New Jersey Enters Into $2.1 Billion Settlement With Ocwen Insurance Over Mortgage Fraud

New Jersey has joined in a $2.1 billion multi-state and federal settlement with Ocwen Financial Corporation and its subsidiary, Ocwen Loan Servicing, concerning mortgage servicing misconduct, Acting Attorney General John J. Hoffman announced on Thursday.

Ocwen, based in Atlanta, specializes in servicing high-risk mortgage loans. The misconduct allegations extend to Homeward Residential Inc. and Litton Home Servicing LP, two companies acquired by Ocwen.

Ocwen is the nation’s fourth-largest mortgage servicer.

The misconduct resulted in premature and unauthorized foreclosures, violations of homeowners’ rights and protections, and the use of false and deceptive documents and affidavits, including “robo-signing,” Hoffman said.

The settlement holds Ocwen accountable for previous mortgage servicing and foreclosure abuses, provides relief to homeowners and prevents future fraud and abuse, Hoffman said.

It does not grant immunity from criminal offenses and would not affect criminal prosecutions, and it doesn’t prevent homeowners or investors from pursuing individual, institutional or class action civil cases.

Ocwen agreed to $2 billion in first-lien principal reduction, and $125 million for cash payments to borrowers on nearly 185,000 foreclosed loans. Ocwen will provide troubled borrowers with $151 million in New Jersey alone, and 1,887 loans will be eligible to receive a cash payment of an estimated $1,000 apiece, depending on how many people file claims.

A total of 49 states and the District of Columbia are involved in the settlement.

Joseph A. Smith, Jr., Monitor of the National Mortgage Settlement, will oversee the Ocwen agreement’s implementation and compliance through the Office of Mortgage Settlement Oversight.

“What we found in the Ocwen case is similar to a lot of the problems we saw in our other mortgage servicer enforcement cases,” Hoffman said.  “This is part of our ongoing civil law enforcement effort to hold servicers, including Ocwen, accountable and ensure that they treat borrowers fairly, and return money to its rightful owners.”

The final settlement will be filed through a consent judgement in the U.S. District Court. If approved by a judge, it will have the authority of a court order.

Due to the complexities of the mortgage market and this settlement, which will span a three-year period, Ocwen will contact borrowers directly in some cases regarding reductions. However, borrowers should contact Ocwen to obtain more information about principal reductions and whether they qualify under terms of this settlement, Hoffman said.