A settlement has been reached between Ocwen Financial Corp. and New York’s banking regulator. The deal calls for the resignation of the company’s chairman of the board.
The Atlanta-based firm has agreed to a settlement with
the New York State Department of Financial Services over its servicing practices and conflicts of interests between affiliates.
The agreement will cost Ocwen $150 million in “hard-dollar” assistance to current and previous distressed New York borrowers.
Individuals who have been foreclosed by Ocwen will receive $10,000 each for a total of $50 million. Excess proceeds will be distributed at a rate of $1,000 per borrower who had a foreclosure initiated by Ocwen but not completed.
Another $100 million will be utilized for housing, foreclosure relief, and community redevelopment programs.
“Today’s agreement will deliver significant assistance to Ocwen homeowners in New York and provide a new path for the company to clean up its operations,” New York Superintendent of Financial Services Benjamin M. Lawsky said in a written statement. “We will continue to closely monitor Ocwen to ensure that it lives up to its obligations under this agreement, and treats struggling homeowners with the respect and dignity they deserve.”
The agreement will
require Ocwen to significantly reform its operations.
The reforms are intended to
address serious servicing misconduct and conflict of interest issues at the company.
An independent auditor will
be on site at Ocwen for up to three years.
Ocwen is prohibited from acquiring additional mortgage servicing rights
until it reaches required benchmarks for its onboarding process and gets approval from the regulator.
Even more significant for Ocwen is the Jan. 16, 2015, resignation of William C. Erbey as executive chairman.
Stepping in as non-executive chairman will be Barry Wish.
“I am grateful to the many associates who have worked alongside me and proud of what we have accomplished,” Erbey said in an announcement. “I am confident about Ocwen’s future under the experienced leadership of the executive team. I have worked with Ron for more than 20 years, and he is uniquely qualified to lead Ocwen going forward.”
In addition, Erbey — who has been at Ocwen for nearly three decades — will resign his chairman positions from affiliates Altisource Portfolio Solutions S.A., Altisource Residential Corp., Altisource Asset Management Corp. and Home Loan Servicing Solutions Ltd.
Erbey will
have no directorial, management, oversight or consulting roles at Ocwen, related entities or at any affiliates and subsidiaries.
Another move being made to reduce conflicts of interest is an expansion of Ocwen’s board of directors by two members who don’t own equity in any affiliates. In addition, executive directors will be limited to two.
“We believe this agreement is in the best interests of our shareholders, employees, borrowers and mortgage investors,” Ocwen Chief Executive Officer Ronald Faris stated in a news release. “We will continue to cooperate with the DFS in the implementation of the terms of this settlement which we believe will allow Ocwen to continue to focus on what we do best — helping homeowners.”
The regulator noted that Ocwen’s recent rapid growth has created a patchwork of legacy servicing systems, and when one is fixed — there are frequently unintended consequences to others.
This causes incorrect or outdated documents to be provided to borrowers.
The state said Ocwen ranks as the fourth-largest residential servicer and the largest subprime mortgage servicer. Data maintained by Mortgage Daily that only considers primary servicing and owned residential assets indicate that Ocwen’s $360.9 total servicing portfolio as of Sept. 30 ranked it as the sixth-largest servicer.
