Ocwen Accused of Backdating Borrower Letters

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Ocwen Financial Corp. has been accused of serious issues in its servicing practices including potentially backdating hundreds of thousands of borrower letters.

At issue are loan modification denial letters that were allegedly dated more than 30 days prior to the date they were mailed.

Ocwen spokesman David Miller of Sard Verbinnen & Co. didn’t immediately respond to a request for a statement.

Ocwen provided the following statement after the publication of this story:

We deeply regret the inconvenience to borrowers who received improperly dated letters as a result of errors in our correspondence systems. As always, our goal is to avoid foreclosure. In the case of the 283 borrowers in New York who received letters with incorrect dates, 281 are currently borrowers with us. We are continuing to review the rest of the cases.

We believe that we have resolved the letter dating issues that we have identified to date, and we continue our investigation as to whether there are additional letter dating issues that need to be resolved. We are working with the monitor on these issues.

We are working with and fully cooperating with DFS and monitors to address their concerns.

A second statement was released by Ocwen correcting its first statement:

Ocwen wishes to correct its statement in a press release earlier today that 283 borrowers in New York received letters with incorrect dates. Ocwen is aware of additional borrowers in New York who received letters with incorrect dates but does not yet know how many such letters there were. Ocwen is continuing its investigation into these matters. We are working with and fully cooperating with DFS and the Monitor to address their concerns.



But a letter from New York Department of Financial Services Superintendent Benjamin M. Lawsky claims that such discrepancies were uncovered in the course of a servicing practices review.

It started in June, when Ocwen was asked to explain why a modification denial letter dated June 14, 2012, was not sent until the 25th of the following month.

Ocwen, which had a total primary servicing portfolio of $381 billion as of June 30, reportedly represented to the state that the issue was isolated to letters of a specific type, around 6,100 letters were involved, the issue was discovered around April or May of this year, and a systems issue was resolved in May.

“Each of these representations turned out to be false,” the letter stated — adding that Ocwen eventually fessed up.

Further investigation quickly led to the discovery of nearly another thousand bad letters.

“Ocwen has obligations under both New York and federal law, as well as various agreements with state and federal authorities, regarding how quickly it must communicate with borrowers” applying for modifications or facing foreclosure.

Potentially hundreds of thousands of letters were backdated, “likely causing … significant harm” to borrowers. The practice was allegedly so pervasive that it might be impossible to determine the scope of non-compliance.

Many borrowers allegedly received letters that were dated 30 days earlier, leaving them unable to appeal the denial within the 30 days allowed.

Similar concerns were raised about borrowers who received foreclosure letters where the date to cure had already elapsed.

Lawsky claims that when a compliance vice president was alerted to the backdating practice, the Atlanta-based company ignored the problem for five months. Even then didn’t adequately investigate the matter — which remains unresolved.

The regulator called Ocwen’s corporate culture “troubling.”

“If the department concludes that it cannot trust Ocwen’s systems and processes, then it cannot trust Ocwen is complying with the law,” Lawsky wrote. “If Ocwen cannot demonstrate immediately that it is capable of properly servicing borrowers’ needs, the department intends to take whatever action is necessary to ensure that borrowers are protected.”

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