Ocwen: The Servicing Odyssey Continues…
In a Huffpost piece published a year ago I detailed some of the major problems that mortgage servicer Ocwen was having with some flawed software which had sent tens of thousands of homeowners scurrying about in a desperate effort to save homes from the auction block. I compared said program — REALServicing — to the software that powered HAL 9000; the obstinate computer from Stanley Kubrick’s 2001: A Space Odyssey, that developed a will of its own and no matter how hard astronaut Dave tried to get those pod bay doors opened HAL refused to comply.
HAL’s doppelganger, I wrote, could be found in this particularly willful software platform and like a defiant child simply would not — could not — spit out any accurate information regarding homeowner payment histories, escrow, amounts due; yes, all the really critical stuff.
Worse still were indiscretions that led to patently illegal foreclosures and evictions.
While Ocwen’s problems have been on the regulatory radar screens for some time (New York’s muscular Department of Financial Services did some settlement arm-twisting in 2012 and 2014) it all came to a head in April, 2017, with some 31 states and the District of Columbia issuing a wave of “enough is enough” cease and desist orders. These regulatory efforts were designed to prevent Ocwen from acquiring new mortgage servicing rights (”MSR’s” in the lingo); the equivalent of keeping Dracula away from needed sources of human blood. These actions also sent Ocwen stock prices plummeting.
Worse still: Ocwen found itself in the cross-hairs of the Consumer Financial Protection Bureau; suing the company for some of the aforementioned indiscretions citing, in particular, on-going use of the REALServicing software system which a former Ocwen executive, cited in the CFPB lawsuit, called a “trainwreck.”
Just how many Ocwen homeowners were impacted and how was this erroneous information used to pursue foreclosures is currently under review in Southern Florida Federal District Court — CFPB v Ocwen — and if you think that the political machinations surrounding the continued existence of the agency might have played a role in calling off the dogs of war: think again.
In fact, the charges leveled against Ocwen were so egregious that even Trump stalwart Pam Bondi chimed in. The now ex-Florida AG, together with the Florida Office of Financial Regulation, filed its own lawsuit in the same Federal District Court and that case is also on-going.
No matter what political persuasion the average Main Street Joe or Jane subscribes to there’s not too much to love about a company with a business plan that emphasizes outsourcing dirty work to bargain basement labor enclaves in India and the Philippines. As I described in the first of three articles for In These Times — Ocwen Servicing Knows Your Angry — much hair pulling was de riguer among American homeowners trying to communicate with so-called Customer Care Representatives in Mumbai. While there’s nothing inherently wrong in hiring overseas the optics, so to speak, aren’t great when these folks are tasked with helping to expedite foreclosures in America. Added to the messy mix are published photos of convivial Ocwen get-togethers of a so-called “Mumbai Foreclosure Team” having a grand old time dancing and partying in front of banners that read, well, “Mumbai Foreclosure Team.”
Then there’s a cast of past characters associated with Ocwen. Included in this mix is colorless charisma-deprived former CEO, William Erbey (the subject of another In These Times piece I penned aptly titled, William C. Erbey Has Built an Empire on Misery).
In the wake of a 2014 settlement with NY’s Department of Financial Services Erbey was sent packing; part of a deal that ended his relationship with Ocwen and its assorted companies. With tail between legs he fled these shores and for some reason ended up in Malta where he now continues to squeak out his “pot calling the kettle black” dissatisfaction with former investors, BlackRock and Pimco, whom he accuses of (fasten your seat belt) engaging in a “covert criminal conspiracy” with the “specific intent and purpose of gouging enormous profits from the forced foreclosures and confiscation of the homes of hundreds of thousands of struggling families all across the United States” Yes, Erbey it seemed, had found religion albeit many might look at this lawsuit filed a few months back as simply camouflage designed to help him recover some of his ill-gotten gains.
Another alumnus: Secretary of Commerce, Wilbur “Uncle Willy” Ross; famously revealed as having custom slippers sporting Commerce Dept. seals and a former investor cum take-over artist who made his financial mark by taking over distressed companies; stripping the assets and often shipping jobs overseas. His other cash cow — American Home Mortgage Servicing Inc., turned Homeward Residential, was a key player, according to writer David Dayen, in pumping up the foreclosure machine before he sold off the cow to Ocwen in 2012 (later becoming a Board member).
With a penchant for embarrassing moments Uncle Willy was filmed clumsily, trying to dance-with-swords, on a May, 2017, trip to try and sell arms to the Saudi’s; worst still (“oh, the horror!”), his removal from the Forbes 400 richest list, in November, 2017, when it was discovered that the $2.9 Big One’s he had claimed in years past was reduced to a paltry $700 million (per his financial disclosure after becoming Commerce Secretary).
Then, my personal favorite: John Devaney
Remember him? In the year before the great crash John’s travails were already garnering headlines: The Street famously published a piece titled, How Many Yachts can John Devaney Water-Ski Behind? which detailed how this poor guy who made a fortune betting/fueling the sub-prime housing crash was now having to sell off his yachts, jets, artwork, and beloved 1882 Victorian mansion. In fact, Time Magazine, memorialized him as one of the storied “twenty five” in its list of 25 folks most responsible for the 2008 crash.
John Devaney re-emerged a few years back as one of the cheeriest of Ocwen’s Wall Street cheer leaders by making major equity investments in the company and anyone who knows the guy knows that he loves to hear himself talk (disclosure: I’ve spoken with John). One need only review transcripts of Quarterly earning call-ins to see that the man has a gift for gab.
However, running off at the mouth and tap-tapping the keyboard may have backfired; a blatantly self-serving “call out” to President Trump and Republican lawmakers in May, 2017 — What is Going on with the CFPB? — may have done more to advance the argument that CFPB was right to file the lawsuit and remains right in its continued pursuit to get to the bottom of the Ocwen story.
As the CFPB case continues to make its way through Florida Federal District Court, lawyers for Ocwen continue desperately to try and limit the scope of discovery; no doubt believing that a treasure trove of old records will continue to damn past and present use of the flawed REALServicing software program that led to displacement of homeowners nationwide. CFPB did lock and load in response; entering into the record, on October 22nd, a twenty two page report commissioned from Torben Voetmann — a financial consultant — giving explicit reasons why the data and documents requested from Ocwen was of prime importance in litigating the case.
Ocwen’s corporate trajectory is a text book case in Capitalism gone wrong; the story of the little financial train that couldn’t and no matter how much lipstick you paint on this pig there’s a surfeit of doubt about the company’s future. Investors may waffle on whether to sell/hold/buy; shareholders may nervously watch the returns but homeowners, if a JD Powers survey is accurate, would like nothing more than to see Ocwen dispatched with alacrity. The esteemed quality-driven ratings organization, this year, rated Ocwen dead last in consumer/homeowner satisfaction.
Ocwen is propped up financially by New Residential Investment Corp. (NRI) which had swept in Phoenix-like in the wake of the April, 2017 regulatory shit-storm to purchase an equity stake in the operation saving it from the bankruptcy crapper. To avoid messy stuff like having to notify homeowners that regulatory approvals were needed to close this deal NRI simply turned Ocwen into a “subservicer” which needed none of that.
Figuring out any plan for Ocwen’s long-term financial survival required more than NRI’s investment; it required a merger and the target company up for grabs was already controversial New Jersey based servicer, PHH. Merging the two portfolios would ramp up the number of homeowners paying in monthlies to 1.7 million (with the requisite new foreclosure possibilities).
The problem: They needed the blessing of New York’s Dept. of Financial Services which had leaned hard on Ocwen for years but finally relented in early October after demanding that all loans be boarded over from REALServicing to a new, more reliable platform by 2020 (this was already a requirement in settlements signed with other states). New York regulators also memorialized their oversight responsibility by including strict caveats regarding compliance, risk management and detailed reporting of any and all consumer complaints (for a period up to three years).
However, REALServicing remains the pig in the poke for investors and shareholders.
The settlement agreements — including the important one with New York regulators — still allow Ocwen to service existing customers with the old software platform, at least for the next two years, which, potentially is a major liability problem; one that, no doubt, also will give class action lawyers much joy. Allowing the use of a software servicing platform — even for a day — that everybody including Ocwen agrees is faulty is akin to the FAA saying “this particular airplane has a known flaw which might lead to loss of life, but what the hell: keep it flying”.
And according to former servicing executive Chris Wyatt, if the information in the REALServicing platform is questionable to begin with who’s going to insure that it’s accurate when boarded to the new system (which is Black Knight’s LoanSphere MSP, also used by Wells Fargo, now under the gun for its own computer generated foreclosure glitches).
Tim Hayes, Ocwen’s flies-under-the-radar Chief Counsel (and the man tasked with signing settlement agreements) has also delved into the quixotic task of finding the golly gee/whiz bang/alchemical potion that can turn bad data in good gold; traveling from his Tax Shelter headquarters in the Virgin Islands to set nose to grindstone working with a software company with the moniker, QuisLex.
The company also bought itself a diverse group of Pied Pipers for its Board — including Phyllis Caldwell, a Beltway businesswoman, who ascended to Chairperson in 2016 and selected to help convince minority homeowners to sign on the dotted line which Ocwen does at “Help and Hope for Homeowners” soiree’s around the country. While Ocwen cites stats on how many loan modifications get signed by homeowners at said events, Ocwen’s spokesperson, John Lovallo, when asked via e-mail to cite follow-up stats about how many of these same homeowners were still in their homes: responded with a no response.
What often gets lost the debate is that real people are still out there in large numbers and they’re still getting hurt.
Just ask Sandy Zbonski, a Tinley Park Illinois resident. Highlighted in a recent television news story she described the pure terror her family has endured care of Ocwen’s past servicing shenanigans. With a Sword of Damocles hanging over their heads — by a thread — they’re waiting, terrified, for her house to go on the auction block sometime in the next two months.
Veronica Collins and her son weren’t so lucky. They were already put out on the street by Ocwen having snatched their Modesto California home, allegedly by fraudulent means, but they want folks — especially at Ocwen — not to forget that they’re still around.
And it may not be over…
Ironically, Collins holds tight to a letter from the White House; an encouragement missive from the President Trump and the First Lady wishing her well and, no doubt, with CFPB still alive and kicking that encouragement may still translate into action.
Speculation is rife about Ocwen’s future. With quarterly losses getting worse, new CEO Glenn Messina — in a recent call with investors — speculated that it may be some time before the company returns to profitability. However, the financial teet they’d been sucking — New Residential Investments — which had injected healthy doses of financing started to slash its servicing advances; a source of revenue key to paying everyday Ocwen expenses like salaries.
Having been born in a Displaced Persons Camp in Germany; son of Holocaust survivors evicted from their own Polish homes by the Nazis, I’ve got a gut reaction to the notion that a knock on the door, in this country, can bring the Sheriff to escort a hard-working family like the Zbonski’s from hearth and home into an uncertain future.
There are rocks to be kicked over as the CFPB case proceeds and important clues to be unearthed regarding why foreclosures continue to be so widespread and so brutal.
Ocwen is the way in, so to speak, and what comes out of this litigation may shed light on the foreclosure shenanigans perpetrated by a loosely regulated “shadow banking” industry — of which Ocwen is a charter member — and an industry that’s ripe for investigation.
Disclosure: I’ve had my own “problems” with Ocwen which I’ll detail in future posts. I make no bones about being “objective” insofar as my allegiance is to all residents of Main Street regardless of politics.
Joel Sucher is a co-founder of Pacific Street Films (together with Steven Fischler) and has written for a number of platforms including American Banker, In These Times, Huffington Post and Observer. com. Sucher is currently working on a memoir, Wells V Sucher, musings on the foreclosure crisis and a play, I owe Goldman Sachs $257.16 (a true story).