Beruflich Dokumente
Kultur Dokumente
Document #1532155
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Document #1532155
Filed: 01/15/2015
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(Page 79 of Total)
Document #1532155
Filed: 01/15/2015
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Ocwen has grown more than ten-fold in the last several years. Beginning in 2009,
Ocwen significantly expanded its servicing operations through the acquisition of several major
servicers of home loans, as well as the acquisition of MSRs for hundreds of billions of dollars in
UPB. From the end of 2009 to the end of 2013, Ocwens servicing portfolio grew from 351,595
residential loans with an aggregate UPB of $50 billion to 2,861,918 residential loans with an
aggregate UPB of $464.7 billion.
(Page 80 of Total)
2.
Document #1532155
Filed: 01/15/2015
Page 3 of 22
Ocwen, as well as examinations of Litton and Homeward, the entities ultimately acquired by
Ocwen. The examination of Ocwen identified, among other things, deficiencies in Ocwens
servicing platform and loss mitigation infrastructure, including (a) robo-signing, (b) inaccurate
affidavits and failure to properly validate document execution processes, (c) missing
documentation, (d) wrongful foreclosure, (e) failure to properly maintain books and records, and
(f) initiation of foreclosure actions without proper legal standing.
3.
weaknesses, and violations of laws and regulations relating to, among other things, foreclosure
governance, implementation of modification programs, record keeping, required notifications,
and the charging of unallowable fees.
4.
Litton, members of Littons information technology staff falsified documents provided to the
Department during the review of Littons information technology infrastructure.
5.
examination findings for both Ocwen and Litton, the Department sought to ensure that Ocwen
had sufficient capacity to properly acquire and manage a significant portfolio of distressed loans,
including the ability to effectively manage the increased volume and comply with requirements
under the federal Home Affordable Modification Program, internal loss mitigation policies and
procedures, and laws and regulations governing mortgage loan servicing and foreclosure
activities.
6.
To that end, Ocwen and the Department entered into an Agreement on Mortgage
Servicing Practices on September 1, 2011, which required Ocwen to: (a) establish and maintain
(Page 81 of Total)
Document #1532155
Filed: 01/15/2015
Page 4 of 22
sufficient capacity to properly acquire and manage its significant portfolio of distressed loans to
ensure a smooth borrower transition; (b) engage in sound document execution and retention
practices to ensure that mortgage files are accurate, complete, and reliable; and (c) implement a
system of robust internal controls and oversight with respect to mortgage servicing practices
performed by its staff and third party vendors to prevent improper foreclosures and maximize
struggling borrowers opportunities to keep their homes.
7.
assess its compliance with the 2011 Agreement and Part 419 of the Superintendents
Regulations, which governs business conduct rules for servicers. The examination identified
gaps in the servicing records of certain loans that indicated repeated non-compliance by Ocwen,
including: (a) failing to send borrowers a 90-day notice prior to commencing a foreclosure
action as required under New York Real Property Actions and Proceedings Law (RPAPL)
1304, (b) commencing foreclosure actions on subprime loans without affirmatively alleging in
the complaint that Ocwen had standing to bring the foreclosure action as required by RPAPL
1302, and (c) commencing foreclosure actions without sufficient documentation of its standing
to do so.
8.
The targeted examination also identified instances that indicated widespread non-
compliance with the 2011 Agreement including: (a) failing to provide borrowers with the direct
contact information for their designated single point of contact, a customer care representative
whose role is to understand each assigned borrowers circumstances and history to ensure that
the borrower receives efficient and consistent customer care; (b) dual-tracking; (c) failing to
conduct an independent review of loan modification denials; (d) failing to demonstrate adoption
of policies and procedures to effectively track sanctioned third-party vendors, including local
(Page 82 of Total)
Document #1532155
Filed: 01/15/2015
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the Department, which required Ocwen to retain an independent compliance monitor for two
years. The Consent Order mandated that the Compliance Monitor, which would report directly
to the Department, would conduct a comprehensive review . . . of Ocwens servicing
operations, including its compliance program and operational policies and procedures. The
review would, at a minimum, consider (a) the adequacy of Ocwens staffing levels, (b) the
robustness of Ocwens established policies and procedures, (c) the fairness of servicing fees and
foreclosure charges, (d) the accuracy of borrower account information, (e) Ocwens compliance
with federal and state law, (f) borrower complaints and recordings of customer service, and (g)
Ocwens compliance with the Agreement.
10.
11.
significant violations of the 2011 Agreement, as well as New York State laws and regulations.
12.
For example, a limited review by the Compliance Monitor of 478 New York loans
that Ocwen had foreclosed upon revealed 1,358 violations of Ocwens legal obligations, or about
three violations per foreclosed loan. These violations included:
failing to confirm that it had the right to foreclose before initiating foreclosure
proceedings;
failing to ensure that its statements to the court in foreclosure proceedings were
correct;
(Page 83 of Total)
Document #1532155
Filed: 01/15/2015
Page 6 of 22
The Department and the Compliance Monitor also identified, among other things,
(a) inadequate and ineffective information technology systems and personnel, and (b) widespread
conflicts of interest with related parties.
Inadequate and Ineffective Information Technology Systems and Personnel
14.
In the course of its review, the Compliance Monitor determined that Ocwens
information technology systems are a patchwork of legacy systems and systems inherited from
acquired companies, many of which are incompatible. A frequent occurrence is that a fix to one
system creates unintended consequences in other systems. As a result, Ocwen regularly gives
borrowers incorrect or outdated information, sends borrowers backdated letters, unreliably tracks
data for investors, and maintains inaccurate records. There are insufficient controls in place
either manual or automatedto catch all of these errors and resolve them.
15.
For example, Ocwens systems have been backdating letters for years. In many
cases, borrowers received a letter denying a mortgage loan modification, and the letter was dated
more than 30 days prior to the date that Ocwen mailed the letter. These borrowers were given 30
days from the date of the denial letter to appeal that denial, but those 30 days had already elapsed
by the time they received the backdated letter. In other cases, Ocwens systems show that
borrowers facing foreclosure received letters with a date by which to cure their default and avoid
foreclosureand the cure date was months prior to receipt of the letter. Ocwens processes
failed to identify and remedy these errors.
(Page 84 of Total)
16.
Document #1532155
Filed: 01/15/2015
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backdating issue when an employee questioned the accuracy of Ocwens letter dating processes
and alerted the companys Vice President of Compliance. Ocwen ignored the issue for five
months until the same employee raised it again. While Ocwen then began efforts to address the
backdating issue, its investigation was incomplete and Ocwen has not fully resolved the issue to
date, more than a year after its initial discovery.
17.
Ocwen uses comment codes entered either manually or automatically to service its portfolio;
each code initiates a process, such as sending a delinquency letter to a borrower, or referring a
loan to foreclosure counsel. With Ocwens rapid growth and acquisitions of other servicers, the
number of Ocwens comment codes has ballooned to more than 8,400 such codes. Often, due to
insufficient integration following acquisitions of other servicers, there are duplicate codes that
perform the same function. The result is an unnecessarily complex system of comment codes,
including, for example, 50 different codes for the single function of assigning a struggling
borrower a designated customer care representative.
18.
Despite these issues, Ocwen continues to rely on those systems to service its
portfolio of distressed loans. Ocwens reliance on technology has led it to employ fewer trained
personnel than its competitors. For example, Ocwens Chief Financial Officer recently
acknowledged, in reference to its offshore customer care personnel, that Ocwen is simply
training people to read the scripts and the dialogue engines with feeling. Ocwens policy is to
require customer support staff to follow the scripts closely, and Ocwen penalizes and has
terminated customer support staff who fail to follow the scripts that appear on their computer
screens. In some cases, this policy has frustrated struggling borrowers who have complex issues
(Page 85 of Total)
Document #1532155
Filed: 01/15/2015
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that exceed the bounds of a script and have issues speaking with representatives at Ocwen
capable of addressing their concerns. Moreover, Ocwens customer care representatives in many
cases provide conflicting responses to a borrowers question. Representatives have also failed in
many cases to record in Ocwens servicing system the nature of the concerns that a borrower has
expressed, leading to inaccurate records of the issues raised by the borrower.
19.
Ocwens failure to fulfill its legal obligations. Prior to the Departments and the Compliance
Monitors review, Ocwen did not take adequate steps to implement reforms that it was legally
obligated to implement pursuant to the 2011 Agreement.
Widespread Conflicts of Interest with Related Parties
20.
uncovered a number of conflicts of interest between Ocwen and four other public companies (the
related parties),1 all of which are chaired by Mr. Erbey, who is also the largest individual
shareholder of each and the Executive Chairman of Ocwen. In addition to serving as chairman
of the board for Ocwen and each related company, Mr. Erbeys holdings in these companies total
more than $1 billion. Other Ocwen executives and directors also own significant investments in
both Ocwen and the related parties. Yet, Ocwen does not have a written policy that explicitly
requires potentially conflicted employees, officers, or directors to recuse themselves from
involvement in transactions with the related companies.
The related parties are, as of the date of this Consent Order, Altisource Portfolio Solutions, S.A.
(Altisource Portfolio), Altisource Residential Corporation, Altisource Asset Management Corporation,
and Home Loan Servicing Solutions Ltd., and any of their affiliates, predecessors and successors in
interest, both past and present, and any of their officers, directors, partners, employees, consultants,
representatives, and agents or other persons and entities acting under their control or on their behalf.
(Page 86 of Total)
21.
Document #1532155
Filed: 01/15/2015
Page 9 of 22
Despite Mr. Erbeys holdings in these companies, Mr. Erbey has not in fact
recused himself from approvals of several transactions with the related parties. Mr. Erbey, who
owns approximately 15% of Ocwens stock, and nearly double that percentage of the stock of
Altisource Portfolio, has participated in the approval of a number of transactions between the
two companies or from which Altisource received some benefit, including the renewal of
Ocwens forced placed insurance program in early 2014.
22.
in its relationship with Altisource Portfolio, which has dozens of subsidiaries that perform feebased services for Ocwen. In one example, Altisource Portfolio subsidiary Hubzu, an online
auction site, hosts nearly all Ocwen auctions. In certain circumstances, Hubzu has charged more
for its services to Ocwen than to other customerscharges which are then passed on to
borrowers and investors. Moreover, Ocwen engages Altisource Portfolio subsidiary REALHome
Services and Solutions, Inc. as its default real estate agency for short sales and investor-owned
properties, even though this agency principally employs out-of-state agents who do not perform
the onsite work that local agents perform, at the same cost to borrowers and investors.
23.
Conflicts of interest are evident at other levels of the Ocwen organization. For
example, during its review, the Monitor discovered that Ocwens Chief Risk Officer
concurrently served as the Chief Risk Officer of Altisource Portfolio. The Chief Risk Officer
reported directly to Mr. Erbey in both capacities. This individual seemed not to appreciate the
potential conflicts of interest posed by this dual role, which was of particular concern given his
role as Chief Risk Officer.
(Page 87 of Total)
Document #1532155
Filed: 01/15/2015
Page 10 of 22
Settlement Provisions
Monetary Payment
24.
25.
Ocwen agrees that it will not claim, assert, or apply for a tax deduction or tax
credit with regard to any U.S. federal, state, or local tax, directly or indirectly, for any portion of
the amount paid pursuant to this Consent Order.
Borrower Assistance
26.
evaluate such borrowers for all applicable modifications and other foreclosure alternatives in
light of their improved financial condition resulting from such payment.
10
(Page 88 of Total)
27.
Document #1532155
Filed: 01/15/2015
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Beginning sixty (60) days after the date of execution of the Consent Order, and
for a period of two years thereafter, Ocwen will provide upon request by a New York borrower
that borrowers complete loan file, which includes all information from all systems, including
comment codes, at no cost to the borrower, regardless of whether such borrowers loan is still
serviced by Ocwen.
28.
Beginning sixty (60) days after the date of execution of the Consent Order,
Ocwen will provide every New York borrower who is denied a modification, short sale, or deedin-lieu of foreclosure, a detailed explanation of the reasons for denial.
29.
Beginning sixty (60) days after the date of execution of this Consent Order, for all
New York borrowers who have been reported negatively by Ocwen to credit agencies since
January 1, 2010, Ocwen will provide upon request at no cost a copy of such borrowers credit
report (including credit scores) no more than once a year, regardless of whether such borrowers
loan is still serviced by Ocwen. Ocwen will make sufficient staff available for borrowers to
inquire about their credit reporting and will dedicate the resources necessary to investigate such
inquiries and promptly correct any errors.
30.
The Operations Monitor will oversee Ocwens compliance with these borrower
assistance provisions and will work with Ocwen to develop appropriate procedures for such
compliance.
Operations Monitor
31.
The Department will select in its sole discretion an independent on-site operations
monitor (the Operations Monitor) that will report directly to the Department.
32.
The Operations Monitor will review and assess the adequacy and effectiveness of
Ocwens operations. Such an assessment will include but is not limited to the following areas:
11
(Page 89 of Total)
Document #1532155
Filed: 01/15/2015
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The Operations Monitor will identify the criteria for determining what constitutes
The purview of the Operations Monitor will extend to all matters directly or
indirectly affecting New York borrowers, including matters that affect borrowers in all states or
in multiple states that include New York.
35.
12
(Page 90 of Total)
Document #1532155
Filed: 01/15/2015
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also develop benchmarks against which to assess Ocwens progress in complying with
recommended corrective measures.
36.
The Operations Monitor will review and assess Ocwens current committees of
the Board of Directors. Ocwen Financial Corporations Board of Directors (the Board) will
consult with the Operations Monitor concerning, among other things, the structure, composition,
and reporting lines of such committees, and whether certain committees should be either
disbanded or created.
37.
The Board will consult with the Operations Monitor to determine which decisions
13
(Page 91 of Total)
Document #1532155
Filed: 01/15/2015
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The Board will consult with the Operations Monitor to determine whether any
Ocwen may acquire MSRs upon (a) meeting benchmarks developed by the
Operations Monitor concerning the adequacy of Ocwens onboarding process for newly acquired
MSRs and its ability to adequately service both those newly acquired MSRs and its existing loan
portfolio, and (b) the Departments approval, not to be unreasonably withheld. The Operations
Monitor will act with reasonable expedition to develop such benchmarks in consultation with
Ocwen. These benchmarks will address, at a minimum, the following:
a. The development and implementation of a satisfactory compliance plan;
b. The development and implementation of a plan to resolve record-keeping and
borrower communication issues;
c. The reasonableness of fees and expenses charged to borrowers and mortgage
investors, including those charged directly or indirectly by related parties;
d. The development and performance of a risk assessment to identify potential risks
and deficiencies in the onboarding process; and
e. The development of a written onboarding plan that addresses potential risks and
deficiencies, including testing and quality control review periodically during the
onboarding process.
14
(Page 92 of Total)
40.
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benchmark pricing and performance studies with respect to all fees or expenses charged to New
York borrowers by any related party.
41.
The Operations Monitor will oversee and ensure Ocwens implementation and
Within one hundred twenty (120) days of the date of the formal engagement of
the Operations Monitor, the Operations Monitor will submit to the Parties a preliminary written
report of findings, including, to the extent the Operations Monitor has had the opportunity to
develop them, any proposed corrective measures and associated benchmarks (the Operations
Report). The Operations Monitor will submit written monthly action progress reports
(Progress Reports) to the Parties. On a quarterly basis, starting ninety (90) days from the date
of the first Operations Report, the Operations Monitor will issue an Operations Report covering
the three-month period immediately preceding.
43.
Ocwen agrees to cooperate fully with the Operations Monitor by, including but
not limited to, providing the Operations Monitor access to all relevant personnel and records
necessary on a real-time basis, including those at any overseas locations, and including
information on business decisions pertinent to the work of the Operations Monitor currently
pending or recently made by Ocwen management or its Board of Directors, to allow the
Operations Monitor to fulfill its duties.
44.
Any dispute as to the scope of the Operations Monitors authority will be resolved
by the Department in the exercise of its sole discretion after appropriate consultation with Ocwen
and/or the Operations Monitor.
45.
Ocwen will pay all reasonable and necessary costs of the Operations Monitor.
15
(Page 93 of Total)
46.
Document #1532155
Filed: 01/15/2015
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The terms of the Operations Monitor will extend for a period of twenty-four (24)
months from the date of formal engagement which shall be no later than May 1, 2015. The
Department may, in its sole discretion, extend the engagement another twelve (12) months if the
Department determines that Ocwen has not sufficiently achieved benchmarks identified by the
Operations Monitor.
Compliance Monitor
47.
The Compliance Monitor will remain engaged for at least three (3) months from
the execution of this Consent Order. The Department may, in its sole discretion, extend the
engagement of the Compliance Monitor for a period not to exceed an additional three (3)
months.
48.
Monitor may call upon the Compliance Monitor to perform work that draws on the Compliance
Monitors institutional knowledge of Ocwen.
49.
Prior to the Operations Monitors engagement and for a short transitional period
thereafter not to exceed forty-five (45) days, the Department may in its sole discretion direct the
Compliance Monitor to fill any of the roles of the Operations Monitor described in this Consent
Order.
Board of Directors
50.
independent board members (the Additional Directors) in consultation with the Compliance
Monitor or the Operations Monitor.
51.
The Additional Directors will not own equity in any related party.
52.
Ocwens Board will contain no more than two executive directors at any time.
16
(Page 94 of Total)
Document #1532155
Filed: 01/15/2015
Page 17 of 22
Conflicts of Interest
53.
With respect to mortgage loans serviced by Ocwen, Ocwen will conduct semi-
annual benchmarking studies of pricing and performance standards with respect to all fees or
expenses charged to New York borrowers or to investors on New York property by any related
party, to determine whether the terms offered by the related party are commensurate with market
rates or, if market rates are not available, are reasonably related to actual expenses incurred by
the related party. Maximum rates for services that are established by government-sponsored
enterprises or other investors may not be presumed to be the market rate and may not substitute
for actual assessment of market rates.
54.
Ocwen will not share any common officers or employees with any related party.
55.
Ocwen will not share risk, internal audit, or vendor oversight functions with any
related party.
56.
Any Ocwen employee, officer, or director owning more than $200,000 equity
ownership in any related party will be recused from negotiating, or voting to approve a
transaction with the related party in which the employee, officer, or director has such equity
ownership, or any transaction that indirectly benefits such related party if such transaction
involves revenues or expense to Ocwen or a related party of $120,000 or more.
Management Changes
57.
Effective January 16, 2015, William Erbey will resign from his position as
Executive Chairman of Ocwen, his position as Chairman of the Board of Directors of Altisource
Portfolio, his position of Chairman of the Board of Directors of Altisource Residential
Corporation, his position of Chairman of the Board of Directors of Altisource Asset Management
Corporation, and his position of Chairman of the Board of Directors of Home Loan Servicing
17
(Page 95 of Total)
Document #1532155
Filed: 01/15/2015
Page 18 of 22
Solutions Ltd. Mr. Erbey will have no directorial, management, oversight, consulting, or any
other role at Ocwen or any related party, or at any of Ocwens or the related parties affiliates or
subsidiaries as of the date of his resignation. Effective at his resignation, Ocwens Board
members and management will not disclose to Mr. Erbey any non-public information about
Ocwen that is not available to other shareholders. In the event that Ocwen discovers a violation
of the terms of this Paragraph, Ocwen will notify the Department of the violation within three (3)
business days of discovery.
No Indemnification
58.
In the event that the Department believes Ocwen to be in material breach of this
Consent Order (Breach), the Department will provide written notice to Ocwen, and Ocwen
must, within ten (10) business days of receiving such notice, or on a later date if so determined in
the Departments sole discretion, appear before the Department to demonstrate that no Breach
has occurred or, to the extent pertinent, that the Breach has been cured.
60.
The parties understand and agree that Ocwens failure to make the required
showing within the designated time period will be presumptive evidence of Ocwens Breach.
Upon a finding of Breach, the Department has all the remedies available to it under the New
York Banking and Financial Services Laws and may use any evidence available to the
Department in any ensuing hearings, notices, or orders.
18
(Page 96 of Total)
Document #1532155
Filed: 01/15/2015
Page 19 of 22
Wavier of Rights
61.
The parties understand and agree that no provision of this Consent Order is
This Consent Order is binding on the Department and Ocwen, as well as Ocwens
successors and assigns that are under the Departments supervisory authority. This Consent
Order does not bind any federal or other state agency or any law enforcement authority.
63.
Except as set forth in Paragraphs 64 and 65, no further action will be taken by the
Department against Ocwen for the matters set forth in this Consent Order, provided that Ocwen
complies with the terms of the Consent Order.
64.
Nothing in this Consent Order shall excuse Ocwen from paying required
restitution to any borrowers harmed by its improper or illegal conduct, including the backdating
of letters to borrowers. To the extent a borrower entitled to restitution has received a cash
payment pursuant to this Consent Order, Ocwen may offset such payment against the restitution
owed to such borrower.
65.
Notwithstanding any other provision in this Consent Order, the Department may
undertake additional action against Ocwen for transactions or conduct that: (a) are not set forth
in this Consent Order; (b) Ocwen did not disclose to the Compliance Monitor or the Department
in connection with the Departments investigation into these matters; and (c) that the Department
and Compliance Monitor were not otherwise aware of in connection with the Departments
investigation and the work of the Compliance Monitor.
Notices
66.
All notices or communications regarding this Consent Order will be sent to:
19
(Page 97 of Total)
Document #1532155
Filed: 01/15/2015
Page 20 of 22
Each provision of this Consent Order will remain effective and enforceable until
contained in this Consent Order has been made to induce any party to agree to the provisions of
the Consent Order.
IN WITNESS WHEREOF, the parties have caused this Consent Order to be signed this 22nd
day of December, 2014.
OCWEN FINANCIAL CORPORATION
By: _______________________
RONALD FARIS
President and Chief Executive Officer
By: _______________________
BENJAMIN M. LAWSKY
Superintendent of Financial Services
(Page 98 of Total)
Document #1532155
Filed: 01/15/2015
Page 21 of 22
Each provision o[this Consent Order will remain effective and enforceable until
contained in this Consent Order has been made to induce any pmty to agree to the provisions of
the Consent Order.
IN WITNESS WHEREOF, the parties have caused this Consent Order to be signed this 19th
day of December. 2014.
By:
By:
~9-
BENc;cJ;-:A~M;oI:-;N-;:M-;-,-;:L--;A-:CW;-;;S'""'K-:::;Y-;--
RONALD FARIS
President and Chief Executive Officer
By:
TIMO:OccT"'H"'Y=M-;-,coH-;-A:CyC;;EOC,S ,-----
Executive Vice President
20
(Page 99 of Total)
Document #1532155
Filed: 01/15/2015
Page 22 of 22
Each provision of this Consent Order will remain effective and enforceable unt il
conta ined in thi s Consent Order has been made to induce any party to agree to the prov isions of
the Consent Orde r.
IN WITNESS WI-IEREOF, the parties have caused this Consent Order to be signed thi s 19th
day of December. 2014.
By:
RON
~~~~~R
' A L D FA ~I~~-----S
By:
li E N:,eJ'-"
AM
= IN
o,-,-:C"O".--;
M L- A
" '::-Y"'SKY
"'""-;-
BY
:-r:V 0{ ~
TIMOTHY M. HAYES
20
12/27/2014
Ocwen Chairman to Resign Following $150 Settlement with N.Y. Regulator | Reverse Mortgage Daily
Document #1532155
Filed: 01/15/2015
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iO1_5yS7sI)
The drama continues to unfold for Ocwen Financial Corp. (NYSE: OCN), which
today which today announced the resignation of Founder and Chairman William
C. Erbey, following a $150 million settlement
(http://www.dfs.ny.gov/about/ea/ea141222.pdf) with one of its top scrutinizers, the
New York Department of Financial Services (NYDFS).
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12/27/2014
Ocwen Chairman to Resign Following $150 Settlement with N.Y. Regulator | Reverse Mortgage Daily
statement.
USCA Case #14-5265
Document #1532155
Filed: 01/15/2015
Page 2 of 6
Under the terms of the settlement, Ocwen will pay a civil monetary penalty of
$100 million to the NYDFS by December 31, which will be used by the State of
New York for housing, foreclosure relief and community redevelopment programs,
according to a release from the regulator.
The remaining $50 million will be used as restitution to current and former New
York borrowers in the form of $10,000 to each borrower whose home was
foreclosed upon by Ocwen between January 2009 and December 19, 2014. The
balance will then be distributed equally among borrowers who had foreclosure
actions filed, but not completed, by Ocwen between that timeframe.
e=eyJhdiI6Njk5NywiYXQiOjE4LCJidCI6MCwiY20iOjEwNTE4LCJjaC
the midst of investigations from the NYDFS. As for the other $50 million, Ocwen
said it will record that amount in its fourth quarter 2014 financial statements.
Also as part of the settlement, Ocwen will not be permitted to acquire additional
mortgage servicing rights, or begin to acquire additional MSRs until an unless it
receives approval from the NYDFS, and meets benchmarks developed by the
independent monitor concerning the adequacy of Ocwens onboarding process for
newly acquired MSRs.
Todays agreement will deliver significant assistance to Ocwen homeowners in
New York and provide a new path for the company to clean up its operations,
said Lawsky in a written statement. We will continue to closely monitor Ocwen
to ensure that it lives up to its obligations under this agreement, and treats
struggling homeowners with the respect and dignity they deserve.
Ocwen has also agreed to several non-monetary provisions under the settlement,
including monitor-led oversight of its operations, in addition to the New York
borrower assistance measures.
(http://engine.adzerk.net/r?
e=eyJhdiI6Njk5MywiYXQiOjE4LCJidCI6MCwiY20iOjEwNDk5LCJjaC
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1-AZgrO_LTBv24I)
Beginning 60 days after December 19and for two yearsOcwen will provide,
upon request, New York borrowers with complete loan files at no cost, as well as
provide every N.Y. borrower detailed explanations as to why a loan modification,
short sale (http://reversemortgagedaily.com/2014/12/18/bloomberg-more-troublefor-ocwen/) or deed-in-lieu of foreclosure were denied.
The company will also provide one free credit report per year, at its own expense,
to any N.Y. borrower on request if Ocwen made a negative report to any credit
agency from January 1, 2010, the company will make staff available for borrowers
to inquire about their credit reporting, dedicating resources necessary to
investigate such inquiries and correct any errors.
Another non-monetary provision of the settlement requires the NYDFS to appoint
an independent Operations Monitor to review and assess the adequacy and
effectiveness of Ocwens operations for two years, with the regulator having the
option to extend this engagement for another 12 months.
The year has been a tumultuous oneto say the very leastfor Ocwen, marked
by numerous investigations from regulators, including the NYDFS as well as the
Monitor of the National Mortgage Settlement, which released a report
(http://reversemortgagedaily.com/2014/12/16/ocwen-just-cant-beat-regulator-heat/)
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http://reversemortgagedaily.com/2014/12/22/ocwen-chairman-to-resign-following-150-settlement-with-n-y-regulator/
12/27/2014
Ocwen Chairman to Resign Following $150 Settlement with N.Y. Regulator | Reverse Mortgage Daily
The fourth-largest
mortgage loan servicer
in the U.S., Ocwen services
an unpaid01/15/2015
USCA Case #14-5265
Document
#1532155
Filed:
Page 3 of 6
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principal balance of approximately $430 billion. In New York alone, the company
services nearly 130,000 residential home loans with a total UPB of more than $30
billion.
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visit http://www.djreprints.com.
http://www.wsj.com/articles/ocwen-financials-shares-tumble-on-california-concerns-1421178252
MARKETS
Ocwen, California Regulators Lock
Horns
Shares Slide 36% as State Says Mortgage Servicer Hasnt Produced Requested Documents;
Ocwen Says It Has Complied
By JAMES STERNGOLD
Updated Jan. 13, 2015 11:35 p.m. ET
Ocwen Financial Corp. is facing a new front in its long-running battle with regulators.
Already reeling from a lengthy fight with New Yorks top financial regulator, Ocwen on
Tuesday pushed back against charges in California that it had failed to produce
required documents in an examination of its mortgage-servicing practices. Investors
reacted negatively to the latest headache and pushed Ocwens stock down 36%.
RELATED STORIES
Erbeys Exit Ends Heady Era at Ocwen (http://www.wsj.com/articles/new-york-financial-regulatorannounces-settlement-with-ocwen-1419257065)
Timeline: Ocwens Regulatory Troubles (http://blogs.wsj.com/moneybeat/2014/12/22/ocwens-regulatorytroubles-a-timeline)
Rules That Aided Ocwen Now Contribute to Woes (http://blogs.wsj.com/moneybeat/2014/12/23/rules-thataided-ocwen-now-contribute-to-woes/?KEYWORDS=ocwen)
1/14/2015
USCA
Caseto#14-5265
Documentlicense
#1532155
Filed: 01/15/2015
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2 of 3
October
seeking
suspend Ocwens
to do business
in California,
its largest
market. Those charges listed more than a dozen occasions when California requested
1/14/2015
USCA
Case #14-5265
Document
#1532155
Filed: 01/15/2015
3 ofto
3
ultimately
doesn't
or cannot satisfy
the
regulators demands,
it could bePage
forced
transfer its mortgage servicing rights in the state to other companies, said Mr.
Dresslar. He said the next hearing before the administrative judge is scheduled for
July.
Bose George, an analyst with Keefe, Bruyette & Woods, said that, while burdensome,
he thought Ocwen would eventually resolve the problem with California, though it
could prove costly.
Others weren't so sure. The continued regulatory problems and failure to reform have
undermined market confidence in the company to the point that it is raised concerns
about whether it can continue as an independent operation, said Kevin Barker, an
analyst at Compass Point Research & Trading LLC.
I think were at that point, Mr. Barker said. These accusations are having serious
and far-reaching implications for this company, Mr. Barker said.
Mr. George said the new disclosure raised a potentially serious problem of whether
Ocwen should have reported the subpoena from California earlier, when it was issued.
Companies are normally required to disclose all material matters that can affect
operations or their stocks.
While companies are normally required to disclose important regulatory issues that
can have a material impact on their operations or stock price, Ocwen hasnt made any
disclosures about the demands of California or the threat to suspend its license before
today.
This does look material, said Mr. George.
Ocwen declined to comment specifically on its disclosures.
Write to James Sterngold at james.sterngold@wsj.com
Copyright 2014 Dow Jones & Company, Inc. All Rights Reserved
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OCWEN
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SUBPRIME MORTGAGES
48
By A LA N ZIB E L
Recommended
postbusinesses from banks like
x Goldman
Ocwen swooped in to buy mortgage
servicing
Sachs Group Inc. and Morgan Stanley MS -2.28% , which sold off their troubled
Fear Gauge Spikes,
subprime mortgage-servicing businesses. In addition, Ocwen and other companies have
Amid Talk of Old
picked up mortgage-servicing assets from banks that remain big mortgage industry
Normal for Stock
players.
Market
The company, which reached a $150 million settlement with a New York regulator this
week over allegations of mistreating homeowners, grew to become the fourth-largest
player in the U.S. mortgage-servicing industry in the third quarter of 2014, from the 16th
largest in 2010, according to Inside Mortgage Finance, a trade publication in Bethesda,
Md. As of the third quarter, Ocwen had $401 billion in mortgage-servicing assets and a
4.1% market share.
The shift of mortgage servicing into nonbanks has prompted some worries among
federal regulators given companies like Ocwen dont have the same financing or
oversight requirements as banks. While state-level regulators and the Consumer
Financial Protection Bureau have some power over such non-bank mortgage servicers
many of them are not currently subject to prudential standards such as capital, liquidity,
or risk management oversight, the Financial Stability Oversight Council said in a report
this summer.
Mortgage investors ability to collect on mortgages is dependent on a single mortgage
servicing company, where failure could have significant negative consequences for
market participants, the report said.
New York officials, in their consent agreement with Ocwen, highlighted evidence of the
companys rapid growth. The company used a patchwork of legacy systems and
systems inherited from acquired companies, many of which are incompatible, the order
said. A frequent occurrence is that a fix to one system creates unintended
consequences in other systems.
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1/14/2015
Ocwen gives
borrowers
or outdated information,
sends#1532155
borrowers backdated
USCA
Caseincorrect
#14-5265
Document
letters, unreliably tracks data for investors, and maintains inaccurate records, the
regulator said.
Isaac Boltansky, a Washington analyst with Compass Point Research and Trading, said
the sale of mortgage-servicing assets to non-bank firms is an example of how some of
the new regulations imposed under the 2010 Dodd-Frank financial law have done little to
reduce financial-system risks.
There are clear instances where the law has simply increased the size of the nonbank
space, he said.
As a non-bank , Ocwen does not have a base of deposits. But unlike banks, mortgage
servicers have been able to operate after filing for bankruptcy protection.
Ally Financial Inc.s former mortgage subsidiary, Residential Capital LLC, filed for
Chapter 11 bankruptcy in May 2012 . Later that year, Ocwen and another non-bank
servicer purchased Residential Capitals mortgage servicing assets for $3 billion.
Filed: 01/15/2015
Page 2 of 3
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BENJAMIN LAWSKY
56
20
12
OCWEN
By A LA N ZIB E L
Mortgage servicer Ocwen Financial Corp. OCN -10.03% grew rapidly after the financial
crisis, but ran into trouble with New York officials, state attorneys general and the
Consumer Financial Protection Bureau over the treatment of homeowners and other
issues.
A timeline of events:
September 2011: New York states superintendent of financial services, Benjamin M.
Lawsky, reaches a pact with Goldman Sachs Group Inc. approving the sale of its
mortgage servicing business to Ocwen Financial Corp., with new standards to prevent
foreclosure abuses.
November 2011: Mr. Lawsky approves
the sale of Morgan Stanley MS -2.28% s
mortgage servicing business to Ocwen,
imposes similar foreclosure abuse
conditions.
October 2012: Ocwen agrees to pay
$750 million in cash and stock to acquire
Homeward Residential Holdings Inc, a
lender and servicer.
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December 2013: Ocwen reaches a $2.1 billion settlement with the Consumer
Financial Protection Bureau and 49 states over alleged homeowner abuses.
February 2014: Mr. Lawsky blocks Ocwens plans to buy the rights to collect
payments on $39 billion of loans from Wells Fargo WFC -1.16% & Co., citing concerns
about the companys rapid growth. Mr. Lawsky also says he is examining Ocwens
relationships with affiliated firms, saying he has uncovered potential conflicts of interest.
August 2014: Mr. Lawsky alleges that Ocwen earned as much as $65 million a year from
http://blogs.wsj.com/moneybeat/2014/12/22/ocwens-regulatory-troubles-a-timeline/
Show 5 More
1/14/2015
distressed
homeowners
by routing
home insurance
fees to affiliated
companies; Ocwen
USCA
Case
#14-5265
Document
#1532155
says it will restate earnings due to accounting problems and discloses Securities and
Exchange Commission investigation of dealings with related companies.
October 2014: Mr. Lawsky says Ocwen backdated thousands of letters to borrowers
that prevented them from being able to promptly correct problem loans. Ocwen
apologizes. Ocwen sets aside $100 million for New York settlement.
November 2014: Ocwen, Wells Fargo cancel planned sale of mortgage-servicing
business.
December 2014: Ocwen criticized by mortgage-settlement watchdog over its compliance
with the 2012 mortgage-practices settlement.
December 2014: Ocwen Executive Chairman William Erbey agrees to step down as
part of $150 million settlement with Mr. Lawsky.
56
Filed: 01/15/2015
Page 2 of 3
$18.9
25%
$193.8
-28%
$1,486.1
-28%
12
ECM
DCM
IB
SPONSORED RESULTS
Celebrity Clothing
Formal Gowns
Party Dresses
Deutsche Bank
UBS
Credit Suisse
Barclays
HSBC
In billions $0
$25
$50
$75
$100
Source: Dealogic
Phillipa
Leighton-Jones
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Erik Holm
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1/14/2015
Document #1532155
Filed: 01/15/2015
Page 3 of 3
Michael J.
Casey
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http://blogs.wsj.com/moneybeat/2014/12/22/ocwens-regulatory-troubles-a-timeline/
1
2
3
4
5
6
7
Document #1532155
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Page 1 of 6
8
9
10
11
12
13
14
15
16
17
vs.
18
19
20
capacity as head of the California Department of Business Oversight, formerly the Department of
21
Corporations (Department), is informed and believes and based upon such information and belief
22
23
I.
24
BACKGROUND
25
Ocwen Loan Servicing, LLC (Ocwen) is a residential mortgage lender and loan servicer
26
licensed by the Commissioner pursuant to the California Residential Mortgage Lending Act
27
("CRMLA") (Cal. Fin. Code 50000 et seq.). Ocwen has its principal place of business located at
28
1661 Worthington Road, Suite 100, West Palm Beach, Florida, 33409. In California, Ocwen has a
-1ACCUSATION IN SUPPORT OF NOTICE OF INTENT TO ISSUE AN ORDER SUSPENDING
RESIDENTIAL
(Page
147 of Total)
MORTGAGE LENDER AND LOAN SERVICER LICENSE
1
2
Document #1532155
Filed: 01/15/2015
Page 2 of 6
branch office located at 2255 North Ontario Street, Suite 400, Burbank, California, 91504.
In December 2014, Ocwen reported that it was servicing more than $90 billion in mortgage
loans and had foreclosed on more than 2500 borrowers during the previous year.
II.
examine the records, documents and affairs of each licensee under the CRMLA to ensure compliance
with the law. California Financial Code section 50314 requires a licensee to keep records and
documents that will properly enable the Commissioner to determine whether the licensee is in
10
11
12
Ocwen through her examination staff. On October 15, 2013, the Commissioners examination staff
13
made additional written requests for documents and information to Ocwen, to ensure its compliance
14
with the recently enacted California Homeowners Bill of Rights (HBOR), a package of
15
amendments to the California Civil Code that became law on January 1, 2013. Ocwen failed to
16
17
On February 7, 2014, the Department by letter made additional written requests to Ocwen for
18
documentation and information. The February 7, 2014 request, in large part, seeks production of
19
documents which should have been produced in response to the Commissioners January 8, 2013 and
20
October 15, 2013 requests. Ocwen was given a deadline of February 25, 2014 to produce the
21
22
On February 25, 2014, Ocwen produced a portion of the documentation called for in the
23
February 7, 2014 request. Ocwen informed the Department that it would be producing further
24
25
The Department contacted Ocwen on March 10, 11 and 12, 2014 to inquire whether the
26
February 25, 2014 and March 7, 2014 productions consist of all of the documentation called for in the
27
Departments February 7, 2014 request. Ocwen did not respond to the Departments inquiries. The
28
Filed: 01/15/2015
Page 3 of 6
incomplete.
Based on Ocwens failure to produce all documentation and information called for in the
Departments February 7, 2014 request, on March 12, 2014, the Commissioner issued an
administrative subpoena duces tecum requesting documentation and information from Ocwen. The
documentation requested in the administrative subpoena duces tecum is almost identical to the
documentation called for in the Departments February 7, 2014 request. Ocwen was given a deadline
8
9
Document #1532155
On March 22, 2014, Ocwen produced a portion of the documentation called for in the
subpoena duces tecum.
10
On April 22, 2014, representatives of Ocwen and the Commissioner took part in a conference
11
call regarding the deficiencies in Ocwens production of documentation. Ocwen agreed to produce
12
13
14
On April 24, 2014, Ocwen produced a portion of the documentation discussed during the
April 22, 2014 conference call.
15
On May 1, 2014, the Department informed Ocwen that Ocwens latest production is
16
incomplete. The Department requested that Ocwen produce the outstanding documentation and
17
information by May 5, 2014, or the Commissioner may issue administrative orders and file a petition
18
in California Superior Court to compel Ocwen to comply with the ongoing examination and
19
20
21
22
Based on the above, on June 16, 2014, the Commissioner issued an Order to Discontinue
23
Violations, pursuant to California Financial Code section 50321, to Ocwen. The Order to Discontinue
24
Violations was issued as a result of Ocwens failure to produce documentation and information upon
25
request of the Commissioner and within the time period specified that would properly enable the
26
27
servicing functions, in violation of California Financial Code section 50314. The Order to
28
Discontinue Violations required Ocwen to immediately cease the violation set forth above and
-3ACCUSATION IN SUPPORT OF NOTICE OF INTENT TO ISSUE AN ORDER SUSPENDING
RESIDENTIAL
(Page
149 of Total)
MORTGAGE LENDER AND LOAN SERVICER LICENSE
Filed: 01/15/2015
Page 4 of 6
immediately produce all books and records requested by the Commissioner by June 26, 2014.
On June 16, 2014, Ocwen was served with the Order to Discontinue Violations. Ocwen did
not request a hearing to challenge the Order to Discontinue Violations and the Order to Discontinue
5
6
Document #1532155
After service of the Order to Discontinue Violations, Ocwen produced a portion of the
outstanding documentation and information.
On August 4, 2014, representatives of Ocwen and the Commissioner took part in a meeting
became apparent that Ocwen had not produced all outstanding documentation by June 26, 2014, as
10
11
III.
12
13
As a part of the Commissioners regulatory examination, on June 16, 2014, the Department by
14
letter requested a loan servicing report and other information from Ocwen. The letter required that the
15
report and information be produced within five (5) days from the date of the letter. Further, the letter
16
informed Ocwen that failure to produce the requested report and information may lead to the
17
18
19
On June 26, 2014, ten (10) days after the Departments June 16, 2014 letter, Ocwen produced
a portion of the information requested in the Departments letter.
20
On July 10, 2014, representatives of Ocwen and the Commissioner took part in a conference
21
call to obtain clarification on the documentation and information produced by Ocwen. As confirmed
22
by discussions during the conference call, Ocwen had still not produced all the information called for
23
24
On July 11, 2004, the Department by letter notified Ocwen that as a result of Ocwens failure
25
to produce all matters requested in the June 16, 2014 letter, within the five (5) day time frame, Ocwen
26
shall forfeit to the Commissioner a sum of one hundred dollars ($100) for every day, beginning July
27
11, 2014, up to ten (10) days, that date being July 20, 2014, until Ocwen produces all of the matters
28
requested. The letter further informed Ocwen that if it fails to produce all matters requested by 8:00
-4ACCUSATION IN SUPPORT OF NOTICE OF INTENT TO ISSUE AN ORDER SUSPENDING
RESIDENTIAL
(Page
150 of Total)
MORTGAGE LENDER AND LOAN SERVICER LICENSE
Document #1532155
Filed: 01/15/2015
Page 5 of 6
a.m. on July 21, 2014, this failure shall constitute grounds for the suspension or revocation of
On July 21, 2014, Ocwen produced a portion of the outstanding information called for in the
June 16, 2014 letter. On July 22, 2014, Ocwen made a further production of requested information.
To date, Ocwen has not produced a complete report containing all of the information requested.
IV.
On July 31, 2014 and August 5, 2014, the Department by letters requested loan servicing
reports from Ocwen for a sample of 1200 and 120 loans, respectively. The letters required that the
10
reports be produced by August 15, 2014, in preparation for an on-site examination of Ocwen to
11
commence on August 18, 2014. Both letters informed Ocwen that failure to produce the requested
12
information may lead to the Commissioner taking adverse action against Ocwens license.
13
Ocwen did not produce the requested information by August 15, 2018. Instead, on August 18,
14
2014, Ocwen produced a portion of the information requested in the July 31, 2014 and August 5,
15
2014 letters and informed the Department that the remaining information would be produced at a
16
later date.
17
On August 18, 2014, the Department by letter notified Ocwen that as a result of Ocwens
18
failure to produce all matters requested in the July 31, 2014 and August 5, 2014 letters, by the August
19
15, 2014 deadline, Ocwen shall forfeit to the Commissioner a sum of one hundred dollars ($100) for
20
every day, beginning August 18, 2014, up to ten (10) days, that date being August 27, 2014, until
21
Ocwen produces all of the matters requested. The letter further informed Ocwen that if it fails to
22
produce all matters required by 8:00 a.m. on August 28, 2014, this failure shall constitute ground for
23
the suspension or revocation of Ocwens license pursuant to California Financial Code section 50327.
24
Since August 28, 2014, Ocwen has made some partial productions of the information
25
requested in the July 31, 2014 and August 5, 2014 letters. However, to date, Ocwen has still not
26
27
///
28
///
-5ACCUSATION IN SUPPORT OF NOTICE OF INTENT TO ISSUE AN ORDER SUSPENDING
RESIDENTIAL
(Page
151 of Total)
MORTGAGE LENDER AND LOAN SERVICER LICENSE
Filed: 01/15/2015
V.
LAW
Page 6 of 6
Section 50326 of the California Financial Code provides, in relevant part, that:
If any licensee fails to do any of the following, the licensee shall forfeit to the people
of the state a sum of up to one hundred dollars ($100) for every day up to the 10th day:
(a) to make any report required by law or by the commissioner within 10 days from
the day designated for the making of the report . . . or (b) fails to include therein any
matter required by law or by the commissioner. Thereafter, any failure shall constitute
grounds for the suspension or revocation of the license held by the residential
mortgage lender or residential mortgage loan servicer.
5
6
7
8
9
Document #1532155
10
11
12
13
14
15
VI.
16
CONCLUSION
17
The Commissioner finds that, by reason of the foregoing, Ocwen has violated Financial Code
18
section 50326 and has violated a prior issued Order to Discontinue Violations and based thereon,
19
grounds exist to suspend the residential mortgage lender and loan servicer license of Ocwen for a
20
21
WHEREFORE, IT IS PRAYED that the residential mortgage lender and loan servicer license
22
23
24
25
26
27
28
By: ___________________________
ALEX M. CALERO
Senior Corporations Counsel
Enforcement Division
-6ACCUSATION IN SUPPORT OF NOTICE OF INTENT TO ISSUE AN ORDER SUSPENDING
RESIDENTIAL
(Page
152 of Total)
MORTGAGE LENDER AND LOAN SERVICER LICENSE
USCACase
Case2:14-cv-02597-MCE-DAD
#14-5265
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Page
Document 1 Filed
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of 431 of 43
15
Case Number:
CLASS ACTION COMPLAINT FOR:
(1) Violations of Californias Unfair
Competition Law (Cal. Bus. & Prof.
18
Plaintiff,
Code 17200 et seq.);
vs.
(2) Violations of the Racketeer
19
Influenced and Corrupt Organizations
20 OCWEN FINANCIAL CORPORATION,
Act (18 U.S.C. 1962(c));
a Florida corporation, and OCWEN LOAN
SERVICING,
LLC,
a
Delaware
limited
21
(3) Violations of the Racketeer
liability company,
Influenced and Corrupt Organizations
22
Act (18 U.S.C. 1962(d));
Defendants.
23
(4) Violations of the Rosenthal fair Debt
Collection Practices Act (Cal. Civ.
24
Code 1788, et seq.);
25
(5) Unjust Enrichment
26
(6) Fraud; and
(7) Breach of Contract
27
Jury Trial Demanded
28
16 DAVID WEINER, individually, and on
behalf of other members of the public
17 similarly situated,
28
30
USCACase
Case2:14-cv-02597-MCE-DAD
#14-5265
Document #1532155
Filed:11/05/14
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Page
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of 432 of 43
For his complaint against Ocwen Financial Corporation (OFC) and Ocwen Loan
7 with its home mortgage loan servicing business. Taking advantage of the economic
8 downturn and the increasing number of loans in default, Ocwen devised a scheme to
9 deceive homeowners who are behind on their mortgage payments into paying, or
10 believing they have to pay, hundreds or thousands of dollars in unlawfully marked-up
11 fees.
12
2.
3.
4.
Ocwen is well-aware that its marked-up fees violate the disclosures made in
28 homeowners mortgage contracts because the fees exceed the actual cost of the default28
30
USCACase
Case2:14-cv-02597-MCE-DAD
#14-5265
Document #1532155
Filed:11/05/14
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Page
Document 1 Filed
Page 3
of 433 of 43
related services, so when Ocwen collects, or attempts to collect, such fees, it is not merely
being paid back, or collecting amounts disbursed, nor are such fees reasonable and
appropriate to protect the note holders interest in the property and rights under the deed
of trust. Nevertheless, through this fraudulent scheme, Ocwen is able to quietly profit
5.
even when examined in bankruptcy proceedings. As one court has explained, [l]enders
have apparently been operating under the assumption that the fees and costs in their
10
proofs of claim are invulnerable to challenge because debtors lack the sophistication, the
11
debtors bar lacks the financial motivation, and bankruptcy courts lack the time. . . .[T]he
12
Court believes that certain members of the mortgage industry are intentionally attempting
13
14
6.
This type of rampant abuse by mortgage servicers like Ocwen has led federal
15
regulators to enter into numerous consent orders, but according to Mark Pearce, Director,
16
17
18
19
20
21
22
23
In re: Prevo, 394 B.R. 847, 848, 851 (Bankr. S.D. Tex. 2008) (emphasis added).
28
See Mark Pearce, Director, Division of Depositor and Consumer Protection, Federal
Deposit Insurance Corporation, Mortgage Servicing: An Examination of the Role of
Federal Regulators in Settlement Negotiations and the Future of Mortgage Servicing
Standards, before the Subcommittees on Financial Institutions and Consumer Credit, and
Oversight and Investigations Committee on Financial Services, U.S. House of
Representatives, July 7, 2011, available at
http://financialservices.house.gov/UploadedFiles/070711pearce.pdf (last visited, Feb. 1,
2012).
27
24
25
26
27
28
USCACase
Case2:14-cv-02597-MCE-DAD
#14-5265
Document #1532155
Filed:11/05/14
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Page
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of 434 of 43
these consent orders do not fully identify and remedy past errors
in mortgage-servicing operations of large institutions; in fact,
the scope of the interagency review did not include a review of
. . . the fees charged in the servicing process. Much work
remains to identify and correct past errors and to ensure that the
servicing process functions effectively, efficiently, and fairly
going forward.
1
2
3
4
5
6
7
8
9
10
7.
Plaintiff brings this action, seeking injunctive relief and damages on behalf of
himself and the thousands of other homeowners who have been victimized by Ocwens
uniform scheme.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
in controversy, exclusive of interest and costs, exceeds the sum or value of $5,000,000
and is a class action in which members of the class of plaintiffs are citizens of states
different from Defendants. Further, greater than two-thirds of the members of the Class
reside in states other than the states in which Defendants are citizens.
10.
This Court also has jurisdiction over this matter under 28 U.S.C. 1331,
1961, 1962 and 1964. This Court has personal jurisdiction over Defendants under 18
U.S.C. 1965. In addition, under 28 U.S.C. 1367, this Court may exercise supplemental
jurisdiction over the state law claims because all of the claims are derived from a common
nucleus of operative facts and are such that Plaintiff ordinarily would expect to try them in
one judicial proceeding.
11.
Venue lies within this judicial district under 28 U.S.C. 1391(b)(1) and
(c)(2) because Defendants contacts are sufficient to subject them to personal jurisdiction
in this District, and therefore, Defendants reside in this District for purposes of venue, or
under 28 U.S.C. 1391(b)(2) because certain acts giving rise to the claims at issue in this
Complaint occurred, among other places, in this District.
28
27
28
3
CLASS ACTION COMPLAINT
USCACase
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of 435 of 43
PARTIES
12.
13.
4
5
Ocwen Loan Servicing, LLC maintains operations in this District related to the activities
at issue in this case, including operations concerning the management of loans that are in
default, which are conducted from offices located in Burbank, California. Ocwen Loan
10
Servicing, LLCs headquarters are located in West Palm Beach, Florida. It is licensed to
11
service mortgage loans in all fifty states, including California, the District of Columbia,
12
13
15.
14
of Defendants committed in connection with the enterprise, the allegation means that
15
Defendants engaged in the act, deed, or conduct by or through one or more of their
16
17
engaged in the management, direction, control or transaction of the ordinary business and
18
19
16.
Plaintiff is informed and believes, and based thereon, alleges that, at all
20
material times herein, each of the Defendants was the agent, servant, or employee of the
21
other Defendants, and acted within the purpose, scope, and course of said agency, service,
22
or employment, and with the express or implied knowledge, permission, and consent of
23
the other Defendants, and ratified and approved the acts of the other Defendants.
24
17.
Defendants are the ultimate recipient of the ill-gotten gains described herein.
25
The fraudulent scheme at issue in this case was organized by executives working at the
26
highest levels of Defendants respective companies, and carried out by both executives
27
28
FACTUAL BACKGROUND
27
28
USCACase
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1
2
3
4
18.
a savings and loan. Banks loaned money and homeowners promised to repay the bank,
with interest, over a specific period of time. The originating bank kept the loan on its
balance sheet, and serviced the loan -- processing payments, and sending out applicable
notices and other information -- until the loan was repaid. The originating bank had a
financial interest in ensuring that the borrower was able to repay the loan.
10
20.
Today, however, the process has changed. Mortgages are now packaged,
11
bundled, and sold to investors on Wall Street through what is referred to in the financial
12
13
14
immediately being able to recover the amounts loaned. It also effectively eliminates the
15
financial institutions risk from potential default. But, by eliminating the risk of default,
16
mortgage backed securities have disassociated the lending community from homeowners.
17
21.
18
lenders and homeowners. Among other things, securitization has led to the development
19
20
for the hedge funds and investment houses who own the loans.
21
22.
22
homeowners. Instead, these companies are paid a set fee for their loan administration
23
services. Servicing fees are usually earned as a percentage of the unpaid principal balance
24
of the mortgages that are being serviced. A typical servicing fee is approximately 0.50%
25
per year.
26
23.
27
investors and noteholders, loan servicers assess fees on borrowers accounts for default-
28
related services. These fees include, inter alia, Brokers Price Opinion (BPO) fees,
27
28
5
CLASS ACTION COMPLAINT
USCACase
Case2:14-cv-02597-MCE-DAD
#14-5265
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of 437 of 43
24.
that homeowners stay current on their loans. Instead, they are focused on minimizing any
costs that would reduce profit from the set servicing fee, and generating as much revenue
as possible from fees assessed against the mortgage accounts they service. As such, their
business model . . . encourages them to cut costs wherever possible, even if [that]
involves cutting corners on legal requirements, and to lard on junk fees and in-sourced
9
10
25.
has explained:
While an investors financial interests are tied more or less
directly to the performance of a loan, the interests of a thirdparty servicer are tied to it only indirectly, at best. The servicer
makes money, to oversimplify it a bit, by maximizing fees
earned and minimizing expenses while performing the actions
spelled out in its contract with the investor. . . . The broad grant
of delegated authority that servicers enjoy under pooling and
servicing agreements (PSAs), combined with an effective lack
of choice on the part of consumers, creates an environment ripe
for abuse.4
11
12
13
14
15
16
17
18
26.
19
a major player in the residential mortgage servicing industry. In fact, Ocwen was the
20
21
22
23
24
25
See Adam J. Levitin, Robo-Singing, Chain of Title, Loss Mitigation, and Other Issues in
Mortgage Servicing, before the House Financial Services Committee, Subcommittee on
Housing and Community Opportunity, Nov. 18, 2010, available at
http://financialservices.house.gov/Media/file/hearings/111/Levitin111810.pdf (last visited
Feb. 1, 2012).
4
28
See Sarah Bloom Raskin, Member Board of Governors of the Federal Reserve System,
Remarks at the National Consumer Law Centers Consumer Rights Litigation Conference,
Boston Massachusetts, Nov. 12, 2010, available at
www.federalreserve.gov/newsevents/speech/raskin20101112a.htm (last visited Jan. 23,
2012).
27
26
27
28
USCACase
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of 438 of 43
fourth largest mortgage servicer in the United States in 2013, collecting payments on
27.
As larger banks have shifted their attention to servicing the mortgage loans of
their core customers -- i.e., prime loan borrowers who use their lending banks other
impaired, borrowers.
7
8
28.
9
10
11
12
13
14
15
16
17
18
19
20
29.
21
residential loans that [they] service are geographically dispersed throughout all 50 states,
22
23
24
25
26
See Karen Freifeld, Peter Rudegeair, and Andrew Hay, NY regulator suspects Ocwen
Financial of possible self-dealing, Reuters, Apr. 21, 2014, available at
http://www.reuters.com/article/2014/04/21/ocwen-financial-letteridUSL2N0ND0R120140421 (last visited, Nov. 5, 2014).
6
28
Ocwen Financial Corp, SEC FORM 10-K (Period Ending Dec. 31, 2013), available at
http://www.sec.gov/Archives/edgar/data/873860/000144530514000799/a2013123110k.ht
m (last visited April 1, 2014).
27
27
28
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of 439 of 43
the District of Columbia and two U.S. territories.7 The five largest concentrations of
December 31, 2013, are located in California, Florida, New York, Texas and New
Jersey.8 California has the largest concentration with 436,374 loans, approximately 15%
30.
revenue has jumped from $360 million in 2010 to a staggering $2 billion in 2013.10
7
8
31.
Ocwens rapid growth and business practices have not gone unnoticed by
10
11
Lawskys office and Ocwen in late 2012, a compliance monitor was installed at Ocwen in
12
13
14
32.
15
February 2014, Lawsky cautioned that Ocwens explosive growth raises red flags, that
16
he sees corners being cut by non-bank servicers like Ocwen, and that Ocwens use of
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Id.
Id.
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Id.
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James Sterngold and Saabira Chaudhuri, Ocwen to Restate Results After Accounting
Change, The Wall Street Journal, August 12, 2014, available at
http://online.wsj.com/articles/ocwen-financial-to-restate-some-results-1407852143 (last
visited, Nov. 5, 2014).
11
Michael Corkery, State Regulator Halts Deal Between Wells Fargo and Loan Servicer,
N.Y. Times, February 6, 2014, available at http://dealbook.nytimes.com/2014/02/06/newyork-regulator-halts-mortgage-servicing-rights-deal/?_php=true&_type=blogs&_r=0 (last
visited, Nov. 5, 2014).
12
Id.
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33.
Such concerns about Ocwens loan servicing practices are well-founded. For
companies like Ocwen, who are determined to maximize the money they earn from
servicing loans, the right to charge default-related service fees has opened the door to a
world of exploitation.
34.
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35.
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millions of loans it services to computer software programs. The software programs are
designed to manage homeowners loan accounts and assess fees, according to protocols
and policies designed by the executives at Ocwen.
36.
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Kate Berry, Lawsky Bashes Ocwen, Says Servicers Growth Raises Red Flags,
National Mortgage News, February 12, 2014, available at
http://www.nationalmortgagenews.com/mortgage-servicing/lawsky-bashes-ocwen-saysservicers-growth-raises-red-flags-1041092-1.html?zkPrintable=true (last visited, Nov. 5,
2014).
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37.
August 10, 2009, Ocwen completed the distribution of the Ocwen Solutions line of
businesses via the spin-off of Altisource.15 As part of the separation, William C. Erbey --
Ocwens Chairman of the Board and the owner of 13% of Ocwens common stock -- also
38.
As of June 30, 2014, Mr. Erbey owns approximately 27% of the common
stock of Altisource.17 He also has taken a very active role in the company. As Altisource
explains in its Form 10-K Statement, its success is dependent upon Mr. Erbeys
10
services, and the loss of his services could have a material adverse effect upon business,
11
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39.
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14
Ocwen Financial Corp, SEC FORM 10-K (Period Ending Dec. 31, 2012), available at
http://www.sec.gov/Archives/edgar/data/873860/000101905613000314/ocn_10k12a.htm
(last visited Sept. 9, 2013).
15
Ocwen Financial Corp., SEC Form 10-Q (Period Ending June 30, 2014), available at
http://www.housingwire.com/ext/resources/files/Editorial/Documents/SEC-ABEA6F4AAO-873860-14-16.pdf (last visited October 23, 2014).
18
See Altisource Portfolio Solutions S.A., SEC FORM 10-K (Period Ending Dec. 31,
2012), available at http://www.sec.gov/Archives/edgar/data/1462418/
000110465913009969/a13-2839_110k.htm (last visited Sept. 9, 2013).
10
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40.
This close and continuing relationship between Ocwen and Altisource was
the subject of a letter Benjamin Lawsky, New Yorks top bank regulator, sent to Ocwen
on February 26, 2014. In the letter, Lawsky addressed potential conflicts of interest
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41.
options in the affiliated companies, which raises the possibility that management has the
opportunity and incentive to make decisions concerning Ocwen that are intended to
benefit the share price of the affiliated companies, resulting in harm to borrowers,
42.
Risk Officer served in the same role for Altisource, and reported directly to Mr. Erbey in
both capacities.22 As Lawsky explained, Ocwen and Altisources joint Chief Risk
Officer seemed not to appreciate the potential conflicts of interest posed by this dual role,
10
which was particularly alarming given his role as Chief Risk Officer.23 Lawskys letter
11
further explains that the Chief Risk Officer told the on-site compliance monitor that
12
Ocwen paid his entire salary, but he did not know and apparently never asked which
13
company paid his risk management staff.24 Lawsky concluded that, while the Chief Risk
14
Officer has since been removed from his role at Altisource, his and Ocwens failure to
15
affirmatively recognize this conflict demonstrates that the relationship between Ocwen
16
17
43.
18
servicing practices . . . also found that Ocwen relies extensively on affiliated companies
19
for its information management system (from the programming of comment codes to
20
21
which further demonstrates the interconnected nature of Ocwens relationship with the
22
affiliated companies.26
23
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Id.
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Id.
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Id.
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Id.
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Id.
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Id.
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44.
purchase mortgage and technology services from Altisource under service agreements that
extend through 2020.27 Ocwen is now Altisources largest customer, accounting for 60%
45.
servicing practices, in April 2014 Lawsky sent Ocwen another letter addressing
13
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Altisource Portfolio Solutions S.A., SEC FORM 10-K (Period Ending Dec. 31, 2012),
available at http://www.sec.gov/Archives/edgar/data/1462418/
000110465913009969/a13-2839_110k.htm (last visited Sept. 9 2012).
28
Id.
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Ocwens use of related companies to provide fee based services.31 As Lawsky explained,
[b]ecause mortgage servicing presents the extraordinary circumstance where there is
effectively no customer to select a vendor for ancillary services, Ocwens use of related
companies to provide such services raises concerns about whether such transactions are
priced fairly and conducted at arms-length.32
47.
9
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On August 4, 2014, Lawsky sent yet another letter raising concerns about
Once again, Lawskys August 2014 letter was particularly concerned with
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Id.
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Id.
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dealings. According to OFCs most recent filing with the Securities and Exchange
Commission (SEC), on June 12, 2014 it received an SEC subpoena, in which the SEC
requested production of various documents relating to [OFCs] business dealings with
Altisource, HLSS, [Altisource Asset Management Corp], and Altisource Residential and
the interests of [OFCs] directors and executive officers in these companies.34
49.
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Despite the fact that Lawsky, the SEC, and other financial regulators have
raised significant concerns about the tangled web of conflicts between the entities,
14
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Lawsky is not the only regulator raising questions about Ocwens business
fraudulently concealed default-related fee income. Rather than simply obtain defaultrelated services directly from independent third-party vendors, and charge homeowners
for the actual cost of these services, Ocwen has a policy, practice, and procedure of
marking up fees for default-related services on homeowners loan accounts. As a result,
even though the mortgage market has collapsed, and more and more borrowers are falling
into delinquency, Ocwen continues to earn substantial profits.
25
26
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33
34
Ocwen Financial Corp., SEC Form 10-Q (Period Ending June 30, 2014), available at
http://www.housingwire.com/ext/resources/files/Editorial/Documents/SEC-ABEA6F4AAO-873860-14-16.pdf (last visited October 23, 2014).
15
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52.
coordinate default-related services, and, in turn, Altisource places orders for such services
with third-party vendors. The third-party vendors charge Altisource for the performance
of the default-related services, Altisource then marks up the price of the vendors services,
53.
disguise the marked-up fees for default-related services, Ocwen effectively side-steps the
10
54.
11
of two documents: (i) the promissory note (the Note); and (ii) the mortgage/security
12
instrument/deed of trust (the Deed of Trust). The mortgage contacts serviced by Ocwen
13
are substantially similar because they conform to the standard Fannie Mae form contract.
14
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55.
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The Deed of Trust discloses to homeowners that, in the event of default, the
(emphasis added.)
56.
The Deed of Trust further discloses that any such amounts disbursed by the
23
servicer to a third party shall become additional debt of the homeowner secured by the
24
Deed of Trust and shall bear interest at the Note rate from the date of disbursement.
25
(emphasis added.)
26
57.
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Payment of the Note Holders Costs and Expenses, if there is a default, the homeowner
28
will have to pay back costs and expenses incurred in enforcing the Note to the extent
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58.
Thus, the mortgage contract discloses to homeowners that the servicer will
pay for default-related services when reasonably necessary, and will be reimbursed or
borrowers that the servicer may engage in self-dealing to mark up the actual cost of those
59.
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60.
12
the disclosures made to borrowers. Furthermore, the wrongful nature of the marked-up
13
fees is demonstrated by the fact that Ocwen conceals the marked-up profits assessed on
14
15
61.
Although Ocwen assesses fees for BPOs on borrowers accounts in the range
16
of $100 to $109, as of December 2010, under Fannie Mae guidelines, the maximum
17
reimbursable rate for an exterior BPO was $80,35 and in practice, the actual cost was much
18
less. According to the National Association of BPO Professionals, the actual cost of a
19
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62.
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63.
See Fannie Mae, Broker Price Opinion Providers and Pricing Structure, available at
https://efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/ntce121710a.pdf (last visited Feb.
1, 2012).
36
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former wholly-owned subsidiary of OFC, began selling marked-up BPOs to Wall Street
64.
Ocwen Banks in-house BPO shop was the subject of the litigation styled
(D. Colo.) (Cartel). In Cartel, Cartel Asset Management, Inc. (CAM), a large
national BPO vendor, sued OFC, Ocwen Technology XChange, Inc., and Ocwen Bank for
theft of CAMs trade secret -- a confidential list of experienced, responsive and competent
realtors who produced high-quality BPOs.37 Ocwen Bank facilitated this theft by secretly
copying the names and contact information of realtors identified on BPOs that it
10
purchased from CAM, and then embedding the stolen information into its own incomplete
11
12
65.
13
the judgment was on appeal, OFC dissolved Ocwen Bank and transferred the database
14
containing the stolen names and contact information to OLS, who continued to use and
15
profit from CAMs trade secret. OLS was added as a defendant in Cartel after the Tenth
16
Circuit remanded for a new trial on damages. In September 2010, a jury returned a
17
verdict in CAMs favor for more than $13.7 million in compensatory and punitive
18
damages based on the theft of the trade secret.40 This jury verdict covered the period up
19
through August 10, 2009, the date when OFC transferred the BPO product line and the
20
database to its affiliated company Altisource. As with OLS before it, Altisource has
21
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23
66.
the following testimony, under penalty of perjury, concerning Ocwen Banks BPO
24
37
25
See Cartel, Case No. 1:01-cv-01644-REB-CBS, Dkt. 438 at 1-4 (D. Colo. Sept. 18,
2007).
26
38
Id. at 13-17.
27
39
Id. at 17-18.
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business:
[A]s of 2004, [Ocwen] Bank would pay an agent or broker
approximately $45 to $50 to provide a BPO and then sell the
BPO for a profit. A reviewed BPO would be sold for
approximately $150 and an unreviewed BPO for approximately
$70.41
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67.
routinely and repeatedly assesses borrowers BPO fees of $100 or more, representing a
100% mark-up, in clear violation of the mortgage contract.
68.
Ocwen also assesses fees for services related to the examination of the title to
the property securing the loan, all of which are ordered through Altisource. These fees
typically appear as a Title Search fee, a Title Report Fee, or fees for FC Thru Title
Searches on homeowners monthly statements.
69.
Upon information and belief, the title examination fees assessed by Ocwen
are significantly marked-up. For example, a title search fee typically ranges between
$150 and $450. Nevertheless, Ocwen routinely charges homeowners $829 for a Title
Search.
70.
third party property preservation vendors -- and its automated mortgage loan
management system, Ocwen engaged in a scheme to fraudulently conceal and assess
unlawfully marked-up fees for default-related services on homeowners loan accounts,
cheating hundreds of thousands of borrowers out of hundreds of millions dollars.
Furthermore, to conceal its activities and mislead homeowners about the true nature of its
actions, Ocwen employed a corporate practice that omits the true nature of the fees that
are being assessed on homeowners loan accounts. These practices are common to all of
Ocwens files.
71.
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72.
For subprime servicers such as Ocwen, late fees alone constitute a significant
fraction of its total income and profit. As a result, Ocwen has an incentive to push
5
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73.
payments, and then cascading their loan accounts with illicit late fees.
74.
These unlawful late fees have forced many homeowners into default, opening
the flood gates for additional late fees and significant charges for defaulted-related
services. Over time, these egregious late fees and fees for default-related services can
10
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75.
15
the Deed of Trust in the Fannie Mae a standard form mortgage contract, there is a
16
hierarchy in which funds from customer payments are to be applied. Specifically, funds
17
are to be applied in the following order: (1) interest due under the promissory note; (2)
18
principal due under the promissory note; (3) amounts due for any escrow items; (4) late
19
charges; and (5) fees for default-related services and other amounts. Escrow items are
20
generally defined as taxes or assessments which may take priority over the lenders
21
interest in the property and premiums for insurance a homeowner is required to have
22
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77.
One way Ocwen misapplies payments is to divert a portion of the interest and
24
principal payments made by homeowners who pay their own property taxes and maintain
25
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78.
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monthly payment cannot be diverted to an escrow account until that payment covers, in
27
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full, the borrowers interest and principal payment due in that given month.
79.
mortgage contracts and diverts customer payments away from principal and interest on
the loan.
80.
As a result of this violation, homeowners who timely pay their own real
estate taxes and insurance premiums are denied the proper interest and principal credits
under the loan agreement. Ocwen instead diverts a portion of the funds (which end up not
being needed to pay escrow items) to an escrow account or flat out rejects the payment.
81.
10
in full, their monthly interest and principal obligations forces homeowners into default.
11
Once in default, Ocwen then makes demands that these homeowners make significant
12
payments, which are riddled with unjust late and default-related service fees.
13
82.
Additionally, when Ocwen forces homeowners who pay their own property
14
taxes and maintain their own insurance into default by misapplying their payments to an
15
escrow account, these homeowners are denied the ability to access the surplus in their
16
escrow account.
17
83.
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Ocwen, in essence, is using the escrow account as one way to justify the late
21
22
Under the terms of the loan agreement, Ocwen will refund homeowners their
85.
23
form of the difference between the actual cost of the services provided and the marked-up
24
fees assessed on homeowners loan accounts, homeowners suffer other, less obvious
25
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86.
27
homeowners to become current on their loan. Charges for such default-related services
28
can add hundreds or thousands of dollars to homeowners loans over time, driving them
27
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2
When homeowners get behind on their mortgage, and fees for these default-
related services are stacked on to the past-due principal and interest payments, Ocwens
practices make it increasingly difficult for homeowners to ever bring their loan current.
Even if homeowners pay the delinquent principal and interest payments, the late and
default-related service fees ensure that homeowners stay in default. Although the next
homeowners bank accounts, part of the payment is applied to the fees first, so there is not
enough to cover the entire monthly payment. This makes that payment late, creating a
10
cascade of more fees, and more arrears, that keeps homeowners in delinquency. By the
11
time homeowners are aware, Ocwen is threatening to foreclose unless a huge payment is
12
made, and the weight of these marked-up fees drops homeowners into a financial abyss.
13
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88.
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90.
Plaintiff Weiner originated his loan with Mylor Financial on December 10,
2003, for $322,700 at 6.5000%. His monthly interest and principal payment was
$2,039.68.
91.
mortgage. However, on or around late 2012 or early 2013, Ocwen took over the servicing
of Plaintiff Weiners mortgage.
92.
escrow account established after GMAC paid Plaintiff Weiners property taxes in 2010.
93.
Plaintiff Weiner fully reimbursed GMAC in early 2011 for the property taxes
it paid. He also paid a $400 escrow fee. Following this incident, Plaintiff Weiner had
telephone conversations with GMAC staff where he arranged that he would pay his own
property taxes going forward. Plaintiff Weiner promised to provide timely proof of said
22
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payments.
94.
Since making this arrangement, Plaintiff Weiner has paid in full all property
taxes associated with his property and has maintained the proper insurance required by his
mortgage contract. Plaintiff Weiner also has always provided Ocwen with timely notice
95.
premium payments, Ocwen charges Plaintiff Weiner a fee of $600 per year for
maintaining an escrow account, and it has failed to properly apply his interest and
principal payments to his loan. Instead, Ocwen has diverted funds to his escrow account.
10
Although Ocwen has never once used it to pay property taxes or insurance, and Plaintiff
11
Weiners escrow account has a positive balance of more than $10,000. More recently,
12
Ocwen has flat out rejected Plaintiff Weiners interest and principal payments on the basis
13
that they are not sufficient to satisfy the defaulted amount on the loan, i.e., interest and
14
15
16
17
96.
to an escrow account, Ocwen has failed to properly credit Plaintiff Weiners account.
97.
18
payments has burdened his account with unscrupulous fees and has forced his loan into
19
default.
20
98.
Plaintiff Weiner not only has been denied the right to have his payments
21
applied correctly to his loan account, but he has also been unable to claim interest
22
deductions on his federal and state tax returns, refinance his loan, has been subjected to
23
harassing telephone calls, and has been under the constant fear of imminent foreclosure.
24
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99.
Because Ocwen has forced his loan into default, Plaintiff Weiner has been
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other default-related service fees that are either not legally due under the mortgage
contract and applicable law, or that are in excess of amounts legally due.
5
6
7
103. Ocwen assessed a Title Search fee in the amount of $829 on the mortgage
account of Plaintiff Weiner on June 9, 2014.
104. Ocwen alone maintains a complete accounting of all fees assessed and paid,
and the details of each and every fee assessed and paid cannot be alleged with complete
10
and believes, and on that basis alleges, that he paid some or all of the unlawful fees
11
12
13
STATUTE OF LIMITATIONS
105. Any applicable statutes of limitations have been tolled by Ocwens knowing
14
and active concealment, denial, and misleading actions, as alleged herein. Plaintiff and
15
members of the Class, as defined below, were kept ignorant of critical information
16
required for the prosecution of their claims, without any fault or lack of diligence on their
17
part. Plaintiff and members of the Class could not reasonably have discovered the true
18
19
106. Ocwen is under a continuous duty to disclose to Plaintiff and members of the
20
classes the true character, quality, and nature of the default-related service fees they assess
21
22
continues to conceal, the true character, quality, and nature of its assessment of marked-up
23
fees on homeowners loan accounts. Plaintiff and members of the Class reasonably relied
24
upon Ocwens knowing, affirmative, and active concealment. Based on the foregoing,
25
Ocwen is estopped from relying on any statutes of limitation as a defense in this action.
26
107. The causes of action alleged herein did or will only accrue upon discovery of
27
the true nature of the charges assessed against borrowers accounts, as a result of Ocwens
28
continuing fraudulent concealment of material facts. Plaintiff and members of the Class
27
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24
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did not discover, and could not have discovered, through the exercise of reasonable
diligence, the true nature of the unlawful fees assessed against their accounts.
108. Legal scholars have explained that, as a result of these deceptive practices, it
is impossible for borrowers to determine that they are victims of these violations, because
without a true itemization that identifies the nature of each fee, parties cannot verify that
charging fees that are not permitted by law or by the terms of the contract. . . . By
obscuring the information needed to determine the alleged basis for the charges, servicers
thwart effective review of mortgage claims. The system can only function as intended if
10
11
12
heart of the problem is [the loan servicers] failure to disclose to its borrowers/debtors, the
13
trustee, or the Court, the nature or amount of fees and charges assessed . . . [l]ack of
14
disclosure facilitates the injury. Naive borrowers/debtors, trustees and creditors rightly
15
assume that [the loan servicer] is complying with the plain meaning of its notes,
16
mortgages, court orders and confirmed plans. Why would anyone assume otherwise? . . .
17
How are they to challenge a practice or demand correction of an error they do not know
18
exists.43
19
20
110. Plaintiff brings this action, on behalf of himself and all others similarly
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situated, as a class action under Rule 23 of the Federal Rules of Civil Procedure.
111. The classes Plaintiff seeks to represent (collectively, the Class) are defined
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as follows:
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See In re: Jones, 418 B.R. 687, 699 (E.D. La. 2009).
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112. Plaintiff reserves the right to amend the Class definitions if discovery and
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further investigation reveals that the Class should be expanded or otherwise modified.
113. Plaintiff reserves the right to establish sub-classes as appropriate.
114. This action is brought and properly may be maintained as a class action
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under the provisions of Federal Rules of Civil Procedure 23(a)(1)-(4) and 23(b)(1), (b)(2)
or (b)(3), and satisfies the requirements thereof. As used herein, the term Class
Members shall mean and refer to the members of the Class.
115. Numerosity: While the exact number of members of the Class is unknown to
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Plaintiff at this time and can only be determined by appropriate discovery, membership in
the Class is ascertainable based upon the records maintained by Ocwen. At this time,
Plaintiff is informed and believe that the Class includes hundreds of thousands of
members. Therefore, the Class is sufficiently numerous that joinder of all members of the
Class in a single action is impracticable under Federal Rule of Civil Procedure Rule
23(a)(1), and the resolution of their claims through the procedure of a class action will be
of benefit to the parties and the Court.
116. Ascertainablity: Names and addresses of members of the Class are available
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from Ocwen. Notice can be provided to the members of the Class through direct mailing,
publication, or otherwise using techniques and a form of notice similar to those
customarily used in consumer class actions arising under California state law and federal
law.
117. Typicality: Plaintiffs claims are typical of the claims of the other members
of the Class which they seek to represent under Federal Rule of Civil Procedure 23(a)(3)
because each Plaintiff and each member of the Class has been subjected to the same
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deceptive and improper practices and has been damaged in the same manner thereby.
118. Adequacy: Plaintiff will fairly and adequately represent and protect the
interests of the Class as required by Federal Rule of Civil Procedure Rule 23(a)(4).
Plaintiff is an adequate representative of the Class, because he has no interests which are
adverse to the interests of the members of the Class. Plaintiff is committed to the
vigorous prosecution of this action and, to that end, Plaintiff has retained counsel who are
119. Superiority: A class action is superior to all other available methods of the
fair and efficient adjudication of the claims asserted in this action under Federal Rule of
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(b)
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redress their claims other than through the procedure of a class action;
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and
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(c)
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absent a class action, Ocwen likely would retain the benefits of their
wrongdoing, and there would be a failure of justice.
120. Common questions of law and fact exist as to the members of the Class, as
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required by Federal Rule of Civil Procedure 23(a)(2), and predominate over any questions
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which affect individual members of the Class within the meaning of Federal Rule of Civil
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Procedure 23(b)(3).
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121. The common questions of fact include, but are not limited to, the following:
(a)
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(b)
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(d)
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(h)
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122. In the alternative, this action is certifiable under the provisions of Federal
Rule of Civil Procedure 23(b)(1) and/or 23(b)(2) because:
(a)
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(b)
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(c)
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123. Plaintiff is not aware of any difficulty which will be encountered in the
management of this litigation which should preclude its maintenance as a class action
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124. Plaintiff incorporates by reference in this cause of action each and every
allegation of the preceding paragraphs, with the same force and effect as though fully set
forth herein.
125. Plaintiff Weiner brings this cause of action on behalf of himself and the
members of the California Subclass.
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126. California Business and Professions Code section 17200 prohibits any
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unlawful, unfair or fraudulent business act or practice. For the reasons described above,
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127. In the course and conduct of their loan servicing and collection, Ocwen
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knowingly, affirmatively, and actively concealed the true character, quality, and nature of
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Relying on Ocwen, Plaintiff Weiner, and members of the California Subclass believe they
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128. In truth and in fact, borrowers are not obligated to pay the amounts that have
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BPOs and title searches. Ocwen disguises the fact that the amounts they represent as
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being owed have been marked-up beyond the actual cost of the services, violating the
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disclosures in the mortgage contract. Contrary to Ocwens communications, they are not
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129. Ocwens knowing, affirmative, and active concealment, as set forth herein,
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constitutes an unlawful practice because it violates Title 18 United States Code sections
1341, 1343, and 1962, as well as California Civil Code sections 1572, 1573, 1709, 1710,
and 1711, Californias Rosenthal Fair Debt Collection Practices Act, and the common
law.
131. Ocwens knowing, affirmative, and active concealment, as set forth herein,
also constitute unfair business acts and practices within the meaning of California
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Business and Professions Code sections 17200 et seq., in that Ocwens conduct was
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injurious to consumers, offended public policy, and was unethical and unscrupulous.
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Plaintiff Weiner also asserts a violation of public policy by concealing material facts from
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fraudulent business act or practice. Ocwens concealment of material facts, as set forth
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above, was false, misleading, or likely to deceive the public within the meaning of
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California Business and Professions Code section 17200. Ocwens concealment was
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made with knowledge of its effect, and was done to induce Plaintiff Weiner and members
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of the California Subclass to pay the marked-up default related service fees.
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134. Plaintiff Weiner and members of the California Subclass relied on their
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reasonable expectation that Ocwen would comply with the disclosures set forth in the
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mortgage agreement, Notes, and Deeds of Trust, and as a result, Plaintiff Weiner and
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members of the California Subclass relied on Ocwens disclosures about the fees on their
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statements, reasonably believing the default-related service fees to be valid charges that
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were not marked-up. Indeed, to lull borrowers into a sense of trust and dissuade them
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from challenging Ocwens unlawful fee assessment, Ocwen concealed their scheme from
borrowers by telling them, in statements and other documents, that such fees are in
accordance with the terms of their mortgage. Had the true nature of the fees been
disclosed to Plaintiff Weiner and the members of the California Subclass, they would
have been aware of the mark-ups and Plaintiff Weiner and the members of the California
Subclass would have disputed the charges and not paid them.
135. Plaintiff Weiner and the members of the California Subclass have been
injured in fact and suffered a loss of money or property as a result of Ocwens fraudulent,
unlawful, and unfair business practices. Plaintiff Weiner and the members of the
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California Subclass would not have paid Ocwens unlawful fees or they would have
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challenged the assessment of such fees on their accounts had it not been for Ocwens
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136. Ocwen has thus engaged in unlawful, unfair, and fraudulent business acts
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entitling Plaintiff Weiner and the members of the California Subclass to judgment and
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equitable relief against Ocwen, as set forth in the Prayer for Relief.
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137. Additionally, under Business and Professions Code section 17203, Plaintiff
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Weiner and members of the California Subclass seek an order requiring Ocwen to
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immediately cease such acts of unlawful, unfair, and fraudulent business practices, and
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138.
allegation of the preceding paragraphs, with the same force and effect as though fully set
forth herein.
139. Plaintiff brings this cause of action on behalf of himself and the members of
the Class.
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THE ENTERPRISE
140. Defendants OFC and OLS are persons within the meaning of Title 18
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1962(c), Ocwen, including their directors, employees, and agents, along with Altisource
enterprise, as that term is defined in Title 18 United States Code section 1961(4) (the
Ocwen Enterprise). The affairs of the Ocwen Enterprise affected interstate commerce
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142. The Ocwen Enterprise is an ongoing, continuing group or unit of persons and
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entities associated together for the common purpose of limiting costs and maximizing
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profits by fraudulently concealing assessments for unlawfully marked-up fees for default-
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143. While the members of the Ocwen Enterprise participate in and are part of the
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enterprise, they also have an existence separate and distinct from the enterprise. The
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Ocwen Enterprise has a systematic linkage because there are contractual relationships,
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agreements, financial ties, and coordination of activities between Ocwen, Altisource, and
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developed and established by its executives, Ocwen controls and directs the affairs of the
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Ocwen Enterprise and uses the other members of the Ocwen Enterprise as
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unlawful mark-ups of services provided by third parties; providing statements that conceal
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the true nature of the marked-up default related service fees; using mortgage loan
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repeated, and unlawful, assessment of marked-up fees for default-related services, Ocwen
engaged in the conduct of the Ocwen Enterprise distinct from Ocwens own affairs as a
loan servicer.
THE PREDICATE ACTS
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unlawfully marked-up third party fees on the mortgage accounts of homeowners who
have mortgage loans administered by Ocwen, as described above, was facilitated by the
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use of the United States Mail and wire. The Ocwen Enterprises scheme constitutes
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racketeering activity within the meaning of Title 18 United States Code section 1961(1),
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as acts of mail and wire fraud, under Title 18 United States Code sections 1341 and 1343.
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148. In violation of Title 18 United States Code sections 1341 and 1343, the
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Ocwen Enterprise utilized the mail and wire in furtherance of their scheme to defraud
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borrowers whose loans are serviced by Ocwen by obtaining money from borrowers using
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149. Through the mail and wire, the Ocwen Enterprise provided mortgage
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agreements.
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151. Furthermore, to lull homeowners into a sense of trust and dissuade them from
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challenging Ocwens unlawful fee assessment, Ocwen concealed their scheme from
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borrowers by telling them, in statements and other documents, that such fees are in
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borrowers disguised the fact that the default-related service fees assessed on homeowners
accounts were marked-up. By disguising the true nature of amounts purportedly owed in
communications to borrowers, the Ocwen Enterprise made false statements using the
Internet, telephone, facsimile, United States mail, and other interstate commercial carriers.
153. This fraudulent concealment was material to Plaintiff and the members of the
Class. Had the Ocwen Enterprise disclosed the true nature of the fees for default-related
services, Plaintiff would have been aware of the mark-up, and would have challenged
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154. Each of these acts constituted an act of mail fraud for purposes of Title 18
United States Code section 1341.
155. Additionally, using the Internet, telephone, and facsimile transmissions to
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fraudulently communicate false information about these fees to borrowers, to pursue and
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achieve their fraudulent scheme, the Ocwen Enterprise engaged in repeated acts of wire
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156. The Ocwen Enterprises knowledge that its activities were fraudulent and
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unlawful is evidenced by, among other things, the fact that they concealed the marked-up
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activity within the meaning of Title 18 United States Code section 1961(5) in which the
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Ocwen Enterprise have engaged under Title 18 United States Code section 1962(c).
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158. All of the predicate acts of racketeering activity described herein are part of
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the nexus of the affairs and functions of the Ocwen Enterprise racketeering enterprise.
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The racketeering acts committed by the Ocwen Enterprise employed a similar method,
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were related, with a similar purpose, and they involved similar participants, with a similar
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impact on the members of the Class. Because this case is brought on behalf of a class of
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similarly situated borrowers and there are numerous acts of mail and wire fraud that were
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used to carry out the scheme, it would be impracticable for Plaintiff to plead all of the
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details of the scheme with particularity. Plaintiff cannot plead the precise dates of all of
the Ocwen Enterprises uses of the mail and wire because this information cannot be
159. The pattern of racketeering activity is currently ongoing and open-ended, and
threatens to continue indefinitely unless this Court enjoins the racketeering activity.
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conduct that by its nature, projects into the future with a threat of repetition.
161. As a direct and proximate result of these violations of Title 18 United States
Code sections 1962(c) and (d), Plaintiff and members of the class have suffered
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substantial damages. Members of the Ocwen Enterprise are liable to Plaintiff and
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members of the Class for treble damages, together with all costs of this action, plus
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reasonable attorneys fees, as provided under Title 18 United States Code section 1964(c).
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162. Plaintiff incorporates by reference in this cause of action each and every
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allegation of the preceding paragraphs, with the same force and effect as though fully set
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forth herein.
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163. Plaintiff brings this cause of action on behalf of himself and the members of
the Nationwide Class.
164. As set forth above, in violation of Title 18 United States Code section
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1962(d), Defendants conspired to violate the provisions of Title 18 United States Code
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section 1962(c).
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165. As set forth above, Ocwen, having directed and controlled the affairs of the
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the Ocwen Enterprise, was aware of the nature and scope of the enterprises unlawful
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166. As a direct and proximate result, Plaintiff and the members of the Class have
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been injured in their business or property by the predicate acts which make up the Ocwen
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167. Plaintiff incorporates by reference in this cause of action each and every
allegation of the preceding paragraphs, with the same force and effect as though fully set
forth herein.
168. Defendants are debt collectors within the meaning of California Civil Code
section 1788.2(c), because Defendants sent mortgage bills to Plaintiff and members of the
California Subclass, Plaintiff and members of the California Subclass made their
mortgage payments to Defendants, Defendants accepted those payments, and Defendants
made demands for payment, including the payment of marked-up fees for default-related
services, by sending letters, making telephone calls, and other attempts to collect
mortgage payments and fees.
169. The marked-up fees for default-related services purportedly owed by Plaintiff
and members of the California Subclass are a debt within the meaning of California
Civil Code section 1788.2(d), because they are money, property or their equivalent
which [are] due or owing or alleged to be due or owing from a natural person to another
person.
170. As alleged herein, and as set forth in detail above, Defendants have
committed violations of the Rosenthal Fair Debt Collection Practices Act, California Civil
Code section 1788, et seq. (RFDCPA), which incorporates by reference, and requires
compliance with, the provisions of the federal Fair Debt Collection Practices Act
(FDCPA), 15 U.S.C. 1692
171. The FDCPA and, therefore, the RFDCPA, prohibits a debt collector from
using any false, deceptive, or misleading representation or means in connection with the
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material facts, namely the fact that Defendants assessed borrowers accounts for marked-
173. Pursuant to California Civil Code sections 1788.17 and 1788.30, Plaintiff and
members of the California Subclass are entitled to recover actual damages sustained as a
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the RFDCPA were committed willingly and knowingly, Plaintiff and members of the
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174. Pursuant to California Civil Code sections 1788.17 and 1788.30, Plaintiff and
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the California Subclass are entitled to recover all attorneys fees, costs, and expenses
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Unjust Enrichment
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175. Plaintiff incorporates by reference in this cause of action each and every
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allegation of the preceding paragraphs, with the same force and effect as though fully set
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forth herein.
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176. Plaintiff brings this cause of action on behalf of himself and the members of
the Class.
177. By their wrongful acts and omissions of material facts, Ocwen was unjustly
enriched at the expense of Plaintiff and members of the Class.
178.
The mortgage contract with borrowers like Plaintiff and the members of the
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Class discloses that Ocwen will pay for default-related services when necessary, and they
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that Ocwen may mark-up the actual cost of those services to make a profit.
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179. Nevertheless, Ocwen marks-up the prices charged by vendors, often by 100%
or more, and then, assesses borrowers accounts for the higher, marked-up fee so that
180. Furthermore, to lull homeowners into a sense of trust and dissuade them from
challenging Ocwens unlawful fee assessment, Ocwen further conceals their scheme from
borrowers by telling them, in statements and other documents, that such fees are in
181. Thus, Plaintiff and members of the Class were unjustly deprived.
182. It would be inequitable and unconscionable for Ocwen to retain the profit,
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benefit and other compensation they obtained from their fraudulent, deceptive, and
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183. Plaintiff and members of the Class seek restitution from Ocwen, and seek an
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order of this Court disgorging all profits, benefits, and other compensation obtained by
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Fraud
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184. Plaintiff incorporates by reference in this cause of action each and every
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allegation of the preceding paragraphs, with the same force and effect as though fully set
19
forth herein.
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185. Plaintiff brings this cause of action on behalf of himself and the members of
the Nationwide Class.
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186. Plaintiff reasonably expected that Ocwen would comply with the disclosures
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set forth in the mortgage agreement, Notes, Deeds of Trust, and as a result, Plaintiff relied
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on Ocwens disclosures about the fees on their statements, reasonably believing the
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187. To lull homeowners into a sense of trust and dissuade them from challenging
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Ocwens unlawful fee assessment, Ocwen concealed their scheme from borrowers by
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telling them, in statements and other documents, that such fees are in accordance with the
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Class, they would have been aware of the mark-up, and Plaintiff would have disputed the
Class have been injured in fact and suffered a loss of money or property. Plaintiff and
members of the Nationwide Class would have challenged the assessment of such fees on
their accounts had it not been for Ocwens concealment of material facts.
190. Ocwen concealed material facts, as discussed above, with knowledge of the
10
effect of concealing of these material facts. Ocwen knew that by misleading consumers,
11
12
191. Plaintiff and members of the Nationwide Class justifiably relied upon
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borrowers accounts, Ocwen intended to induce Plaintiff and members of the Nationwide
16
Class into believing that they owed Ocwen money that it was not actually entitled to.
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concealment of material facts, Plaintiff and each member of the Nationwide Class has
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Breach of Contract
23
194. Plaintiff incorporates by reference in this cause of action each and every
24
allegation of the preceding paragraphs, with the same force and effect as though fully set
25
forth herein.
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195. Plaintiff brings this cause of action on behalf of himself and the members of
the Nationwide Class.
196. Ocwen assumed the obligations of Plaintiffs mortgage agreement, and the
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mortgage agreement of all Class members, when it took over the servicing of their loans.
197. Plaintiff satisfied his obligations under the mortgage agreement by making
timely payments of principal and interest.
Plaintiff and members of the Class, placing such payments in suspense accounts without
authorization by the mortgage agreements, and assessing late fees not authorized under
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199. Ocwen knew or should have known that misapplying timely payments was
and continues to be a material breach of homeowners mortgage agreements.
200. Ocwen is in further breach of contract by treating Plaintiff and members of
11
the Class as if they were in default due to the misapplied payments, when, in fact, Plaintiff
12
and members of the Class are not delinquent under the mortgage agreement.
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representative of the Class, and appointing Plaintiffs counsel as counsel for the Class;
2.
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including: enjoining Ocwen from continuing the unlawful practices as set forth herein,
and directing Ocwen to identify, with Court supervision, victims of its conduct and pay
them restitution and disgorgement of all monies acquired by Ocwen by means of any act
7.
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incurred in connection with the commencement and prosecution of this action; and
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For such other and further relief as the Court deems just and proper.
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Plaintiff hereby demands a trial of his claims by jury to the extent authorized by
law.
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