A settlement between Ocwen Loan Servicing and the CFPB and other state regulators was announced today.
The court order still needs to be approved by a judge, but calls for $2 billion in principal reductions for homeowners and another $125 million in refunds to homeowners who already went through foreclosure. This include homeowners whose loans are serviced by Ocwen, as well as those who were transferred over from Litton Loan Servicing and Homeward Residential Holdings. (More info on the fact sheet here)
Reports earlier this week (U.S. preparing civil charges against Citigroup, Merrill Lynch) indicate that civil fraud charges are likely forthcoming for Citigroup and Merryl Lynch (related to mortgage securities).
The California Reinvestment Coalition has advocated on behalf of homeowners who are dealing with the many loan servicing problems listed today in the CFPB materials about Ocwen, including robo-signing, illegal foreclosures, illegal fees being charged, lost paperwork, inappropriate loan modification denials, not honoring trial modifications that were entered into prior to a loan being transferred, and more. Our survey of over 80 housing counselors and nonprofit attorneys in April 2013 found many banks are not in compliance with the California Homeowner Bill of Rights or loan servicing standards required under the National Mortgage Settlement.
In light of the JPMorgan Chase settlement announced last month, this announcement about Ocwen today, and the strong possibility of future settlements, CRC members and allies signed onto a statement to federal regulators and prosecutors, with suggestions on how to structure future settlements so that homeowners benefit from them.
These suggestions are based on “lessons learned” from the National Mortgage Settlement, Independent Foreclosure Review, and experiences housing counselors and nonprofit attorneys have had in trying to help homeowners stay in their homes.
1. Relief commensurate with harm caused. Financial institutions have yet to be forced to pay for the total harm caused by predatory mortgage lending and improper foreclosure practices that have drained wealth from working families and their neighborhoods.
2. A priority on keeping people in their homes and first lien principal reduction.
3. Support for housing counselors and legal service lawyers. These groups, whose sole focus is on their clients, are the only real competition for the steady stream of loan modification scam artists who gladly charge families thousands of dollars while doing nothing to save their homes.
4. Best practices and strong standards going forward. Stronger servicing standards have been put in place by the California Homeowner Bill of Rights (HBOR), the National Mortgage Settlement, and the soon to be effective rules of the Consumer Financial Protection Bureau. But an April 2013 CRC survey of over 80 housing counselors in California found that large servicers were routinely violating key provisions of HBOR and NMS. The NMS Monitor found some of the same issues; almost half of the nearly 90,000 complaints made to his office were related to problems with a bank not providing a responsive, capable Single-Point-of-Contact or apparent dual track violations. Besides compensating victims, settlements must end harmful practices.
5. Support for affordable housing. The foreclosure crisis has not only harmed homeowners, it has exacerbated an already desperate affordable housing crisis. Families displaced from their homes by foreclosure are now competing for housing with tenants in a heated rental housing market. These families are also competing with Wall Street investors who pay all-cash for homes, beating out first-time homebuyers and then renting the houses back to some of the same people originally displaced by the Wall Street-generated economic crisis.
6. Transparency and data reporting to ensure relief is distributed fairly. Most of the recent settlement agreements have for the most part allowed the offending parties to determine how to distribute relief. This has contributed to a feeling that the hardest hit communities have been ignored. The California Attorney General did well to negotiate a separate California agreement as part of the NMS that created incentives for servicers to provide relief in hard hit counties. But even this provision didn’t ensure that relief reached the hardest hit communities. And the National Mortgage Settlement agreement did not require that servicers report the race, ethnicity, gender and income of borrowers and neighborhoods where relief was provided. All future agreements must require this level of transparency to ensure fair housing and fair lending laws are honored.
7. Strong enforcement and monitoring. A settlement agreement is not worth the paper it is written on if the terms are not clear and meaningful, and if the oversight and enforcement is lax to the point of inviting banks to ignore their obligations.
For more information about today’s announcement with Ocwen:
UPDATE: CA homeowners expected to receive $268 million in principal reductions, $23 million in cash payments: