A year-long analysis of Ocwen Financial Corp.'s operations conducted by independent third-party global financial advisory firm Duff & Phelps concluded that accusations from investors that Ocwen (as Master Servicer) failed to collect on $82 billion worth of RMBS Trusts were "baseless," according to an announcement from Ocwen on Wednesday.
Duff & Phelps conducted a review of two items: Gibbs & Bruns' Notice of Nonperformance filed on January 23, 2015, on behalf of institutional investors, and Ocwen's consent orders with both the Consumer Financial Protection Bureau and the New York Department of Financial Services.
The year-long analysis of Ocwen's servicing operations, accounting, loan modifications, borrower compliance, and operations and governing practices involved examining thousands of servicing files, data points, and invoices, and a comprehensive review of Ocwen's systems and records, according to Ocwen.
“We are pleased with the results of Duff & Phelps’ year-long independent review. We continue to focus on servicing loans in the best interest of loan investors and on being a leader in helping homeowners,” said Ron Faris, President and CEO of Ocwen.
According to Ocwen, the Dunn & Phelps investigation:
- Did not find any evidence that Ocwen failed to account for P&I payments to the Master Serviced trusts.
- Did not find any evidence that Ocwen charged the Master Serviced Trusts for any undisclosed or ‘mysterious’ expenses.
- Did not find evidence that Ocwen made negative NPV modifications in order to maximize servicing fees and prematurely recoup advances.
- Did not find evidence that Ocwen engaged in modifications in order to prematurely recover advances at the time of modification.
- Did not find evidence to conclude generally that Ocwen made extreme and imprudent modifications.
- Found that Ocwen applied the Stop Advance Tag on loans consistently with Ocwen’s Stop Advance model and not with regard to whether or not the loan had been modified or whether the borrower defaulted immediately after modification.
- Did not find evidence that Ocwen failed to comply with the SCRA requirements for borrowers on active military duty.
- Did not find evidence sufficient to conclude generally that Ocwen engaged in deceptive, misleading, or inadequate practices with regard to newly boarded loans.
- Did not find evidence sufficient to conclude generally that Ocwen improperly imposed lender-placed insurance.
- Did not find evidence to conclude generally that the Master Serviced Trusts were charged higher fees in connection with sales of REO properties involving Hubzu auctions or REALHome brokers as opposed to traditional sales and/or unrelated brokers.
On January 23, 2015, shareholders with 25 percent of the voting rights in 119 residential mortgage-backed securities trusts with an original balance of $82 billion filed a formal Notice of Nonperformance against BNY Mellon, Citibank, Deutsche Bank, HSBC, US Bank, and Wells Fargo, as Trustees, accusing Ocwen of failing to properly collect payments on the trusts. The investors claimed losses of more than $1 billion as a result.
In a public release, law firm Gibbs & Bruns LLP said a "lengthy investigation and analysis by independent, highly qualified experts" turned up multiple instances of Ocwen's 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.
Ocwen fired back a few days later, accusing the investors of pushing borrowers into foreclosure; Ocwen attorney Richard A. Jacobsen said that the Gibbs & Bruns letter was "drafted in an inflammatory tone, with misleading content, and coordinated with media release so as to create wildy false impressions."
In December 2013, the Consumer Financial Protection Bureau ordered Ocwen to pay $2 billion for alleged servicing violations. Then in December 2014, Ocwen settled with the New York Department of Financial Services for $150 million after a two-plus year investigation by the New York DFS which found that Ocwen had sent backdated foreclosure notices to hundreds of borrowers. Ocwen blamed the erroneously dated material on computer errors.