Perhaps the most dramatic developments in Ocwen Financial Corp.’s long and colorful history came Thursday afternoon, when state and federal regulators unleashed an onslaught of enforcement actions.
The bipartisan barrage paints Ocwen as so incompetent that it can’t properly credit borrowers’ loan payments or keep track of their escrow accounts for property taxes and homeowners insurance.
Ocwen lashed back, saying state and federal regulators are simply wrong. But the company, a part of West Palm Beach’s corporate landscape for nearly three decades, consistently has made headlines for all the wrong reasons.
Ocwen has racked up thousands of consumer complaints and has been hit with state and federal regulatory enforcement actions that run into the billions. The company routinely ranks dead last in JDPower’s ratings of mortgage servicers, industry jargon for companies that collect homeowners’ loan payments.
In a bit of office intrigue, two former female employees once won $1 million settlements stemming from a male coworker secretly videotaping them in the company’s West Palm Beach mailroom and restroom. And in an eyebrow-raising maneuver, Ocwen invited criticism when it bought its billionaire chairman’s mansion for millions more than the home was worth, then sold at a loss.
Then came Thursday’s regulatory actions, which sent shares of Ocwen (NYSE: OCN) plummeting more than 50 percent. On Thursday morning, Ocwen’s market value was $682 million. At the close of trading Friday, the company was worth just $301 million.
In one of the actions released Thursday, North Carolina’s banking examiner led a 20-state cease-and-desist order that barred Ocwen from taking on new business. In the order, North Carolina Commissioner of Banks Ray Grace said he and other state regulators insisted that Ocwen reconcile escrow accounts for 2.5 million homeowners.
Ocwen’s response? Doing so would cost $1.5 billion. But Ocwen did offer to reconcile 457 accounts, a fraction of a fraction of a percent of the loans it services.
“Ocwen has consistently failed to correct deficient business practices that cause harm to borrowers,” Grace said in a statement. “We cannot allow this to continue.”
Federal regulators were equally incredulous. A suit filed by the federal Consumer Financial Protection Bureau said that in the past two years, more than 300,000 borrowers have filed more than 580,000 complaints and written notices about mistakes made by Ocwen.
The CFPB routinely is pilloried by conservatives and the financial industry for being too hard on banks. But on Thursday, Pam Bondi, Florida’s Republican attorney general, filed her own suit against Ocwen that was similar to the CFPB’s action.
Ocwen — a name fashioned by spelling “new co” backwards — had 9,700 employees at the end of 2016, most of them in India and the Philippines. The company has about 300 workers at its West Palm Beach headquarters, according to the Business Development Board of Palm Beach County.
Ocwen has weathered regulatory actions in the past, in part by agreeing to cut ties with Bill Erbey, the former Palm Beach resident and longtime chairman of the company. Erbey remains Ocwen’s largest shareholder, with 21 million shares.
In late 2013, federal and state regulators hit Ocwen with a $2.1 billion settlement for cheating homeowners. But investors shrugged off the news. Ocwen told the Securities and Exchange Commission its actual cost to settle the regulatory action would be about $67 million.
Some wonder if the company can weather its latest setback. In 2014, 2015 and 2016, the company reported a cumulative net loss of $920 million. Revenue declined in 2015 and 2016.
“I don’t know how they get out of their present morass,” said Richard Greenfield, an attorney who represented Ocwen investors in a suit that alleged conflict of interest by Erbey. “Their basic business at this point is not doing very well.”
Others argue that Ocwen will survive.
“We do not believe that the CFPB or the states want to put Ocwen out of business,” Jaret Seiberg, an analyst at Cowen and Co., wrote in a commentary. “Forcing the movement of servicing for 1.3 million mortgages is fraught with risk for the borrowers as payments can get misplaced, data can be lost, and modification efforts can be derailed. The CFPB, in our view, recognizes this threat.”
Launched in 1988, Ocwen long has gotten attention for all manner of unseemly goings-on. In one episode, police in 1999 arrested an Ocwen employee and found on his video camera footage from a hidden camera placed under a desk in the company’s West Palm Beach mailroom.
Two of the women who appeared in the video sued Ocwen, saying they were harassed at work even after the cameraman was fired. In 2005 they won $1 million settlements after a jury trial in Palm Beach County Circuit Court. They said that in addition to the under-the-desk camera, they also saw a man’s hand moving ceiling tiles in a women’s bathroom. Their complaints to management went unheeded, the women said.
In 2008, a Government Accountability Office report said Ocwen, as the property manager for thousands of foreclosed homes owned by the U.S. Department of Veterans Affairs, neglected maintenance and charged taxpayers for repairs that weren’t made.
All along, consumers complained en masse, regaling state and federal regulators with tales of lost payments, long hold times and botched escrow accounts. A common theme was that Ocwen seemed eager to push borrowers into foreclosure.
And JDPower routinely ranks Ocwen dead last or next to last in its ratings of customer satisfaction with mortgage servicers.
If the company was sharp-elbowed with customers, it took a notably gentler approach with Erbey. In a generous perk , Ocwen in 2012 bought Erbey’s Atlanta mansion for $2 million more than he paid at the peak of the housing market. Ocwen paid $6.48 million for Erbey’s house in so he could move to the tax haven of St. Croix.
“It is really ironic that a company that is a subprime mortgage processor would give a sweet deal to its executive chairman that its own customers couldn’t get,” Vineeta Anand, chief research analyst at the AFL-CIO’s Office of Investment, said at the time.
Ocwen put the mansion on the market for less than it paid. Ocwen finally unloaded the house in 2016 for $3.6 million — a 44 percent haircut.