The nation’s largest servicer of subprime mortgages has engaged in abuses that could potentially harm hundreds of thousands of borrowers, according to the New York Superintendent of Financial Services.
The state regulator issued a letter Tuesday to Ocwen Financial Corp., documenting many of the same kinds of abuses that worsened the housing crisis and the Great Recession.
Ocwen inappropriately backdated foreclosure warnings and letters that denied mortgage loan modifications, making it nearly impossible for borrowers to appeal the company’s decision, according to the letter from Benjamin Lawsky, New York’s Superintendent of Financial Services.
Many borrowers who had fallen behind on their payments also received warning letters months after the deadline for avoiding foreclosure had already passed.
The agency also determined that Atlanta-based Ocwen failed to investigate the backdating of its letters to borrowers nearly a year after an employee raised questions about the practice.
“The existence and pervasiveness of these issues raise critical questions about Ocwen’s ability to perform its core function of servicing loans,” Lawsky wrote in the letter.
The letter refrains from saying whether the backdating was intentional or the result of poor oversight by Ocwen.
In a statement Tuesday, Ocwen blamed software errors in the company’s correspondence systems for the improperly dated letters to at least 281 of its borrowers in New York who received letters with incorrect dates.
The company added that it is investigating two other cases and cooperating with New York’s Financial Services department.
“We believe that we have resolved the letter-dating issues that have been identified to date, and we continue our investigation as to whether there are additional letter-dating issues that need to be resolved,” the company said.
Lawsky launched a probe into Ocwen in August amid allegations that Ocwen overcharged struggling homeowners on a product called force-placed insurance, which servicers force borrowers to buy if they don’t maintain voluntary homeowners’ insurance.
If mortgage borrowers don’t pay up for newly purchased insurance, Ocwen forecloses on their homes.
Ocwen managed $106 billion worth of subprime mortgages at the start of 2014, according to Inside Mortgage Finance.
Ocwen shares slid $4.80, or 18 percent, to $21.46 in afternoon trading.
The stock is down 61 percent this year.
From The Associated Press. Josh Boak in Washington contributed to this report.
