UPDATE 1-U.S. orders mortgage servicer Ocwen to give borrowers $2 bln in relief

Thursday, 19 Dec 2013 | 1:37 PM ET


WASHINGTON, Dec 19 (Reuters) - U.S. officials on Thursday ordered the largest nonbank mortgage servicer to provide $2 billion in help to underwater borrowers to resolve allegations of misconduct that led to thousands of people losing their homes.

Ocwen Financial Corp must reduce loan balances for struggling homeowners and refund $125 million to foreclosed borrowers under a consent order with the U.S. Consumer Financial Protection Bureau and officials from 49 states and the District of Columbia.

Ocwen, which is the fourth-largest mortgage servicer in the country, failed to account for borrowers' payments, gave false reasons for denying loan modifications and robo-signed legal documents, the consumer bureau said.

"Deceptions and shortcuts in mortgage servicing will not be tolerated," Director Richard Cordray said in a statement.

Ocwen separately disclosed the agreement on Thursday and said it had already set aside funds to cover all but about $500,000 of the required refund payments.

Ocwen did not admit to the allegations, according to court documents.

Mortgage servicers include banks and nonbank firms that collect borrowers' payments, communicate with them about modifying loans in distress and handle foreclosure processes.

Ocwen specializes in servicing subprime or delinquent loans, the consumer bureau said. In recent years, it has purchased servicing rights from some of the biggest U.S. banks, including Morgan Stanley and Goldman Sachs.

Regulators found widespread abuses by servicers in the years after the 2007-2009 financial crisis, when foreclosures spiked. As a result, several big banks, including Bank of America and Citigroup, settled with officials and agreed to tougher consumer protection requirements.

The consumer bureau said Ocwen would have to comply with similar servicing standards and would be overseen by an independent monitor.

  Price   Change %Change