By Marcy Gordon
WASHINGTON — Ocwen Financial Corp. will reduce struggling borrowers’ loan balances by $2 billion in an agreement with federal regulators and 49 states over foreclosure abuses.
The Consumer Financial Protection Bureau and state attorneys general announced the deal Thursday with the Atlanta-based company, one of the largest U.S. mortgage servicers. The regulators said Ocwen pushed borrowers into foreclosure through illegal actions, such as failing to promptly and accurately credit mortgage payments.
The company also miscalculated interest rates and charged borrowers improper fees, the regulators said.
“We believe that Ocwen violated federal consumer financial laws at every stage of the mortgage servicing process,” CFPB Director Richard Cordray said in a conference call with reporters. “We have concluded that Ocwen made troubled borrowers even more vulnerable to foreclosure.”
Under the agreement, Ocwen also will refund a combined $125 million to about 185,000 borrowers who had been foreclosed upon from 2009 through 2012. It also agreed to change the way it manages mortgages. The company must stop “robo-signing” of documents, the practice of automatically signing off on foreclosures without a proper review.
The agreement must be approved by a federal court in Washington.
The $2.1 billion settlement includes Wisconsin, Washington, D.C., and 48 other states, according to a news release. Wisconsin borrowers could receive more than $13 million as part of the deal. About $12 million of Wisconsin’s share will be given to borrowers as reductions in mortgage principals. The remaining $1 million will be given as cash payments to borrowers on as many as 2,484 eligible loans.
Representatives of Ocwen didn’t immediately return a telephone call seeking comment.
Ocwen is the fourth-largest mortgage servicer in the country and the biggest that isn’t a bank.
Federal and state regulators have signed agreements with a number of large banks and mortgage processing companies over foreclosure abuses.
Ocwen’s compliance with the settlement will be overseen by Joseph A. Smith Jr., the monitor for the $25 billion settlement reached in February 2012 between the federal government and the states and five major banks – Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.
The Daily Reporter’s Beth Kevit also contributed to this report.