Atlanta-based mortgage servicer Ocwen Financial is a player in hundreds of thousands of homeowner bankruptcies each year, and for a good reason: Ocwen services mortgages worth over $82 billion. Ocwen’s primary clients are the major mortgage lenders: BNY Mellon, Citibank, Deutsche Bank, HSBC, US Bank, and Wells Fargo. These investors are apparently furious with Ocwen for pushing loan modifications and stalling foreclosures.
After a lengthy investigation and analysis by “independent, highly qualified experts” turned up multiple instances of Ocwen’s alleged failure to perform, including use of trust funds to pay borrower relief obligations through modifications on trust-owned mortgages; conflicts of interest with affiliate companies; failure to maintain adequate records and communications with borrowers; and “[e]ngaging in imprudent and wholly improper loan modification, advancing, and advance recovery practices;” among others. The investors believe the trusts lost more than $1 billion as a result.
Ocwen countered by blasting the investors’ law firm for writing its accusation “in an inflammatory tone, with misleading content, and coordinated with media release so as to create wildy false impressions.” Ocwen called the investors’ effort to stop loan modifications and push foreclosures on homeowners “ill-conceived” and state that “(w)hile knee-jerk foreclosures may redound to the special economic interests of your clients, they are not in the best interests of the trusts as a whole, not consistent with industry practice, and therefore prohibited under the servicing agreements.”
What this high level war of the words between the financial titans will mean to homeowners is far from certain. Borrowers in default continue to struggle with unmanageable mortgages for loans made before or just after the recession hit in 2008, and home values have not rebounded sufficiently to support these troubled loans. If the major investors who are pushing back against their servicers for making loan modifications too easy get their way, then we can expect a very big wave of foreclosures in the months and years ahead.