients with Ocwen matter should know that we are evaluating each case to determine how this Consent Order affects your rights.

Here’s a copy of the order itself: Ocwen Consent Order [PDF]

Some of the most amazing admissions come in paragraphs 14–18 of the Consent Order:

14. In the course of its review, the Compliance Monitor determined that Ocwen’s information technology systems are a patchwork of legacy systems and systems inherited from acquired companies, many of which are incompatible. A frequent occurrence is that a fix to one system creates unintended consequences in other systems. As a result, Ocwen regularly gives borrowers incorrect or outdated information, sends borrowers backdated letters, unreliably tracks data for investors, and maintains inaccurate records. There are insufficient controls in place— either manual or automated—to catch all of these errors and resolve them.

15. For example, Ocwen’s systems have been backdating letters for years. In many cases, borrowers received a letter denying a mortgage loan modification, and the letter was dated more than 30 days prior to the date that Ocwen mailed the letter. These borrowers were given 30 days from the date of the denial letter to appeal that denial, but those 30 days had already elapsed by the time they received the backdated letter. In other cases, Ocwen’s systems show that borrowers facing foreclosure received letters with a date by which to cure their default and avoid foreclosure—and the cure date was months prior to receipt of the letter. Ocwen’s processes failed to identify and remedy these errors.

16. Moreover, Ocwen failed to fully investigate and appropriately address the backdating issue when an employee questioned the accuracy of Ocwen’s letter dating processes and alerted the company’s Vice President of Compliance. Ocwen ignored the issue for five months until the same employee raised it again. While Ocwen then began efforts to address the backdating issue, its investigation was incomplete and Ocwen has not fully resolved the issue to date, more than a year after its initial discovery.

17. Ocwen’s core servicing functions rely on its inadequate systems. Specifically, Ocwen uses comment codes entered either manually or automatically to service its portfolio; each code initiates a process, such as sending a delinquency letter to a borrower, or referring a loan to foreclosure counsel. With Ocwen’s rapid growth and acquisitions of other servicers, the number of Ocwen’s comment codes has ballooned to more than 8,400 such codes. Often, due to insufficient integration following acquisitions of other servicers, there are duplicate codes that perform the same function. The result is an unnecessarily complex system of comment codes, including, for example, 50 different codes for the single function of assigning a struggling borrower a designated customer care representative.

18. Despite these issues, Ocwen continues to rely on those systems to service its portfolio of distressed loans. Ocwen’s reliance on technology has led it to employ fewer trained personnel than its competitors. For example, Ocwen’s Chief Financial Officer recently acknowledged, in reference to its offshore customer care personnel, that Ocwen is simply “training people to read the scripts and the dialogue engines with feeling.” Ocwen’s policy is to require customer support staff to follow the scripts closely, and Ocwen penalizes and has terminated customer support staff who fail to follow the scripts that appear on their computer screens. In some cases, this policy has frustrated struggling borrowers who have complex issues that exceed the bounds of a script and have issues speaking with representatives at Ocwen capable of addressing their concerns. Moreover, Ocwen’s customer care representatives in many cases provide conflicting responses to a borrower’s question. Representatives have also failed in many cases to record in Ocwen’s servicing system the nature of the concerns that a borrower has expressed, leading to inaccurate records of the issues raised by the borrower.

In short, Ocwen has been a virtual dumpster fire of broken promises and falsified records. Only time will tell whether the company can survive this latest round of misdeeds.

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