If you have or had a mortgage serviced by Ocwen, which is the largest non-bank mortgage servicer in the country, you might get mortgage relief due to a recent settlement. Under the settlement, certain borrowers with mortgage loans that are currently serviced by Ocwen are eligible for principal reductions and, if you lost your home to foreclosure and Ocwen (or a company purchased by Ocwen) was the servicer at the time of the foreclosure, you may be entitled to receive a cash payment.
Read on to learn more about the Ocwen settlement, who is eligible for relief under the settlement, and the types of relief available if you qualify.
The Ocwen Settlement
An investigation into Ocwen’s foreclosure activities over the past several years revealed extensive loan servicing misconduct, including (among other things):
- robosigning (where foreclosure documents were signed by people who had no knowledge about whether the information contained in the documents was correct)
- charging improper fees
- providing false or misleading reasons for denying loan modifications, and
- failing to honor in-process loan modifications agreed to by prior servicers.
To hold Ocwen accountable for these servicing violations, 49 state attorneys general, the District of Columbia, and the Consumer Financial Protection Bureau (CFPB) reached a settlement with Ocwen Financial Corp. and its subsidiary, Ocwen Loan Servicing, in December of 2013.
Relief Provided by the Settlement
Once entered by the court, the settlement will require Ocwen to provide the following forms of relief to eligible borrowers.
Ocwen Must Provide Cash Payouts to Borrowers Who Lost Their Homes to Foreclosure
The settlement requires Ocwen to pay $125 million to certain borrowers who went through a foreclosure between January 1, 2009 and December 31, 2012.
Who can benefit. To receive a cash payment, Ocwen or one of the companies purchased by Ocwen (Litton Loan Servicing LP and Homeward Residential Holdings LLC, which was previously known as American Home Mortgage Servicing, Inc. or “AHMSI”) must have been your loan servicer at the time of foreclosure. (The company that you make your monthly mortgage payment to is your mortgage servicer.)
You must also meet all of the following criteria.
- You made at least three payments on the loan.
- You lived or intended to live in the property as your principal place of residence at the time you took out the loan.
- The property was a one to four unit residential property.
- The unpaid principal balance of the first-lien was no more than $729,750 for a one-unit property, $934,200 for a two-unit property, $1,129,250 for a three-unit property, or $1,403,400 for a four-unit property.
- You must make a valid claim. (Supposedly, the settlement administrator will mail you a Notice Letter and Claim form, though you may want to provide your current contact information to your state attorney general’s office to ensure that you receive one.)
Amount of the payout. Each successful claimant will receive an equal portion of the $125 million. The amount is expected to exceed $1,000 per claimant, though the actual amount will vary based on how many claims are filed.
Other claims. You do not have to release any claims and are free to seek additional relief in the courts (for example, you can still file a lawsuit) even if you receive a payment under the settlement.
Loan Modifications for Struggling Homeowners
The settlement also orders Ocwen to provide $2 billion in principal reductions to eligible underwater borrowers who are at risk of foreclosure. To accomplish this, Ocwen will offer write-down loan modifications to eligible borrowers. (A “write-down” loan modification reduces the principal balance on the loan. A lower principal balance results in lower monthly payments.)
Who can benefit. To be eligible, Ocwen must currently service your loan. (To find out who your mortgage servicer is, look at your mortgage payment coupon. You can also call Ocwen at 800-337-6695 to find out if it is your servicer.)
Notification. Ocwen will notify borrowers who are eligible for loan modifications. However, if Ocwen is your loan servicer, you are encouraged to call the company directly to find out if you are eligible. The settlement does not indicate which borrowers will get modifications so it may be in your best interest to be proactive in finding out if you are eligible under the settlement.
Ocwen Must Adhere to New Servicing Standards
In addition, the settlement requires Ocwen to comply with the standards for servicing loans found in the National Mortgage Settlement. (Learn more in Nolo’s article National Mortgage Settlement: New Rules Help Protect Homeowners in Foreclosure.)
Ocwen must also comply with further consumer protections. For example:
- If a loan is transferred to Ocwen, it must determine the status of a pending loss mitigation request within 60 days of transfer. Until then, Ocwen cannot refer a loan to foreclosure, initiate a foreclosure, or proceed with foreclosure.
- Ocwen must honor loan modifications that were agreed to by the prior servicer.
- Ocwen must assign a single point of contact to each borrower who requests loss mitigation. If the single point of contact is not available when a borrower calls in, other personnel with access to the borrower’s information must be available if the borrower wants to speak to someone immediately.
- Servicing fees must be legitimate.
(These standards are in addition to the new CFPB mortgage servicing rules that went into effect on January 10, 2014. Learn more in Nolo’s article New Federal Rules Protecting Homeowners With Mortgages.)