Ocwen Executes Major Compliance Overhaul

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MORTGAGE EXPERT
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The executive who oversees compliance at Ocwen Financial Corp. has had his work cut out for him since taking the job nearly two years ago. In an interview, he talked about overhauling compliance.

Before being named chief compliance officer of the West Palm Beach, Florida-based firm in April 2015, Michael Hollerich had worked at organizations like HSBC, ABN AMRO Bank and PricewaterhouseCoopers.

His arrival followed a consent order with California’s Department of Business Oversight and a settlement with the New York’s Department of Financial Services that had former chairman William Erbey resigning.

Since he took the post, Ocwen has faced additional legal actions — most recently a $225 million settlement with California.

Hollerich sat down to talk with Mortgage Daily at last week’s Mortgage Bankers Association servicing conference in Grapevine, Texas, about how he has led a change in culture at the company that has it much better prepared to avoid such incidents going forward.

He noted that the process began in 2013 when Ocwen first hired a chief risk officer. The effort was stepped up in late 2014 with
an increased focus on compliance. Much of the control work was being done by the compliance department, itself, up to that point, and an effort was made to embed those functions in the work of non-compliance staff.

“The ownership of some of the risk and the control
was actually in the compliance department [which] was performing those types of activities,” Hollerich said. “And that’s not really the model that you want to have and what’s expected with the regulators.”

So Ocwen sought out someone with more of a broader financial services background to implement more of a best-practice, proactive compliance management system when they hired him.

“That was really the
big culture change that I sought when I came into the organization that needed to occur is the transfer of risk ownership from the compliance function into the business,” he explained.

At the time he started, there was
much change occurring, uncertainty about regulatory expectations and multiple examinations taking place. He said that the exams started off poorly and deteriorated after that.

Hollerich’s first major project was
to stabilize the unprecedented regulatory scrutiny that Ocwen faced and build the credibility of the compliance department.

The first step was to
look at the examination management process, take control of it and stabilize it.

Next was bringing the rest of the compliance organization back into a centralized corporate function.
This included an assessment of skill sets and training of compliance officers.

The compliance division needed to build credibility among the rest of the company and become a trusted advisor.

This first phase took place in the second-half 2015.

Next up was to document the compliance program, put a plan in place for 2016 and execute against that plan.

By that point, all of the policies and procedures for the entire organization had been
consolidated into a single system with a single point of contact, and the review process was all automated.

While only a handful of people used to interact with examiners,
now a broader group goes in front of them. Regulators no longer feel they’re dealing with a buffer.

Compliance staffing at the company has grown from the mid-50s when he arrived to nearly 200 people.

In addition, the compliance training has been greatly enhanced. Top-performing employees who are already proficient in a given area aren’t required to complete training modules about those areas and are sometimes used to help train other employees about those subjects.

Hollerich said that Ocwen has overhauled its customer correspondence letters. The number of letter templates has been cut from somewhere near a thousand to just around 200 now. The letters prompt users to utilize the correct inputs.

Another move was to bring in a number of third-party consultants with industry expertise for targeted reviews. These consultants have helped Ocwen get more in line with industry best practices. In addition, at a cost of around $1 million, over six months they were able to help ensure that Ocwen’s current system would have helped it avoid past regulatory problems.

Hollerich indicated that Ocwen now welcomes regulatory examinations and sees them as an opportunity to show off how well things are running.

“We want them to come in, experience Ocwen, experience what our new culture is,” he said. “And the ones that have come and performed on-site examinations over the last 12, 14 months have … seen something completely different than either what their perception was or what they saw the last time they were there.”

Mortgage Expert

Mortgage Daily Staff

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