Ocwen Financial Corp. (NYSE: OCN) announced Monday morning that it had reached a comprehensive settlement with the New York Department of Financial Services regarding the recent investigation. When the company previously set aside $100 million for a potential settlement, 24/7 Wall St. asked if this was enough.
In conjunction with the settlement taking place, William C. Erbey, executive chairman of Ocwen, will step down from his position effective January 16, 2015. At that time, Barry Wish, a director, will assume the role of non-executive chairman.
According to the settlement from Monday morning:
Ocwen will pay a civil monetary penalty of $100 million to the DFS by December 31, 2014, which will be used by the State of New York for housing, foreclosure relief and community redevelopment programs. The Company will also pay $50 million as restitution to current and former New York borrowers who had foreclosure actions filed against them by Ocwen between January 2009 and December 19, 2014. As previously communicated in the third quarter of 2014, Ocwen recorded a charge of $100 million to increase its legal reserves in anticipation of a potential settlement with the DFS. Ocwen will record an additional $50 million charge in its fourth quarter 2014 financial statements to reflect the final settlement amount.
In total Ocwen would owe $150 million toward the settlement. Out of the $50 million in restitution, $10,000 would be paid to each current and former New York borrower whose home was foreclosed on by Ocwen within the set dates.
A series of non-monetary provisions were also set forth in the settlement, which basically includes more rigorous reporting to borrowers and more oversight within the company.
What caused the initial stir in October were reports that Ocwen had backdated letters being sent out to homeowners regarding loan modifications and the like.
The New York State Department of Financial Services issued a letter that discussed denied loan modifications dated more than 30 days prior to the date that Ocwen mailed the letters, which only gave those borrowers 30 days from the date of the letter. The letter also noted that in other cases Ocwen’s systems showed that borrowers facing foreclosure received letters with so-called cure dates that were months prior to receiving their letters.
Another issue was that Ocwen was accused of doing nothing to investigate or address the backdating issue when an employee questioned the accuracy of the firm’s letter dating processes and alerted the vice-president of Compliance. Then the department said that Ocwen ignored the problem for five months until the same employee raised the issue again.
Shares of Ocwen were down 25% at $16.35 in the first half of the trading day on Monday. The stock has a consensus analyst price target of $24.67 and a 52-week trading range of $16.73 to $56.82. That 52-week high was hit on the same day as the news.