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Glitches and Complaints Plague Ocwen, other Mortgage Servicers

rep-am.com | October 13, 2014

By E. Scott Reckard

Tyesha Hansborough and her husband, Christley Paton, had paid the property insurance on their Inglewood, Calif., home along with their mortgage, putting the money in escrow like most homeowners.

Trouble is, the couple said, their mortgage servicer -- Ocwen Financial Corp. -- didn't pass that money on to the insurance company for this year's premiums.

They battled unsuccessfully for months to reinstate the lapsed policy without additional costs, the couple said. Ocwen instead imposed so-called force-placed insurance -- expensive coverage that protects the lender's interest, but doesn't shield the homeowners from loss.

"There have been so many home-invasion robberies around here, and if that were to happen to us, we wouldn't be covered," Hansborough said, prompting Paton to add: "I feel like we were robbed -- by Ocwen."

OCWEN IS THE LARGEST of a new breed of mortgage servicers now contracting with banks, which want out of that business after the nationwide foreclosure fiasco. The emerging industry has taken on the servicing rights of more than $1 trillion worth of mortgage loans, according to trade publication Inside Mortgage Finance.

The foreclosure fiasco -- years of mishandled paperwork, robo-signing of house-seizure documents and other snafus -- resulted in the nation's five major banks settling state and federal investigations for $25 billion in 2012.

Regulators also adopted tougher consumer protection laws and required banks to maintain higher capital cushions against losses, making mortgage servicing less profitable for banks.

Now, however, companies such as Ocwen in Atlanta and Nationstar Mortgage Holdings Inc. near Dallas appear overwhelmed with the huge workload, and face some of the same complaints that plagued the major banks.

As specialists in handling delinquent borrowers, non-bank servicers had been thought to be less likely to ignore phone calls, lose paperwork, and mishandle accounts, but consumer advocates and the Consumer Financial Protection Bureau said that often has not been the case.

"Simply put, consumers should not be hit with surprises by those collecting their payments," the consumer bureau's deputy director, Steven Anton akes, told a lenders conference early this year.

The troubles have brought on investigations by state and federal regulators.

OCWEN TOOK OVER bill collection duties for Paton, a Frito-Lay sales representative, and Hansborough, a medical assistant, two years ago from Bank of America Corp., after BofA modified the couple's mortgage to lower their payment. The couple had weathered a bankruptcy in 2004 and a sharp drop in Hansborough's income after the birth of their third child in 2010.

The new servicer paid the first year's insurance premium to the Auto Club of Southern California, but not the second.

Hansborough said she was startled by an Auto Club letter in January saying the bill was overdue. The couple had fallen a month behind on payments to Ocwen, but the company didn't say that was why the premium went unpaid. Instead, Ocwen representatives told her repeatedly that the company had checked with the insurer and that the bill had been paid after all.

"They said, 'Don't worry. It's paid in full,'" she said.

By the time that was proved wrong, the coverage had lapsed.

An Ocwen spokesman, Richard Gillespie, said the Auto Club assured the company in February that someone had paid the bill. Auto Club spokesman Jeffrey Spring denied that.

Though Ocwen and the Auto Club blamed each other, they didn't blame the couple. Still, neither company has acted to reinstate coverage on the original terms.

HANSBOROUGH SAID OCWEN agreed recently to drop a separate charge for private mortgage insurance, a premium the couple had been required to pay because they have no equity in the home. But she still wanted a regular policy.

"It's not our fault," she said. "I'm so disgusted."

Ocwen is represented by an outside public relations agency, Sard Verbinnen, which would not comment on the missed payment, but emphasized that the company goes to great lengths to help troubled borrowers avert foreclosure.

Failing to honor modifications granted by prior servicers and improperly denying modifications were among the allegations last year when Ocwen reached a $2.1 billion settlement with the Consumer Financial Protection Bureau and state regulators over allegations that it abused borrowers.


Back to October 2014 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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