Sacramento area borrowers could receive nearly $20 million in financial assistance from Ocwen Financial Corp. under a $2.1 billion settlement announced Thursday between the mortgage servicing giant, the federal government and 49 states.
All told, California borrowers could receive as much as $268 million from Ocwen, the nation’s fourth largest mortgage servicer, which specializes in subprime and delinquent loans.
Assistance will consist mainly of mortgage principal reductions, though some cash payments are also included.
“This settlement will help homeowners who’ve been misled while trying to modify their Ocwen mortgages,” California Attorney General Kamala Harris said in a press release.
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The AG’s office said Sacramento County borrowers could receive an estimated $13.5 million under the agreement. Placer County borrowers are slated to get $3.5 million; El Dorado borrowers, $1.8 million, and Yolo borrowers, $1.1 million, it said.
The deal is the latest in a series of massive settlements negotiated between federal and state authorities, including Harris, and national lenders and loan servicers who participated in the nation’s housing meltdown.
Ocwen, based in Atlanta, is one of the nation’s largest mortgage servicers. Harris’ office said the settlement resolves allegations that Ocwen engaged in “robo-signing” foreclosures without adequate review and “dual-tracking” customers by foreclosing on them even as the same customers were working with Ocwen to modify their loans.
Federal regulators with the Consumer Financial Protection Bureau said that Ocwen also failed to promptly credit mortgage payments, miscalculated interest rates and charged borrowers improper fees.
“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 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 agreement must be approved by a federal court in Washington.
The loan servicer said in a written statement Thursday that the agreement was “in alignment with the same ultimate goals that we share with the regulators – to prevent foreclosures and help struggling families keep their homes.”
Ocwen is the biggest mortgage servicer in the country that isn’t a bank. Its executive chairman, William Erbey, was named this year to Forbes Magazine’s list of the 400 richest Americans, with an estimated fortune of $2.3 billion.
In 2010, Ocwen laid off 900 employees in North Highlands after buying subprime lender HomeEq and closing its massive, windowless Watt Avenue servicing center. Many of the jobs were expected to be outsourced to India and Uruguay.
Servicing companies collect payments from borrowers and handle customer services, loan modifications and foreclosures.
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, the states and five major banks – Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.
Last month, the U.S. Justice Department announced a $13 billion settlement with JPMorgan Chase to resolve allegations that the bank sold financially toxic bundles of mortgage-backed securities to unsuspecting investors, including California’s retirement systems for public employees and teachers. The settlement included $4 billion in consumer relief.
The settlements are part of the continuing fallout from the housing crisis that struck starting in 2007, as home values plunged and millions of borrowers defaulted on their mortgages.
The CFPB, 49 states and the District of Columbia signed the agreement with Ocwen. Oklahoma is the only state that isn’t participating.
The largest share of the mortgage relief, an estimated $342 million, is expected to go to Florida. The state’s attorney general, Pam Bondi, said during the conference call that Florida now has the highest foreclosure rate in the U.S.
The rate of foreclosures in many parts of California, including Sacramento, have fallen dramatically as home values rose in the past year.