Ocwen Adjusts Servicing Practices to Appease Regulator

Subprime servicing specialist Ocwen Federal Bank FSB last month entered into a supervisory agreement with its regulator, promising to end certain billing practices and to expedite its handling of consumer complaints.

The Office of Thrift Supervision has been monitoring the West Palm Beach, Fla., thrift for several years in the wake of consumer complaints that continue to dog the company.

OTS did not levy any fines against the federally chartered thrift but nonetheless is demanding quick action to implement a "best practices" approach to servicing that is outlined in the supervisory agreement.

OTS also is demanding detailed monthly reporting on its implementation of the agreement, including reports on all unresolved consumer complaints that have been outstanding for 30 days.

Ocwen chairman and chief executive William Erbey said the company is committed to excellence in customer service. "We are grateful for the insights gained in our ongoing dialogue with OTS and consumer interest organizations, and will continue to strive for ways to better serve our clients."

The supervisory agreement builds on the steps Ocwen has take to establish a consumer ombudsman program and to eliminate charges for default notices.

Ocwen also agreed to expedite pay-off quotes, drop charges for forbearance agreements and implement safeguards on force-placed insurance so consumers are not double-charged for hazard insurance.

Ocwen is the target of several class-action lawsuits that allege the company engages in abusive servicing practices, such as charging borrowers for force-placed insurance when the borrower already has insurance. Ocwen disputes the allegations.

The lawsuits generally claim that Ocwen is failing to post monthly mortgage payments properly, charging inappropriate late fees, prematurely referring accounts to collections and forcing homeowners into default as part of a scheme to generate fee income.

Some of the same class-action attorneys who forced another subprime servicer, Fairbanks Capital Corp., Salt Lake City, into a $15 million settlement, have filed lawsuits against Ocwen. Ocwen considers the litigation to be "copycat" suits that are without merit.

Fitch Ratings said it views the supervisory agreement positively because OTS did not assess any fines or penalties against Ocwen and the regulator did not cite any violations of laws or regulations.

The New York credit rating agency does not believe the agreement will have much of a financial impact on the company and Fitch is not changing Ocwen's debt or servicer ratings.

"The servicer ratings continue to remain on Rating Watch Negative where they were placed on Dec. 4, 2003, pending Fitch's determination of the impact of the recently filed purported class-action lawsuits brought against Ocwen," Fitch said.

The supervisory agreement attempts to address some of the problems consumers have in getting Ocwen to provide written loan pay-off quotes when they try to refinance with another lender or pay off the note.

Ocwen agreed to provide borrowers loan pay-off quotes within seven days of a request and to itemize all charges. "Only supportable and actual fees and charges may be included in such quotes," the agreement says.

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