Atlanta-based Ocwen Financial Corp. had a spectacular rise in recent years as it took over collecting home loan payments for struggling banks after the 2008 mortgage meltdown.
Now the little-known company is making a name for itself in less desirable ways.
Ocwen, one of the nation’s largest loan servicers that collect mortgage payments and forward them to lenders, faces a growing pile of accusations that it has misled borrowers, collected inflated and improper fees, and unfairly pushed homeowners into foreclosure.
Such cases matter even to homeowners not directly affected. The foreclosure tidal wave of 2009-2012 dragged down home values across metro Atlanta and elsewhere, a swoon still felt even as the housing market recovers.
Ocwen, which did not make executives available to be interviewed, has acknowledged problems, saying some were limited in scope while others stemmed from faulty procedures that were overwhelmed by a flood of troubled mortgages. It has pledged to work with regulators to fix them.
The company, which handled more than a tenth of the nation’s $1 trillion in delinquent loans last year, according to TheStreet.com, says it works hard to help struggling homeowners avoid foreclosure.
“They really, really do try to keep people from being foreclosed on,” said Margaret Popper, a New York public relation s representative for the company.
That’s not how Lewis Corley, who lost his Duluth home after a frustrating five-year battle with Ocwen, sees it.
“They knew exactly what they were doing. They were going to hornswoggle us,” said Corley, who sued the company in Gwinnett Superior Court in 2011 but lost last year after going without a lawyer for much of the case. He said Ocwen initially ignored a previous agreement to lower mortgage payments, rejected some payments, couldn’t be reached by telephone, and misdated a letter offering a loan modification, making it appear that their payments were further behind than they were.
In June, Corley, 57, and his wife and two teen-age children were evicted from the four-bedroom home his father had built.
Popper said the Corleys had plenty of chances to catch up on their loan payments and avoid foreclosure. “This really is a case where Ocwen bent over backwards,” she said.
Instead of throwing struggling homeowners like Corley a lifeline, Ocwen and other loan servicers, which don’t own the loans, pushed borrowers even deeper underwater after the financial crisis, according to lawyers and regulators who have challenged their practices in court.
Ocwen is under investigation by New York’s financial regulator for allegedly sending thousands of back-dated letters that caused homeowners to think they had missed opportunities to lower their loan payments and avoid foreclosure. The agency is also looking into allegations that Ocwen tacked high-cost insurance policies from a sister company onto some homeowners’ mortgage payments.
The firms say they have since halted the practice.
In an open letter to homeowners in late October, Ocwen CEO Ron Faris apologized for misdated letters, saying, “Having potentially caused inadvertent harm to struggling borrowers is particularly painful to us because we work so hard to help them keep their homes and improve their financial situations.”
New York’s investigation comes on top of a settlement late last year after the federal Consumer Financial Protection Bureau and attorneys general in 49 states, including Georgia, accused Ocwen of “systematic misconduct at every stage of the mortgage servicing process.” Ocwen agreed to provide more than $2 billion of loan relief or cash payments to affected borrowers.
Stock nosedive
The firm, whose headquarters is near Perimeter Mall, also faces lawsuits from scores of homeowners in Georgia.
Ocwen’s once-soaring stock has declined by almost two-thirds over the past 14 months, wiping out most of a roughly 300 percent run-up since 2012.
That’s whittled hundreds of millions from the wealth of Ocwen’s chairman, Bill Erbey. He still has a net worth of about $1.8 billion from his holdings in Ocwen and four other related, publicly-traded companies, according to Forbes magazine.
In a move that slashed Ocwen’s corporate taxes, the former Atlantan moved himself and Ocwen’s executive offices to St. Croix in 2012, according to the magazine. Ocwen picked up the $6.5 million tab for buying his Atlanta mansion, according to a company filing. The firm’s main office remains here, though more than half of its 10,100 employees work in call centers in India.
Under Erbey, the former president of General Electric’s mortgage lending businesses, Ocwen was a small player for most of its 26 year history. The company specialized in handling loan payments, foreclosures and other chores on troubled loans for big lenders.
Erbey’s companies took off as loans soured and banks sought third-party servicers. Revenue grew almost six-fold from 2010 to 2013, topping $2 billion. The stock price of an Erbey spin-off that handles title insurance, Altisource Asset Management, jumped 75-fold in a little over a year, to more than $1,100 a share in early 2014.
Complaints multiply
But by then, federal and state regulators were investigating homeowner complaints. Investigators and lawyers alleged that Ocwen shelved homeowners’ applications for federal relief programs or ignored earlier agreements with previous loan servicers.
In many cases, lawyers and regulators allege, Ocwen erroneously pushed borrowers into default by telling them they had to halt payments to apply for modifications, and by tacking on huge insurance bills and other fees.
Once homeowners are months behind on their payments, it can be a short trip to non-judicial foreclosure in Georgia. It’s also an uphill battle to get most judges to look at whether the loan servicers’ actions landed them in deeper trouble, said Lawrenceville attorney Bill Smith, who eventually took on the Corleys’ case.
“In Georgia, once you’re in foreclosure, they can pretty much stick a fork in you. You’re done,” Smith said.
Court records and interviews indicate that the Corleys’ efforts to save their home quickly derailed in 2009 after Ocwen took over servicing their $320,000 loan.
As sales dried up at his small sign-making business during the deepening recession, Corley, a former marketing executive, said he began having trouble keeping up with his $2,205 monthly mortgage payments. The family was also struggling with more than $60,000 in medical bills after an aneurysm that year hospitalized Corley for six weeks.
Under the federal relief program, the Corley’s previous mortgage servicer agreed to permanently lower their monthly payments to $1,553 if they met a three-month trial period. After the Corleys had sent in the first two payments, that servicer collapsed. Ocwen took over the loan and, unaware of the modification deal, returned their third $1,553 check, saying it was too small to cover past-due payments on the mortgage. Corley said he spent days trying to get through to Ocwen by phone to clear things up, without success.
‘Messed up everything’
“The rejection of that third check messed up everything,” said Smith.
The family was even further behind when, in a Nov. 5 letter, Corley said Ocwen offered its own modification plan to lower their payments to $1,468 — starting on Oct. 1.
Corley said he thought the retroactive date seemed odd, but signed the agreement and sent in a check for $1,468. “Cool, great, we really are about to get back on track,” Corley said he thought at the time.
Over the next 11 months the family made nine more payments under the modified plan, according to court records, but in late 2010 Ocwen returned the family’s last check and filed a foreclosure notice. According to court records, the family had made 14 monthly payments in the 15 months since the original servicer modified the loan, but Ocwen had rejected two of them.
A month later, the Corleys filed bankruptcy.
Ocwen foreclosed in 2011, and Corley challenged it in Gwinnett Superior Court. But Judge Robert Walker Jr., sided with Ocwen. The judge said the family was behind “almost immediately” after Ocwen’s October 2009, loan modification, but it’s unclear if he was aware that the offer was had been back-dated by more than a month.
Judge Walker also said the family had “ample opportunity” to avoid foreclosure.
