Ocwen Financial Corporation; Ocwen Mortgage Servicing, Inc.; and Ocwen Loan Servicing, LLC

Agency: Consumer Financial Protection Bureau
Date: Apr. 20, 2017
Type: enforcement action
Source: consumerfinance.gov/enforcement/actions/ocwen-financial-corporation-oc
Pages: 306
PDFs: 6 documents (links below)

Documents in this case

Complaint · Apr. 20, 2017 · 93 p.
Judgment · Aug. 2021 · 2 p.
Amended complaint · Aug. 2021 · 87 p.
Amended complaint · Aug. 2021 · 84 p.
Opinion · Aug. 2022 · 14 p.
Judgment · May 2023 · 25 p.

Case summary

On April 20, 2017, the Bureau filed a complaint against mortgage loan servicer Ocwen Financial Corporation and its subsidiaries. The Bureau alleges that they used inaccurate and incomplete information to service loans, misrepresented to borrowers that their loans had certain amounts due, illegally foreclosed on homeowners that were performing on agreements on loss mitigation options, failed to adequately investigate and respond to borrower complaints, and engaged in other conduct in violation of the CFPA, TILA, FDCPA, RESPA, and Homeowners Protection Act (HPA). On September 5, 2019, the district court rejected the majority of Ocwen’s arguments in its motion to dismiss but required the Bureau to re-plead its allegations, which the Bureau did on October 4, 2019. The case was partially consolidated with a related case against Ocwen brought by the Office of the Attorney General and Office of Financial Regulation for the State of Florida, and the Florida plaintiffs settled their claims against Ocwen. On March 4, 2021, the district court granted in part defendants’ Motion for Summary Judgment as to Counts 1-9 of the Bureau’s First Amended Complaint based on res judicata. On April 19, 2021, the Bureau filed a Second Amended Complaint that dropped Count 10 of its First Amended Complaint and limited the claims set forth in Counts 1 through 9 to allegations of violations for the time period of January 2014 through February 26, 2017. On April 21, 2021, in light of the Bureau’s recently filed Second Amended Complaint, the district court entered a Final Judgment in favor of the defendants. The Bureau filed a notice of appeal the same day.

On April 6, 2022, the Eleventh Circuit held that the parties intended to preclude new challenges to conduct covered by the parties’ prior 2013 settlement agreement’s servicing standard, monitoring, and enforcement regime. It vacated the district court’s decision and remanded the case for further analysis of the Bureau’s claims and the parties’ prior 2013 settlement agreement. On May 2, 2023, the district court dismissed the case, granting summary judgment to Ocwen.

Complaint (Apr. 20, 2017)

PDF of this document (93 pages)

Page 2

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA WEST PALM BEACH DIVISION

Case No. 9:17-CV-80495

CONSUMER FINANCIAL PROTECTION BUREAU,

Plaintiff,

vs.

OCWEN FINANCIAL CORPORATION,

a Florida corporation,

OCWEN MORTGAGE SERVICING, INC.,

a U. S. Virgin Islands corporation, and

OCWEN LOAN SERVICING, LLC,

a Delaware limited liability company,

Defendants.

______________________________________________

COMPLAINT

The Consumer Financial Protection Bureau (“Bureau”) brings this action against Ocwen Financial Corporation, Ocwen Mortgage Servicing, Inc., and Ocwen Loan Servicing, LLC (collectively “Ocwen” or “Defendants”) under Sections 1054 and 1055 of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5564 and 5565. Ocwen is one of the largest mortgage servicers in the United States. The Company specializes in servicing the loans of distressed borrowers. It committed numerous violations of Federal consumer financial laws that have harmed borrowers. Among other things, Ocwen has improperly calculated loan balances, misapplied borrower payments, failed to correctly process escrow and insurance payments, and failed to properly investigate and make corrections in response to consumer complaints. Ocwen has Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 1 of 93

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compounded these failures by illegally foreclosing upon borrowers’ loans and selling loan servicing rights to servicers without fully disclosing or correcting errors in borrowers’ loan files.

The Bureau brings this action against the Defendants under: (1) Sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531, 5536; (2) Sections 807(2)(a), 807(10), and 808 of the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692e(2)(a), 1692e(10), and 1692f (the “FDCPA”); (3) Sections 6 and 19 of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2605, 2617, and the regulations promulgated thereunder at Regulation X, 12 C.F.R. part 1024 (“Regulation X”); (4) Section 105(a) of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1604(a), and the regulations promulgated thereunder at Regulation Z, 12 C.F.R. part 1026 (“Regulation Z”); and (5) Section 3(b) of the Homeowners Protection Act of 1998, 12 U.S.C. § 4902(b) (the “HPA”). 3.

The Bureau brings this action to obtain permanent injunctive relief, restitution, refunds, disgorgement, damages, civil monetary penalties, and other relief for the Defendants’ violations of Federal consumer financial law. JURISDICTION AND VENUE 4.

The Court has subject-matter jurisdiction over this action because it is brought under Federal consumer financial law, 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.

Venue is proper in this district under 28 U.S.C. § 1391(b) and 12 U.S.C. § 5564(f) because Defendants are located in or do business in this district and part of the events giving rise to the claims took place in this district.

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PLAINTIFF 6.

The Bureau is an independent agency of the United States created by the CFPA. 12 U.S.C. § 5491(a). The Bureau is charged with enforcing Federal consumer financial laws. 12 U.S.C. §§ 5563, 5564.

The CFPA is a Federal consumer financial law. 12 U.S.C. § 5481(14). Under Sections 1031 and 1036 of the CFPA, it is unlawful for any covered person to commit or engage in unfair, deceptive, or abusive acts or practices. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).

The FDCPA, RESPA, TILA, and HPA are Federal consumer financial laws. 12 U.S.C. § 5481(14). Under Section 1036 of the CFPA, it is unlawful for any covered person “to offer or provide to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C § 5536(a)(1)(A). Violations of the FDCPA, RESPA, TILA, and HPA are therefore violations of Section 1036 of the CFPA. 12 U.S.C § 5536(a)(1)(A).

The Bureau is authorized to commence civil actions in federal district court, in its own name, to address violations of Federal consumer financial law, including violations of the CFPA. 12 U.S.C. § 5564(a) and (b). DEFENDANTS 10.

Ocwen Financial Corporation (“OFC”) is a publicly-traded Florida corporation that maintains its principal place of business in West Palm Beach, Florida. At all times relevant to this complaint, OFC has done business in this District and throughout the United States.

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11.

Ocwen Mortgage Servicing, Inc. (“OMS”) is a United States Virgin Island corporation that maintains its principal place of business in the United States Virgin Islands. At all times relevant to this complaint, OMS has done business in this District and throughout the United States.

12.

Ocwen Loan Servicing, LLC (“OLS”) is a Delaware limited liability company that maintains its principal place of business in West Palm Beach, Florida. At all times relevant to this complaint, OLS has done business in this District and throughout the United States.

13.

OFC, through its subsidiaries, originates and services loans. OFC, OMS, and OLS (collectively “Ocwen”) engage in servicing activities relating to the loans by, among other things, processing borrower payments, administering loss mitigation processes, and managing foreclosures. Ocwen also acquires and collects upon borrowers’ mortgage debts that are in default.

14.

OFC, the parent and publicly-traded company, wholly owns all of the common stock of its primary operating subsidiary, OMS. OMS wholly owns the stock of another of OFC’s primary operating subsidiaries, OLS. All three entities share and have shared key executives, such as Ronald Faris, Timothy Hayes, Michael Bourque, and John Patrick Cox. All three entities, through OFC, file a consolidated financial statement with OFC’s public disclosures.

15.

OFC controls, directs, operates, and participates in mortgage servicing activities, including the daily cashiering, escrow, insurance, loss mitigation, foreclosure, call center, and consumer complaint operations for Ocwen’s loans. OFC enters into agreements for products and services that are necessary for Ocwen to service mortgage loans and collect debt. OFC has contracted for such products and services, including a Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 4 of 93

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system of record and related technology services, for and on behalf of Ocwen’s affiliates, which include OMS and OLS.

16.

OMS is also engaged in servicing loans. OMS is licensed by numerous state regulators to service loans and collect mortgage debts. OMS has entered into agreements for products and services that are necessary for Ocwen to service mortgage loans and collect debt. OMS has contracted for such products and services, including a system of record and related technology services used by OLS and OFC. OLS also represented, in an August 23, 2016 Consent Order with the State of Washington Department of Financial Institutions, that OMS engages in the servicing or subservicing of OLS loans.

17.

OLS is also engaged in servicing loans. OLS is licensed by numerous state regulators to service loans and collect upon borrowers’ mortgage debts. OLS is also the owner of the mortgage servicing rights for the loans that Ocwen services. 18.

Under OFC’s and OMS’s direction, authority, and control, OLS has also engaged in the marketing and processing and transmitting of payments for credit monitoring products, financial advisory products, and other products that are added on to Ocwen borrowers’ accounts.

19.

OFC, OMS, and OLS are, and have been at all times relevant to this Complaint, “covered persons,” as that term is defined by 12 U.S.C. § 5481(6)(A), because they offer or provide a consumer financial product or service for use by consumers primarily for personal, family, or household purposes, or that is delivered, offered, or provided in connection with such a product or service by: servicing mortgage loans; collecting on consumers’ mortgage debts; and marketing and processing and transmitting payments for credit monitoring products, financial advisory products, and Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 5 of 93

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other products that are added on to the accounts of borrowers whose loans they service (“add-on products”). 12 U.S.C. § 5481(15)(A)(i), (iv), (vii), (viii), and (x). 20.

OFC is, and has been at all times relevant to this Complaint, a “related person” because, as described in Paragraph 14, it is the direct and indirect shareholder of all OMS and OLS stock, and is thus a “controlling shareholder” and “shareholder…or other person…who materially participates in the conduct of the affairs” of OMS and OLS, which are covered persons. 12 U.S.C. § 5481(25)(C)(i) and (ii). OFC is thus “deemed to [be] a covered person for all purposes of any provision of Federal consumer financial law.” 12 U.S.C. § 5481(25)(B). OMS is, and has been at all times relevant to this Complaint, a “related person” because, as described in Paragraph 14, it owns all of OLS’s stock and is thus a “controlling shareholder” and a “shareholder…or other person…who materially participates in the conduct of the affairs” of OLS, which is a covered person. 12 U.S.C. § 5481(25)(C)(i) and (ii). OMS is thus “deemed to [be] a covered person for all purposes of any provision of Federal consumer financial law.” 12 U.S.C. § 5481(25)(B). 21.

OFC and OMS are, and have been at all times relevant to this Complaint, service providers to OLS because, as described in Paragraphs 15 and 16, OFC and OMS have provided material services to OLS. 12 U.S.C. § 5481(26)(A). OFC and OMS have also controlled and participated in the design, operation, and maintenance of OLS’s mortgage servicing activities and marketing and processing and transmitting payments for add-on products. 12 U.S.C. § 5481(26)(A)(i).

22.

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activities and marketing of and payment processing and transmitting payments for addon products. OFC and OMS also contract for critical mortgage servicing operations for and on behalf of OLS. OFC, OMS, and OLS also file consolidated financial statements and share employees and offices. Accordingly, an act by one entity constitutes an act by each entity comprising the “common enterprise,” and OFC, OMS, and OLS are each jointly and severally liable for the acts and practices alleged below. 23.

As described in Paragraphs 14-18, OFC and OMS have directed and controlled OLS’s mortgage servicing activities and marketing of and payment processing and transmitting payments for add-on products, and authorized OLS to service Ocwen’s loans. Employees of OFC and OMS have knowledge of and control or have the ability to control the activities of OLS discussed herein. OFC and OMS, as OLS’s principals, are liable for the actions of their agent, OLS.

FACTUAL ALLEGATIONS

BACKGROUND I.

Company background.

24.

William Erbey formed Ocwen in 1988. He served as the Company’s Chief Executive Officer until 2010. Ronald Faris succeeded Erbey and continues to serve as Ocwen’s Chief Executive Officer.

25.

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balance of approximate $183.1 billion. As of December 31, 2016, Ocwen serviced approximately 1,393,766 loans with an aggregate unpaid principal balance of approximately $209 billion. Its loans are located in all fifty states and the District of Columbia.

26.

Borrowers do not choose their mortgage servicer and have no control over whether and how Ocwen services their loans.

Ocwen’s REALServicing System of Record.

27.

Fundamental functions of a mortgage servicer include processing and applying borrower payments, communicating accurate payment information to borrowers, managing escrow accounts, and maintaining accurate loan balance information.

28.

Servicers also respond to borrower inquiries, handle loss mitigation requests, and initiate foreclosure proceedings, among other functions. 29.

To perform these tasks, servicers input loan and borrower information into electronic databases, often referred to as systems of record. Systems of record are essential to a servicer’s ability to service loans in accordance with applicable legal requirements. If the information the servicer inputs into the system of record is inaccurate, or the system itself has deficiencies that produce inaccurate information even when the servicer inputs correct information, a servicer can make critical errors that harm borrowers.

30.

Ocwen has used and continues to use a proprietary system of record, REALServicing, and its related sub-systems (collectively “REALServicing”). 31.

In 2009, Ocwen spun off its internal technology department into a separate company, Altisource Portfolio Solutions (“Altisource”). As a result of this spin- Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 8 of 93

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off, Altisource owns and maintains the REALServicing platform. Ocwen has contracted with Altisource for technology services. In 2012 and 2013, while Erbey was the Chairman of the Boards of both Altisource and Ocwen, Ocwen extended this technologyservices contract through 2025.

32.

No other mortgage servicer uses REALServicing.

II.

OCWEN HAS SERVICED LOANS BASED ON INACCURATE AND INCOMPLETE BORROWER LOAN INFORMATION 33.

As set forth in greater detail below, Ocwen has serviced loans and collected upon debts based on inaccurate and incomplete borrower loan information. Ocwen has often input inaccurate and incomplete information, or failed to input accurate or complete information, about borrowers’ loans into its REALServicing system of record. Even when the information in REALServicing has been accurate, REALServicing has generated inaccurate information about borrowers’ loans due to system deficiencies. Because of these system deficiencies, Ocwen has had to rely upon manual processes and workarounds that have themselves resulted in errors in borrowers’ loan information. 34.

Ocwen’s use of inaccurate and incomplete information to collect mortgage, tax, and insurance payments, communicate with borrowers about loss mitigation issues, proceed with foreclosures, and when selling the servicing rights of borrowers’ loans to new servicers has resulted in significant harm to borrowers.

Ocwen loaded inaccurate and incomplete information into A.

REALServicing and serviced loans using this information. 35.

When Ocwen acquires servicing rights for loans, it moves, or “boards,” the records for those loans from the prior servicers’ systems of record onto REALServicing. 36.

As described in Paragraph 25, between 2010 and 2014, Ocwen acquired the rights to service millions of residential loans, including more than 1.7 million Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 9 of 93

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Residential Capital loans. Ocwen inputted inaccurate and incomplete loan information and payment data from these acquisitions into REALServicing.

Ocwen boarded inaccurate and incomplete loan and payment data 1.

from prior servicers into REALServicing.

37.

In many instances, the systems of record that other servicers use contain data fields that are different from the data fields in REALServicing. To check whether it is correctly boarding loan data from the prior servicer’s systems onto REALServicing, Ocwen verifies critical loan data fields—such as interest rate, property type, and unpaid principal balance—by matching it with the information in the borrower’s loan documentation. If the information in REALServicing does not match what Ocwen finds in the documents, Ocwen is supposed to correct the error in REALServicing. 38.

To ensure the loan data it is using to service loans is complete and accurate, Ocwen seeks to complete this loan verification process within 60 days of boarding the loan onto REALServicing. Since 2014, however, Ocwen has not completed this process within 60 days. Instead, it has relied on unverified loan information for months—and often for more than a year—to service hundreds of thousands of loans. 39.

As of December 2013, Ocwen had a backlog of more than 400,000 transferred loans that remained unverified. It did not finish verifying and making corrections to critical data fields for these loans until August 31, 2014. Due to this backlog, Ocwen also delayed verifying the 1.7 million Residential Capital loans it previously acquired in 2013, and which it moved from Residential Capital’s servicing platform and boarded onto REALServicing on a rolling basis beginning in early 2014. Ocwen did not even begin the verification process for the Residential Capital loans until September 1, 2014; at that time, Ocwen was servicing more than 1.1 million unverified Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 10 of 93

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Residential Capital loans on REALServicing. By the end of 2014, when Ocwen completed boarding Residential Capital loans onto REALServicing, the verification backlog had grown to more than 1.3 million unverified Residential Capital loans. As of April 2016, Ocwen still had a backlog of more than 263,000 unverified Residential Capital loans.

40.

In November 2014, Ocwen determined that it was taking, on average, 261 days to complete its verification process for each loan it boarded. In some cases, the verification process has taken more than a year, far beyond Ocwen’s expected 60-day time period.

41.

As of 2014, in addition to boarding loans with inaccurate loan information, Ocwen also boarded loans that contained payment history data that it had reason to believe was inaccurate or incomplete. Ocwen, for example, boarded incomplete or incorrect payment histories onto REALServicing, such as payment histories that include misapplied payments and transactions that occurred before the loan was even originated.

42.

As of 2014, Ocwen had also failed to verify whether the prior servicers’ corporate advances or fees for servicing-related expenses—such as attorneys’ fees, property inspection fees, property preservation fees, force-placed insurance charges, and foreclosure-related expenses—were valid and actually owed by borrowers. In many instances, Ocwen has charged borrowers for these charges and fees, even though neither Ocwen nor the prior servicer had invoices or other documents to support these charges and fees, and even though Ocwen was receiving disputes from borrowers claiming that these charges or fees were not owed.

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43.

For example, in December 2014, when Ocwen reviewed loans it had boarded the previous year, it determined that it was missing invoices or other documents to support $98 million in corporate advances that it had charged to borrowers. In June 2015, Ocwen also learned that it did not have documentation to support $58 million out of $85 million in corporate advances that it had charged to borrowers whose loans it transferred to new servicers.

As a result of Ocwen’s verification failures, Ocwen has serviced 2.

thousands of loans based on incorrect information. 44.

Because Ocwen failed to verify the accuracy and completeness of borrowers’ loan data during its expected 60-day time period after boarding, it has delayed correcting any loan data errors or incomplete loan information. As a result of the delay—in many instances, more than a year—Ocwen serviced a significant number of loans based on inaccurate loan information.

45.

According to Ocwen, which tracked the results of its verification of loans from 2014 through at least April 2016, a significant percentage of the loans it ultimately verified contained errors or incomplete information and required corrections. For example, in April 2014, Ocwen reported that 72 percent of the loans it verified that month contained errors or incomplete information and required corrections in REALServicing. In March 2016, 90 percent of the loans Ocwen verified contained errors or incomplete information that required corrections. 46.

As a result of the findings of its verification process, from September 2014 until April 2016, Ocwen determined that it needed to make more than 870,000 corrections in REALServicing, including, more than: 43,000 corrections to the maximum late fees a borrower could be charged (under state law); 31,000 corrections to Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 12 of 93

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loans’ maturity dates; 27,000 corrections to loan terms; 24,000 corrections to loans’ first interest rate cap maximum; and 5,000 corrections to loans’ interest rates. 47.

Even when Ocwen completed its verification process and identified inaccuracies in loan data, in many instances, Ocwen has failed to accurately correct the errors in REALServicing. For example, in November 2014, Ocwen conducted an internal audit and found that its loan verification personnel were not properly correcting or updating the information in REALServicing in 63 percent of loans the audit team reviewed. The audit found that Ocwen personnel had failed to properly correct critical data fields such as loan maturity date, loan term, first payment date, balloon term, and first interest rate cap.

48.

In 2015, Ocwen’s outside consultant identified additional deficiencies in Ocwen’s loan boarding process, such as:

• “High volume of loans error out of the automated process for unknown reasons requiring manual revision”;

• “Limited available data fields cause various groups to use and reuse same fields for different information”; and • “Limited system functionality in place to accommodate SCRA [Servicemembers Civil Relief Act] requirements (e.g., unable to stop fees if fee was in place prior to customer becoming SCRA eligible).”

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Ocwen’s reliance on its deficient servicing platform, B.

REALServicing, has exacerbated its use of inaccurate loan information.

Ocwen and its outside consultant have concluded that 1.

REALServicing is failing.

49.

Ocwen’s own senior leadership has repeatedly recognized and acknowledged REALServicing’s failures.

50.

For example, in an internal communication in 2014 with Ocwen’s Chief Executive Officer, Ocwen’s Head of Servicing described Ocwen’s technology as: An absolute train wreck. I know there’s no shot in hell, but if I could change systems tomorrow I would. I can’t tell you the number of hours I and others spend on basic servicing technology blocking and tackling. I’m not talking about differentiators here. I’m talking about getting system to stay online, escrow analysis to work, letters to print, etc. It’s ridiculous. (Emphasis added.) 51.

Ocwen’s former Head of Servicing Compliance testified in May 2016 that she was “absolutely” concerned that Ocwen could not service loans on REALServicing in compliance with applicable laws when she worked at the company between 2014 and 2015. She testified that she, other members of the Compliance Department, and the leaders of Servicing Operations, Loss Mitigation, and other Ocwen business units “frequently” and “loudly” raised this concern. In determining the root cause of various issues, she explained, “the answer would almost always be REALServicing and the processes that we’re using, would be the answer we would get from the business . . . . [It was a] commonality across all of [the business units] . . . . Everything in servicing, every department in servicing.” 52.

These senior leaders’ conclusions are not outliers. Between 2014 and 2016, Ocwen assessed REALServicing and also hired an outside consultant to do the same. Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 14 of 93

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Both Ocwen and its consultant concluded that REALServicing lacks the basic system architecture and design necessary to properly service loans. 53.

Since 2014, Ocwen has also tracked its regulatory violations, risk areas, and other failures in spreadsheets named “Risk Convergence Reports.” Each regulatory violation, risk item, or failure identified in the report includes a description of the issue, the date Ocwen identified the issue, whether the issue is dependent on Altisource, the status of any technology fix or other operational remediation, and other information. 54.

Each item in the Risk Convergence Reports is assigned a risk rating, ranging from “R1” to “R5.” “R1” is the highest risk rating, which Ocwen defines as: “Potential adverse impact of over $5 million”; “Actual or high possibility for fraud, waste or abuse”; “Breach of company policy or procedures (frequent, repeat, or disregarding policy)”; “Noncompliance with the law or regulation”; or “Material errors or irregularities are a reasonable possibility.”

55.

According to Ocwen’s list of items in the Risk Convergence Report, the items often resulted from and have continued due to REALServicing failures or system limitations. When, for example, Ocwen conducted its first on-site audit of Altisource and REALServicing in 2014, Ocwen auditors concluded that, although 70 percent of the items contained within the Risk Convergence Report related to “technology projects and enhancements” that Altisource was responsible for, little progress was being made to resolve the items due to Altisource’s “lack of priority.” 56.

As of August 2015, Ocwen had catalogued 2,803 issues on its Risk Convergence Report. Of those 2,803 issues, Ocwen assigned the highest risk rating, “R1,” to more than 550 issues, many of which resulted from REALServicing’s deficiencies.

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57.

In 2016, Ocwen’s Chief Information Officer and other personnel performed an architectural assessment of REALServicing, and reported, among other things, that REALServicing had “significant deficiencies represent[ing] significant risk and expense to Ocwen” and concluded that the “the most important dimensions of Core Technology” to REALServicing, such as performance and scalability, loan type support, risk exposure, and organizational capability, compare “unfavorably” to other mortgage platforms.

REALServicing’s deficiencies impact Ocwen’s ability to lawfully 2.

service loans.

58.

REALServicing suffers from fundamental system architecture and design flaws, including a lack of properly managed data, lack of automation, and lack of capacity. These flaws have adversely impacted the accuracy of the information that Ocwen uses to service loans–and, thus, Ocwen’s ability to service loans–in a number of ways.

59.

First, with respect to Ocwen’s data management, REALServicing requires the use of more than 10,000 comment codes and flags. Yet, Ocwen lacks a complete data dictionary defining its comment codes, flags, and data fields. As a result, Ocwen personnel do not share a common understanding of what these comment codes or flags mean or how Ocwen personnel should use them.

60.

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them; and what downstream activities the codes trigger and what upstream activities trigger the codes. He further testified that “neither Ocwen nor Altisource could provide that information.” Further, he testified that Ocwen’s use of thousands of REALServicing comment codes was “antiquated” and that it was “inappropriate” that Ocwen did not have a data dictionary to define these codes and describe their impact on other activities.

61.

Second, REALServicing lacks the necessary automation and functionality to handle basic servicing operations. In 2015, an Ocwen consultant concluded that REALServicing had limited workflows and lacked automation. As detailed in the next subsection and Section III, in certain areas, such as payment processing and escrow, this lack of automation has resulted in significant and excessive manual workarounds that have created errors in borrowers’ accounts.

62.

Third, REALServicing has lacked the capacity to process the large number of loans that Ocwen has acquired and, in part as a result, it has not been functional for lengthy periods of time. After Ocwen’s large 2013 and 2014 loan acquisitions, Ocwen’s personnel reported “high incidents of system unavailability.” For example, for the year of 2014, Ocwen’s officials reported that its loss mitigation system “was down approximately 17,000 work hours.” In internal communications in 2014, Ocwen’s Head of Loss Mitigation expressed exasperation about the unavailability of Ocwen’s loan modification systems:

I am sorry guys, this has broken my back. Enough is enough on daily issues with these systems. We have lost more than 15 days of production of past 3 months … I need this system up every day and performing. It is clear by the issues over the past 3 months that there are not any controls on data and system quality.

(Emphases added.) Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 17 of 93

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63.

Fourth, REALServicing suffers from various bugs, defects, and failures. For example, in 2014, due to programming errors and data not properly converting among REALServicing applications, Ocwen sent more than 1,800 borrowers permanent loan modification agreements that contained incorrect interest rate, principal payment, maturity date, and balloon payment information.

Ocwen has relied excessively on manual data entry and reports C.

to address REALServicing’s failures.

64.

Because of REALServicing’s failures and limitations, Ocwen has resorted to manual processes, which themselves have resulted in errors. Ocwen’s consultant reached the following conclusions—which Ocwen conceded were correct—after analyzing REALServicing and interviewing Ocwen business leaders: • “[Ocwen’s] lack of business process automation has resulted in excessive manual processes to address gaps”;

• “Manual workarounds and reporting are widely used to compensate for insufficient system functionality to complete, track, or control processes”; and • “While appearing cost effective, manual controls pose significant risk in heightened compliance environment.” (Emphases in original.) 65.

Ocwen creates reports–typically referred to as “control reports”–to catch errors and mistakes or data that REALServicing cannot process due to a lack of automation and other system deficiencies, but these reports are of limited use for at least two reasons.

66.

First, as Ocwen’s former Head of Compliance testified, the reports are only effective to the extent that they are based on accurate and complete data. But Ocwen’s former Head of Servicing Compliance, who worked for Ocwen from April of 2014 until Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 18 of 93

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August 2015, testified in May 2016 that REALServicing lacks the necessary data to generate effective control reports and detect problems. She explained, for example, that when generating a control report using a certain field in REALServicing, that field is “used about five different ways” so the report generates a “whole mish-mash of information” that does not help Ocwen personnel understand whether an exception or error occurred.

67.

Second, Ocwen’s manual workarounds and processes introduce the risk of human error. As Ocwen’s former Head of Compliance testified, the concern that such manual processes could result in human error is “one of the sort of classic reasons one automates a manual process.” Other former and current Ocwen business unit leaders have reiterated this point.

68.

For these reasons, Ocwen’s controls have been ineffective. As Ocwen’s former Head of Servicing Compliance testified: “[E]very business unit in the entire organization” lacked sufficient controls to prevent mistakes and to detect when mistakes occurred.

Ocwen’s use of inaccurate and incomplete information has D.

harmed borrowers.

69.

Ocwen’s use of inaccurate and incomplete information resulting from its boarding of inaccurate and incomplete information into REALServicing, REALServicing’s deficiencies, and Ocwen’s error-prone manual processes has caused or is likely to have caused borrowers substantial harm, and resulted in Ocwen communicating, orally and in writing, information to borrowers that it knew or had a reason to know was inaccurate.

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70.

Ocwen is aware of this substantial harm or likelihood of substantial harm. In 2015, Ocwen’s outside consultant conducted interviews with Ocwen business leaders. These leaders identified 67 failures—or “pain points”—representing “functional and/or technical deficiencies” that “stemm[ed] from systematic and manual processes,” including the following:

• With respect to escrow: a “technical gap causing escrow analysis to be conducted incorrectly” and a “manual bankruptcy workaround for loans acquired already in bankruptcy, causes information to be deleted from history as new information is updated. This information should be disclosed to the borrower in order to calculated escrow accurately”;

• With respect to insurance disbursements: “no systematic controls exist in to prevent duplicate disbursements in REALServicing resulting in 6k -12k incidents per year. Personnel must manually remove necessary codes (e.g., paid in full, service released)”;

• With respect to loan modification processes: “[u]pon review of a [loan modification] package, terms are found to be incorrect approximately 80% of the time (e.g., NPV miscalculation, final modification date incorrect)”; • With respect to foreclosure data: “[d]ata between REALResolution [the REALServicing application for foreclosures] and REALServicing is not always in sync due to lack of adequate system mapping”; and • With respect to the payment of borrower taxes: “[a]lthough tax assessment information is supposed to be used to project more accurate payments, REALServicing automatically uses last years billing amount, even if installments for the current year are different.”

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71.

More generally, Ocwen has serviced borrowers’ loans and communicated, orally and in writing, with borrowers using inaccurate and incomplete information, including information relating to borrowers’ loan terms, amounts received from and owed by borrowers, escrow amounts, insurance amounts, and/or loss mitigation and foreclosure information. As set forth above and below in Section III, because Ocwen has serviced loans based on inaccurate and incomplete information, it has, among other things, collected or attempted to collect inaccurate amounts from borrowers, failed to timely pay borrowers’ insurance policies, provided borrowers with loan modifications with inaccurate terms, and initiated wrongful foreclosure proceedings upon borrowers’ loans.

72.

Ocwen’s use of a deficient system of record that results in inaccurate and incomplete borrower loan information does not benefit consumers or competition. Such a system of record does not result in cost savings, enhanced customer service, or other benefit to consumers or competition.

OCWEN’S SERVICING FAILURES HAVE MANIFESTED III.

THEMSELVES IN AT LEAST EIGHT DISTINCT WAYS THAT HARM BORROWERS

Ocwen has mishandled borrowers’ payments.

73.

Ocwen is required to correctly credit borrowers’ payments, including any overpayment or partial payments, consistent with the borrowers’ mortgage notes and applicable laws, including Regulation Z.

74.

Ocwen has routinely failed to send borrowers timely and accurate periodic statements, failed to timely and accurately credit and apply borrower payments, and failed to correct billing and payment errors.

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75.

Each day, Ocwen cashiering personnel manually enter, pull, and match entries in REALServicing for more than 45,000 borrower-related transactions, including 5,000 payment transactions and more than 40,000 disbursements. Ocwen internal business units requested that Ocwen automate REALServicing to process borrowers’ payments and disbursements for taxes and insurance. They explained that, “due to the volume[,]” there is an “immense need to automate this reconciliation” to ensure “no risk for data loss or corruption.”

76.

As Ocwen’s former Head of Compliance testified, Ocwen has a higher risk profile in the mortgage servicing industry due its heavy use of manual processes in its Cashiering Unit, which handles credits to (e.g., borrowers’ payments) and debits from (e.g., disbursements for taxes or insurances) a borrower’s loan balance.

Ocwen’s obligations under Regulation Z, Regulation X, the CFPA, 1.

and the FDCPA.

77.

Under Regulation Z, a servicer generally must provide a borrower with a periodic statement each month that details, among other things, the amount the borrower must pay that month, how the servicer will break down and apply the borrower’s monthly payment, all transaction activity since the last statement, and the amount of payments in a suspense or unapplied funds account. When a servicer receives a full periodic payment for a loan secured by the consumer’s principal residence, it must credit the payment as of the date the payment is received unless, among other exceptions, the delay in crediting does not result in a charge to the borrower or negative reporting to a consumer reporting agency.

78.

If the servicer receives a partial payment and holds it in a suspense or unapplied funds account, Ocwen must, after accumulating funds sufficient to cover a Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 22 of 93

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periodic payment, treat such funds as a full periodic payment (e.g., an amount sufficient to cover principal, interest, and escrow, if applicable, for any given billing cycle). 79.

Under Regulation X, a servicer is also required to have policies and procedures reasonably designed to ensure, among other objectives, that the servicer is providing accurate and timely disclosures to a borrower as required by applicable law, such as periodic statements required under Regulation Z. 80.

In addition to the requirements under Regulation Z and Regulation X, a servicer is prohibited from engaging in unfair, deceptive, and abusive acts and practices related to payment crediting and debt collection activities under the CFPA and FDCPA.

Ocwen has failed to comply with Regulation Z, Regulation X, the 2.

CFPA, and the FDCPA.

81.

Ocwen has failed to comply with Regulation Z, Regulation X, the CFPA, and/or the FDCPA in at least six ways.

82.

First, in numerous instances, Ocwen has sent borrowers periodic statements that contain inaccurate information—such as the date when Ocwen received a borrower payment or the payment amount owed by a borrower—because of inaccurate information in REALServicing. In other instances, even when the information in REALServicing has been accurate, REALServicing’s deficiencies have resulted in Ocwen sending borrowers periodic statements with inaccurate information related to interest, late fees, escrow amounts, prepayment penalty statuses, payment amounts, deferred principal balance amounts, and payments that Ocwen should have credited but refused to credit and returned to borrowers. As demonstrated by Ocwen’s recurring inaccuracies in its periodic statements, Ocwen has also failed to maintain reasonably designed Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 23 of 93

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policies and procedures to ensure that it is providing borrowers with accurate and timely periodic statements.

83.

Second, Ocwen has failed to properly credit full periodic payments that borrowers properly made to Ocwen as of the date of receipt, wrongly resulting in late fees, negative credit reporting, and inaccurate loan delinquencies. 84.

Since at least 2014, Ocwen has known that its lockbox vendor, which handled its intake of physical payments (e.g., checks) until 2016, was unable to accurately record the date when Ocwen received a borrower’s physical payment. As Ocwen detailed in its Risk Convergence Reports, this failure has resulted in “delayed payment posting, incorrect payment effective dating, late fees assessment, and negative credit reporting.”

85.

Ocwen has identified numerous other payment processing errors by its personnel and lockbox vendor, including:

• Inconsistent processing of multiple payments (2 or more checks in one envelope) that “cause misapplication of physical payments by applying as an individual payment instead of combined multi-payment”;

• Ocwen’s lockbox vendor’s failure to image correspondence received with payments, resulting in payments not being correctly identified “until a borrower claim is received. Ultimately, this results in delays in payment posting process, late fee assessment, and negative credit reporting;” and • Where borrower payments by wire are manually entered and converted by Ocwen personnel into REALServicing: “[s]ometimes the file conversion does not convert the data properly and the data needs to be reviewed, corrected and uploaded to Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 24 of 93

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REALServicing by Cashiering” and “[e]rrors can occur during this manual process.”

86.

Even after switching lockbox vendors in 2016, Ocwen continued to identify payment processing mistakes. For example, in January of 2016, Ocwen found that “$8,420,208 in payments were received but not posted to customer’s accounts.” Ocwen concluded: “Management has identified that not applying received payments or loading payments multiple times has become a common occurrence.” 87.

Third, Ocwen has failed to timely credit payments from borrowers’ suspense accounts when the suspense amount has accumulated sufficient funds to cover a full periodic payment. Ocwen has allowed borrowers’ payments to languish in suspense accounts for several days, months, and even years. As a result of Ocwen’s failure to timely credit payments in suspense accounts, in certain instances, Ocwen has charged borrowers late fees and deemed borrowers to be delinquent. 88.

For example, a September 15, 2015 audit by investors of loans Ocwen serviced found that: “unapplied/suspense funds were not properly maintained,” and that, as of June 2015, more than 4,000 of the investor’s loans had suspense amounts “aged over 90 days up to 1,236 days” that totaled more than $2.6 million with amounts ranging to $0.01 to more than $27,000. The auditors also found that for the miscellaneous suspense account there were more than 2,000 investor loans “with amounts over 90 days and up to 680 days and that totaled over $1.9 million with amounts [in the suspense account] ranging from $0.01 to $267,475.64.” 89.

Fourth, Ocwen has misapplied borrowers’ payments and miscalculated borrowers’ loan balances and amounts due. Once Ocwen receives a payment from a borrower, the mortgage contract specifies how Ocwen must credit the payment (e.g., to Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 25 of 93

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principal and interest first, then to any late and default fees). Ocwen has identified numerous instances where it has misapplied borrowers’ payments and miscalculated borrowers’ loan balances and amounts due. For example, in May 2016 Ocwen determined that, due to a failed attempt in 2014 to fix a REALServicing technology flaw, it was charging incorrect amounts to borrowers and was “not being compliant with the terms dictated in the note” which “directly impact the monthly account statement sent to the borrowers.”

90.

Fifth, for borrowers in bankruptcy, Ocwen has failed to process and apply payments correctly in accordance with certain bankruptcy requirements. By 2016, Ocwen had concluded that REALServicing was broken in a number of ways that adversely affected borrowers whose loans were subject to bankruptcy protections, including that:

• “When REALServicing makes a contractual payment using pre- or post-petition funds, the payment covers only the principal and interest component. Escrow is not paid. This is contrary to what a bankruptcy court expects. Payments should only be made for the full contractual amount, including the escrow (as calculated for the due date of the payment to be made);”

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accounts as either pre-petition payments, post-petition payments, or bankruptcy interests. There are some cases where, due to loan status, funds from the trustee are not applied as payment, but are applied to miscellaneous suspense or other non-payment accounts. Ocwen receives funds from bankruptcy trustees in a single check that usually covers multiple accounts. Ocwen needs to apply the funds across the different loans.”

91.

Sixth, based on Ocwen’s above failures, Ocwen has communicated, orally and in writing, inaccurate information to borrowers about amounts due from borrowers, amounts received from borrowers, dates as to when Ocwen received borrowers’ payments, and borrower delinquency statuses. These representations are material to borrowers managing their mortgages and are likely to mislead borrowers acting reasonably under the circumstances.

Ocwen’s payment processing failures have caused significant 3.

borrower harm.

92.

Ocwen’s errors in crediting borrower payments and use of inaccurate payment information have significantly harmed borrowers. Ocwen has charged borrowers improper late fees; reported inaccurate, negative payment information to credit reporting agencies; subjected borrowers to collection calls based on inaccurate information; and wrongly threatened borrowers with foreclosure. This conduct has harmed borrowers financially and caused borrower frustration and emotional distress. 93.

Even when Ocwen has identified a payment error, in many instances it has not properly corrected the error. Pursuant to Ocwen’s policies and procedures, its Cashiering Department corrects identified errors through a “reversal request” or Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 27 of 93

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correction to a borrower’s account. In many instances, however, Ocwen’s personnel have not made the reversal request in a timely or accurate manner. 94.

A March 30, 2016 internal audit found, for example, that Ocwen’s Cashiering Department lacked controls to ensure that reversal requests–approximately 3,700 a month at that time—were timely and accurately processed. The auditors also found that, when Ocwen actually processed reversal requests, it processed requests in the sample incorrectly.

95.

Not surprisingly, given Ocwen’s significant problems crediting and applying borrower payments, a large number of borrowers have complained about Ocwen’s payment processing.

96.

From April 2015 to April 2016 alone, Ocwen received complaints from more than 68,000 borrowers related to its processing of payments. Ocwen determined it made numerous errors in the following categories: “Payments Not Applied Correctly”; “Funds Not Applied Correctly”; “Reversal Requests”; “Late and NSF Fees”; “Payment Missing –Not Applied to Account”; “Chargeback Issue - Borrower Disputes Charged Back Item”; “Fee Assessed Improperly”; “Payment Not Processed Timely”; “ACH Drafted Incorrectly (Incorrect Date, Multiple Drafts, etc.)”; “Payoff Overage”; “ACH Payment – Chargeback”; and “Incorrect Data in the Account Statement.” 97.

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addition, when the borrower received her May 2016 mortgage statement, she reports that Ocwen had misapplied her April 2016 principal and interest payment into a suspense account. As a result, even though the borrower had sent Ocwen funds in advance to prepay her mortgage, the consumer reports that Ocwen changed her status to delinquent in May 2016, charged her late fees, and made disruptive and embarrassing collection calls to her at her home and work.

98.

Another borrower complained that Ocwen began rejecting her monthly payments in November of 2014, even though she had been making full payments pursuant to a September 2014 loan modification. The borrower states that when she contacted Ocwen, an Ocwen case manager told her that Ocwen’s systems had rejected the payment because the modified payment amount that Ocwen had recorded in its system was a few cents different than the modified monthly payment amount that Ocwen had told the borrower to pay in a letter approving her loan modification. After supposedly fixing this issue, the borrower reports that Ocwen then began misapplying her payments to the previous month (e.g., claiming the borrower made her January 2015 payment in February 2015). As a result, the borrower began receiving delinquency notices and eventually a notice of default from Ocwen indicating that she had a past due balance of $2,446.66. The borrower reports that she made repeated attempts to get Ocwen to correct its mistakes, but as of October 2016, Ocwen had still not fixed them. According to the borrower, this ordeal has caused her a significant amount of stress and embarrassment: “It is very embarrassing to come home and see a notice on my door of an impending foreclosure especially when I have made and continue to make my mortgage payments to Ocwen.”

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99.

Another borrower complained that Ocwen sent him an inaccurate payoff quote that caused the borrower’s pending property sale to fall through. In a March 31, 2016 letter, Ocwen sent the borrower a payoff statement with a payoff balance of $88,325.49. A few months later, on September 8, 2016 Ocwen sent the borrower another payoff statement that listed a payoff balance of $139,149.61—$50,000 more than the payoff quote Ocwen provided just a few months earlier. According to the borrower, he contacted Ocwen at least 15 times to dispute the payoff amount, but was not able to get Ocwen to address the matter until he submitted a complaint to the Bureau and the Texas Attorney General. In a letter dated September 28, 2016, Ocwen admitted that “the figures on the payoff statement sent on September 8, 2016 were incorrect.” In the letter, Ocwen stated that it had generated a new payoff statement with a corrected payoff amount of $84,569.90—more than $55,000 less than the payoff quote Ocwen provided to the borrower a few weeks earlier. Ocwen did not explain, though, how the error had occurred in the first place. According to the borrower, due to the payoff discrepancy, he had to delay the pending sale of the property and the sale fell through. He had to find another buyer for his property, which he later did.

Ocwen has botched borrowers’ escrow accounts.

100. Ocwen has also failed to perform basic tasks associated with managing borrowers’ escrow accounts. Specifically, due to systems failures, control lapses, and excessive reliance on manual processes, Ocwen has failed to conduct escrow analyses or accurate escrow analyses; failed to timely send borrowers accurate escrow statements; and failed to properly account for and apply borrower escrow shortage payments. 101.

As of April 2016, Ocwen managed escrow accounts for more than 78 percent of the loans it services. In 2014, Ocwen hired consultants to review and report Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 30 of 93

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upon its escrow practices. The resulting report identified more than three million “documented CFPB violations” during 2014, including Ocwen’s failure to: provide escrow statements or accurate escrow statements to borrowers; conduct escrow analyses or accurate escrow analyses; and accurately impose hazard and flood insurance.

Ocwen’s obligations under RESPA, the CFPA, and the FDCPA. 1.

102.

RESPA and Regulation X generally require servicers to do the following for escrow accounts that they establish in connection with a federally related mortgage loan: (1) perform an annual escrow analysis to determine the monthly escrow account payments for the next computation year; (2) provide an annual statement reflecting the activity in the escrow account during the escrow account computation year and a projection of the activity in the account for the next year; (3) refund to the borrower any surplus disclosed in an escrow analysis or, if the surplus is less than $50, alternatively credit such surplus against future escrow payments; and (4) potentially seek repayment for any shortage (i.e., the amount by which a current escrow account balance falls short of the target balance at the time of an escrow analysis) disclosed in an escrow analysis. 103.

Under Regulation X, a servicer is also required to have policies and procedures reasonably designed to ensure, among other objectives, that the servicer is providing accurate and timely disclosures to a borrower as required by applicable law, such as escrow statements required under Regulation X. 104.

In addition, the CFPA and FDCPA prohibit servicers from engaging in unfair, deceptive, and abusive acts and practices related to escrow and debt collection activities.

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Ocwen has failed to comply with RESPA, the CFPA, and the 2.

FDCPA.

105.

Ocwen has failed to comply with RESPA, the CFPA, and/or the FDCPA in at least five ways.

106.

First, as of mid-2014, Ocwen had failed to conduct annual escrow analyses within the required time period for up to 230,000 delinquent borrowers and up to 60,000 borrowers who had filed for bankruptcy, in violation of Regulation X. 107.

According to the Head of Ocwen’s Escrow Department, until at least July or August of 2014, Ocwen did not conduct these annual analyses for borrowers in delinquency.

108.

Ocwen’s failure to conduct escrow analyses for borrowers in delinquency also impacted the accuracy of its borrowers’ payoff and reinstatement quotes. Because REALServicing’s calculation of delinquent borrowers’ payoff and reinstatement quotes— the amount they need to pay to respectively payoff or reinstate their loan to become current—depends in part on borrowers’ escrow balances, REALServicing miscalculated the payoff and reinstatement quotes for many of the loans for which Ocwen did not conduct an escrow analysis. Ocwen’s failure to conduct escrow analyses resulted in Ocwen providing up to 5,000 delinquent borrowers with inaccurate reinstatement quotes.

109.

In some instances, Ocwen failed to perform or timely perform escrow analyses during the pendency of a Chapter 13 bankruptcy. Further, Ocwen failed to service its loans in accordance with bankruptcy protections and has attempted to collect purported escrow shortages or arrears in violation of bankruptcy orders and rules. Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 32 of 93

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110.

In June 2016, Ocwen’s Head of Bankruptcy testified that more than 22,000 borrowers in bankruptcy were impacted by Ocwen’s failure to conduct a timely escrow analysis and that Ocwen is currently attempting to remediate these borrowers. Ocwen’s consumer complaint data indicates that, for the year of April 2015 to April 2016, at least 8,000 of these 22,000 impacted borrowers complained to Ocwen. 111.

In many instances, even when Ocwen has performed escrow analyses on borrowers’ accounts, Ocwen has either: (1) failed to send escrow statements to borrowers because of REALServicing system deficiencies; or (2) sent inaccurate escrow statements. Consequently, Ocwen has failed to maintain reasonably designed policies and procedures to ensure that borrowers receive timely and accurate escrow statements. 112.

As a result, in mid-2014, Ocwen performed escrow analyses for an estimated 10,000 to 20,000 borrowers but then failed to generate or timely send the required escrow statements to these borrowers within the required year. 113.

When Ocwen has sent escrow statements, in many instances, the escrow statements have contained inaccurate information pertaining to the borrowers’ account histories, escrow balances, and escrow payments. In September of 2014, Ocwen’s then Head of Servicing Compliance acknowledged this failure in internal e-mails: Escrow notices not compliant with RESPA, not sent timely or not sent at all are huge and are the foundation for all else. These are, by the way, the three biggest borrower communication issues across the board for Ocwen - required content not included, letter not sent, or letter not sent timely. This is estimated to impact 800,000 borrowers or 52% of the Ocwen customer base. (Emphases added.) 114.

Third, Ocwen has failed to timely process escrow shortage payments—i.e., payments that borrowers made at Ocwen’s request to satisfy a shortage or deficiency in Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 33 of 93

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their escrow accounts—that Ocwen needed to pay the borrowers’ insurance or tax disbursements, in violation of Regulation X.

115.

Since 2014, Ocwen’s personnel has manually entered a comment code in REALServicing when the borrower has paid an escrow shortage. As Ocwen’s auditors found in a March 30, 2016 audit, however, Ocwen did not have adequate controls over the entry of these comment codes and therefore Ocwen did not catch when its personnel failed to manually enter appropriate comment codes relating to escrow shortages. As Ocwen’s auditors found, this resulted in “the continued collection of escrow shortage amounts” that borrowers already paid. Specifically, Ocwen failed to timely process escrow shortage payments for what Ocwen estimates to be 5,000 to 10,000 borrowers. 116.

Fourth, in many instances, Ocwen has miscalculated borrowers’ escrow amounts or mistakenly imposed escrow requirements, resulting in Ocwen charging, collecting, or attempting to collect, through communications to borrowers, incorrect escrow amounts.

117.

Ocwen has miscalculated borrowers’ escrow amounts by mistakenly paying borrowers’ insurance premium charges twice; disbursing borrowers’ insurance premiums to the wrong insurance companies; creating escrow accounts even though borrowers were already paying their insurance premiums or taxes directly to their insurance companies or taxing authorities; and failing to account for escrow amounts or accurate escrow amounts in borrowers’ loan modification payment amounts (e.g., borrowers’ modified monthly mortgage payments), which borrowers learn of only after accepting the new modified amount.

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118.

In the bankruptcy context, Ocwen has also failed to generate accurate escrow amounts. In late 2014, the Head of Ocwen’s Escrow Department wrote in an email, which was forwarded to Ocwen’s Chief Executive Officer: I've stressed importance of getting the BK escrow balance issues fixed, but no confirmation of root cause or target correction date . . . . It's a system issue because a bucket that determines the amount of money that a customer sends for their monthly payment can change with no record of why on the system . . . . Please help get the importance across on this issue. If this is not fixed, I cannot recommend that we move to analyze BK for the portfolio. Even with a control report to catch them, there is still risk the balance will be wrong when you actually analyze the account. (Emphases added.) 119.

In late 2014, Ocwen’s then Head of Servicing also emailed Ocwen’s Chief Executive Officer and asked for additional consulting resources to handle Ocwen’s escrow deficiencies because, as Ocwen’s Head of Servicing Operations reported: “you are familiar with this issue - the BK escrow balance bucket is wrong and requires every BK loan to be manually reviewed and we can still have errors.” 120.

Fifth, as a result of Ocwen’s above failures, Ocwen has communicated, orally and in writing, inaccurate information to borrowers about escrow amounts, reinstatement amounts, and payoff amounts. These representations are material to borrowers managing their mortgages and are likely to mislead borrowers acting reasonably under the circumstances.

Ocwen’s escrow failures have caused significant borrower harm. 3.

121.

Ocwen’s escrow errors have caused significant harm to borrowers, including the costs and emotional distress that borrowers suffer when attempting to get Ocwen to correct its mistakes.

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122.

This type of harm can disproportionately affect borrowers in bankruptcy. As Ocwen’s former Head of Servicing Compliance testified: If you have a borrower who is sixty days down or in BK [bankruptcy], if an analysis is done and they find that the escrow account is short and the payment has to go up by fifty bucks…..If you've got somebody that's sixty days down or in BK [bankruptcy] and all of a sudden, because of a shortage in the escrow account, their payment goes up by fifty bucks, that can make a big difference. So it can have a disproportionate impact because they're already on the ropes financially.

123.

From April 2015 to April 2016, Ocwen received more than 53,000 complaints relating to its handling of escrow accounts. Ocwen determined it made numerous errors in the following categories: “Escrow Analysis Needed, Last Analysis Incorrect”; “Escrow Payment Change Inquiry”; “Escrow Info Incorrect or Not Set Up”; “Escrow Analysis Needed”; “Escrow Overage Not Received”; “Escrow Payment Change Dispute”; “Escrow Analysis Needed due to Payment”; “Negative Escrow Balance”; “Escrow Analysis Requested due to Refund”; and “Taxes Escrowed- Paid on Wrong Parcel.”

124.

One borrower contacted Ocwen multiple times to complain about an incorrect, inflated escrow deficiency. The borrower had previously filed for bankruptcy, and by a bankruptcy court order on June 1, 2015, his account was deemed current with an escrow deficiency of $530.67. Despite the court order, Ocwen continued to report an escrow deficiency of $8,468.03. The borrower complained repeatedly to Ocwen, but to no avail. In March 2016, the borrower filed a complaint against Ocwen with the Bureau and the Texas Attorney General. In a response letter dated June 3, 2016, Ocwen acknowledged that, per the June 1, 2015 court order, the borrower’s account should have been deemed current with an escrow shortage of only $530.67. Ocwen also Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 36 of 93

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admitted that it had sent the borrower two escrow statements that reflected an “incorrect escrow account balance deficiency” and apologized for any “frustrations [the borrower had] incurred as a result of the error.” Ocwen agreed to make corrections to the borrower’s account, run a new escrow analysis, waive all fees and expenses that Ocwen had charged to the account, and amend any negatively reported credit information.

125.

The complaint submitted by another borrower typifies the myriad of payment processing, escrow, and insurance errors Ocwen makes, and how they can drive borrowers into foreclosure. The borrower complained about the following series of errors:

• When the borrower entered into a loan modification in April of 2016, his principal balance increased by more than $161,000, but Ocwen was unable to explain why his balance increased by this amount; • Even though the borrower made his required monthly modification payments on time, Ocwen repeatedly failed to post his payments on time or at all; • Ocwen charged the borrower for flood insurance that the borrower did not need because his property was not in flood zone; and • Ocwen then erroneously attempted to foreclose on the borrower. 126.

In a letter dated February 10, 2017, Ocwen admitted to multiple errors in the process:

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• Ocwen admitted, though, that the negative escrow balance was wrong and based on erroneous charges it imposed on the borrower for lender-placed flood and hazard insurance: “When the modification was completed the calculations used Lenders Placed Flood Insurance and Lenders Placed Hazard Insurance for multiple years that were not necessarily due.” • As a result of these erroneous charges, Ocwen determined that the borrower actually had a positive escrow balance or surplus of $36,788.16 in his escrow account, not an negative escrow balance or deficiency of more than $88,000. 127.

In light of these errors, Ocwen stated that it would be “re-modifying the loans current terms accordingly” and would attempt to waive the foreclosure fees it had imposed on the borrowers’ account. On March 24, 2017, the foreclosure proceedings against the borrower were voluntarily dismissed. 128.

This borrower’s experience also illustrates the types of harm that Ocwen’s errors impose on borrowers. The borrower described the ordeal as follows: I spent one full day a week for the last three and a half years dealing with Ocwen, this includes calling the company mainly waiting on the phone on hold and talking to individuals at their call center . . . and faxing and emailing. Recently I have spent a large amount of time and money dealing with the foreclosure proceedings. The costs and time included attorney fees and paying for my own counsel, which cost between $6,000 and $8,000, to respond to the Notice of Foreclosure, amongst other costs.

Ocwen has mishandled borrowers’ hazard insurance. C.

129.

Ocwen has failed to make timely payments of borrowers’ hazard insurance premiums and serviced loans based on inaccurate insurance data that has led to wrongful insurance premium charges.

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Ocwen’s obligations under RESPA, the CFPA, and FDCPA. 1.

130.

Under RESPA and Regulation X, if a borrower’s monthly payment includes a payment for hazard insurance, such as homeowner’s insurance, wind insurance, or other types of property-related insurance, then the servicer must generally make disbursements in a timely manner, on or before the deadline to avoid a penalty, as long as the borrower’s payment is not more than 30 days overdue. 131.

In addition, the CFPA and FDCPA prohibit servicers from engaging in unfair, deceptive, and abusive acts and practices related to debt collection activities and in connection with mortgage servicing, including in the context of charges its imposes relating to borrowers’ insurance policies, such as flood insurance policies.

Ocwen has failed to comply with its RESPA, CFPA, and FDCPA 2.

obligations.

132.

Ocwen has failed to comply with RESPA, the CFPA, and FDCPA in at least three ways.

133.

First, in numerous instances since September 2014, Ocwen has failed to properly disburse borrowers’ payments to their hazard insurance companies. Due to syncing and updating failures between REALServicing and Ocwen’s insurance vendor’s system, Ocwen’s insurance vendor did not recognize that numerous Ocwen borrowers had escrow accounts and therefore failed to make disbursements to these borrowers’ insurance companies. In other instances, incorrect account data in REALServicing has resulted in Ocwen making incorrect disbursements for borrowers’ insurance policies. Ocwen, for example, made double payments (out of borrowers’ accounts) for the same insurance policy on approximately 3,275 accounts, disbursed premiums to wrong Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 39 of 93

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payees, and failed to timely disburse funds to pay approximately 40,000 insurance premiums.

134.

Ocwen’s failures have resulted in the lapse of hazard insurance coverage for more than 10,000 borrowers. As of March 2015, more than: • 1,500 of these borrowers were able to reinstate their insurance policy, but had to pay a higher premium;

• 3,000 of these borrowers received letters from Ocwen indicating that it was going to impose force-placed insurance on their loans because they lacked hazard insurance;

• 500 of these borrowers had force-placed insurance imposed on their loans by Ocwen; and • 100 of these borrowers were foreclosed upon by Ocwen. 135.

For borrowers who were forced to pay a more expensive premium to reinstate or obtain new hazard insurance coverage, Ocwen’s insurance vendor ultimately agreed to provide a credit to the borrower to cover the increase in premium for at least three years.

136.

Second, Ocwen’s use of inaccurate insurance data to service borrowers’ loans has led it to charge borrowers for insurance premiums for insurance policies that borrowers were not required to maintain. For example, Ocwen has repeatedly used inaccurate flood insurance data to service its loans. 137.

In early 2014, a large bank servicer who transferred the subservicing rights of its loans to Ocwen audited a sample of loans where Ocwen had force-placed flood insurance policies on borrowers’ properties. For approximately half of the loans it tested, the large bank servicer found that Ocwen had imposed force-placed flood Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 40 of 93

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insurance on borrowers’ homes, despite the fact that the large bank’s records indicated that the borrowers already had their own flood insurance policies in place. 138.

In late 2014, when Ocwen reviewed its escrow processes, it also found that it had “[i]nconsistent and/or incomplete flood determination data loaded for all loans on REALServicing” and that “[a]ccurate flood determination data is required to ensure appropriate tracking of flood insurance.”

139.

In early 2015, when Ocwen audited flood zone data among its various service providers, it found more than 3,000 loans for which the flood-zone-related data in REALServicing was inaccurate. In July of 2015, Ocwen’s auditors also concluded that Ocwen “lacks sufficient controls to ensure lender-placed flood insurance policies do not exceed regulatory required coverage amounts.” Ocwen’s auditors also reviewed a sample of 40 loans where the property was located in a flood zone and noted: “there were several loans where the lender-placed flood insurance policy amounts exceeded the required statutory or investor minimum coverage. Further, there were instances where gap insurance policies were created, even though the customer independently purchased sufficient flood coverage.”

140.

Third, based on Ocwen’s above insurance-related failures, Ocwen has communicated, orally and in writing, inaccurate information to borrowers about the amount or whether insurance premium charges are due from borrowers. These representations are material to borrowers managing their mortgages and are likely to mislead borrowers acting reasonably under the circumstances. Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 41 of 93

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Ocwen’s insurance failures have caused significant borrower 3.

harm.

141.

Ocwen’s insurance failures have caused substantial financial and emotional harm to borrowers. From April 2015 to April 2016, Ocwen received complaints from more than 19,000 borrowers related to its management of borrowers’ insurance policies. Ocwen found that it had made numerous errors relating to forceplaced insurance imposed on borrowers’ accounts, borrowers’ hazard insurance not being paid, and insurance refunds not being timely refunded or paid to borrowers. 142.

For example, one borrower complained to Ocwen that it had erroneously force-placed flood insurance on his property. According to the borrower, he had to take out a loan to pay the more than $4,300 cost of the flood insurance policy. In a May 3, 2016 letter, Ocwen admitted that “[i]n review of the account, [the force-placed flood insurance policy] was due to an incorrect loan number provided by the insurance company.”

143.

Another borrower’s experience highlights the difficulty borrowers have had in getting Ocwen to correct its insurance errors, as well as the downstream effects these errors can have on borrowers’ escrow accounts and payments amounts. This borrower complained to Ocwen multiple times about her escrow payments, but was not able to resolve her complaints until she submitted a complaint through her state regulator. In a May 8, 2015 letter responding to the borrower and the state regulator, Ocwen admitted that it had made a “duplicative disbursement for windstorm hazard insurance,” resulting in the borrower being overcharged for insurance. In addition, Ocwen conceded that the duplicate wind insurance payment had caused her escrow Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 42 of 93

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balance to appear artificially low, which resulted in Ocwen incorrectly increasing the borrower’s monthly payment to account for the purported shortage.

Ocwen has mishandled borrowers’ private mortgage insurance. D.

144.

Ocwen has also failed to timely cancel borrower’s private mortgage insurance (“PMI”). Borrowers are generally required to purchase PMI when they obtain a mortgage but have a down payment of less than 20 percent, or when they refinance their mortgage but have less than 20 percent equity in their property. 145.

Under HPA, servicers are required to automatically terminate a borrower’s requirement to pay PMI on the “termination date,” the date when the principal balance of the mortgage is first scheduled to reach 78 percent of the original value of the property or, if the borrower is not current as of the termination date, the first day of the first month beginning after the date that the borrower becomes current on the loan. 146.

Since 2014, Ocwen has failed to comply with the HPA by failing to timely terminate borrowers’ PMI after learning that the termination data contained in REALServicing was often unreliable or missing altogether. Ocwen ultimately overcharged borrowers approximately $1.2 million for PMI premiums, which Ocwen later refunded to borrowers.

Ocwen has unlawfully marketed and processed payments for E.

add-on products.

147.

Since at least 2011, Ocwen has been directly and materially involved in marketing and processing payments from consumers for at least 109 add-on products. These products include identity theft protection products, credit monitoring, and other financial advisory products or services.

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Ocwen’s role in marketing and processing payments for add-on 1.

products.

148.

Until it stopped marketing add-on products in 2013, Ocwen marketed add-on products to the borrowers whose loans it serviced. Among other things, Ocwen: assisted in the development of add-on product solicitations; reviewed and approved each add-on product solicitation; and identified the borrowers whom Ocwen and its add-on product vendor would target for a particular marketing campaign.

Ocwen has failed to comply with the CFPA by enrolling borrowers 2.

into add-on products through misleading solicitations. 149.

Ocwen has sent borrowers misleading solicitations to enroll them into add-on products.

150.

One solicitation was in the form of a voucher for $40 worth of gasoline. This solicitation did not clearly or conspicuously disclose that to actually redeem the voucher, the borrower had to enroll in the add-on product and remain in it for at least one year, during which time the borrower would be obligated to pay a monthly fee of $14.95 per month. The solicitation also did not clearly or conspicuously disclose that the borrower would receive the $40 in four separate $10 vouchers provided quarterly. This information was listed in small print on the second page of the solicitation, and not on the face of the enrollment voucher that the borrower signs and submits. 151.

Ocwen also sent a solicitation that appeared to be a check from Ocwen made out to the borrower. This check solicitation came in a “fold and tear” envelope and included a prominent Ocwen logo in the return address section of the envelope. The face of the check included a date, a check number, a routing number, and was made payable to the borrower. The solicitation only disclosed in small print directly above the check Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 44 of 93

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amount, and in small print on the back of the check, that, by cashing the check, the borrower was agreeing to enroll in an add-on product. 152.

Ocwen has also enrolled borrowers into add-on products without proof of their affirmative consent. Ocwen did not require its add-on product vendors to provide proof that a borrower agreed to enroll in the add-on product before Ocwen began billing and collecting payments from the borrower for the add-on product. As a result, unless Ocwen specifically requested a copy of the call recording or other proof of enrollment, Ocwen did not know whether the borrower actually agreed to enroll in the add-on product. And if a borrower complained that he or she did not agree to enroll in the addon product, Ocwen has stated that: “Sometimes by not responding to [an add-on product] vendor, the vendor assumes you accepted the coverage.” 153.

In addition to its role in marketing and enrolling borrowers into add-on products through misleading solicitations, Ocwen processed payments, including billing and collecting payments, from these borrowers for these products.

Ocwen’s solicitation, enrollment, and payment processing 3.

practices for add-on products have caused significant borrower harm.

154.

Ocwen’s role in marketing and processing payments from borrowers for add-on products has resulted in significant financial harm to borrowers. In many instances, borrowers paid for add-on products that they were misled into enrolling in. 155.

Ocwen’s borrower complaint records reveal that numerous borrowers contacted Ocwen to complain that they never agreed to enroll in the add-on products. Borrowers also complained that, after questioning Ocwen about the add-on charges, they learned that Ocwen enrolled borrowers into such products after the borrowers Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 45 of 93

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cashed vouchers or checks, even though borrowers were unaware that cashing such vouchers or checks would result in their enrollment in the add-on products.

Ocwen has failed to properly identify and communicate with F.

successors in interest.

156.

Between January 2014 and mid-2015, Ocwen failed to implement policies and procedures that were reasonably designed to meet the objective of Ocwen properly handling accounts for successors in interest to a deceased borrower (“successors”), particularly when successors were applying for loss mitigation assistance. As a result, Ocwen failed to properly recognize individuals as successors, denied loss mitigation assistance to, and, in some instances, ultimately conducted foreclosure sales upon the loans of successors who may have been eligible for a loan modification or other loss mitigation options.

Ocwen’s obligations under Regulation X.

157.

Under Regulation X, servicers are required to have policies and procedures that are reasonably designed to ensure upon notification of the death of a borrower the servicer can promptly identify and facilitate communication with a successor with respect to the property secured by the deceased borrower’s mortgage loan.

158.

When a borrower passes away, a successor to the borrower’s property interest may seek to communicate with a servicer about the deceased borrower’s mortgage loan. A successor may want information about the status of the mortgage loan obligation prior to assuming the mortgage. A successor may also apply for loss mitigation assistance prior to assuming the mortgage in order to determine whether the mortgage loan obligation is affordable for the successor. Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 46 of 93

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Ocwen has failed to comply with its obligations under Regulation 2.

159.

Between January 2014 and mid-2015, appropriate Ocwen business units did not have policies and procedures to ensure that Ocwen handled successors in interest as required under Regulation X. As a result, when potential successors called Ocwen, its call center personnel did not provide clear and complete information and generally only requested death certificates, a last will and testament, and/or a probate order from potential successors, even though Ocwen has required additional documentation, such as a letter of testamentary or a letter of administration, to establish that an individual’s status as a successor.

160.

Ocwen has also lacked reasonably-designed policies and procedures to ensure that it promptly identified and facilitated communications with a successor about the appropriate steps and information required for a successor to assume a mortgage and obtain a loan modification. Prior to mid-2015, certain Ocwen business units, such as Loss Mitigation, had no policies and procedures relating to successors. Other business units did have policies and procedures, but they were deficient. As a result, when successors have contacted Ocwen to apply for loss mitigation assistance, Ocwen personnel have provided them with incomplete or inaccurate information about Ocwen’s specific requirements regarding the loss mitigation application and assumption process.

Ocwen’s failure to comply with its Regulation X obligations has 3.

caused significant harm to successors.

161.

Ocwen’s failure to maintain reasonably-designed policies and procedures has made it more difficult for, and in many instances actually prevented, successors from obtaining necessary information about the status of a deceased borrower’s Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 47 of 93

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mortgage and potential loss mitigation options. Ocwen has estimated that, when it incorrectly denied loan modifications on the ground that there was no successor when Ocwen’s own records indicated that there was a successor, it has “harmed” at least 202 borrowers and that there was “probable harm” to 195 borrowers. As of January 2016, Ocwen had also initiated foreclosure proceedings on at least 314 of the loans that it identified as potentially being impacted by its failures. 162.

For example, one potential successor complained that Ocwen had provided her with misinformation about the requirements for receiving a loan modification for her deceased mother-in-law’s property. According to the potential successor, when she contacted Ocwen to inform it that her mother-in-law had passed away and that she and her husband wanted to request loss mitigation assistance to keep the property, Ocwen told her that she and her husband would not need to assume the mortgage. According to the potential successor, Ocwen later informed her—after she had made all required payments under a trial modification—that if she wanted to receive a permanent modification, she and her husband would have to assume the mortgage. The potential successor also complained that Ocwen had wrongfully charged foreclosure fees to the account, even though Ocwen records showed it had placed a foreclosure hold on the account. The potential successor complained to Ocwen, which directed the potential successor to its foreclosure firm, to explain the foreclosure fees. When the potential successor contacted Ocwen’s foreclosure firm about the foreclosure fees, however, she reports that the firm told her that it had not done any work because the foreclosure was on hold.

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Ocwen has failed to protect borrowers when it has made G.

servicing errors.

163.

Ocwen’s errors at every loan servicing stage have made it even more important that the company adequately investigate and respond to borrower complaints and notices of errors. These functions can act as a “safety net” to catch borrowers before they are further harmed by a servicer’s unlawful conduct. Here, too, Ocwen has failed borrowers. Since April 2015, Ocwen has received more than 580,000 complaints and written notices of error from more than 300,000 different borrowers. 164.

Since 2014, Ocwen has routinely failed to reasonably investigate, and, when appropriate, make corrections in response to borrower complaints and notices of errors. These failures have caused serious harm to consumers.

Ocwen’s obligations under Regulation X.

165.

Under Regulation X, servicers are required to have policies and procedures that are reasonably designed to ensure that Ocwen investigates, responds to, and, as appropriate, makes corrections in response to complaints by borrowers. Written borrower notices that are sent to an Ocwen-designated address and allege certain types of errors are considered a qualified written request and notice of error (collectively “NOE”) and entitle borrowers to additional protections under RESPA and Regulation X. For both complaints and written NOEs, servicers generally are required to conduct a reasonable investigation of the alleged error and, as appropriate, make corrections.

Ocwen has failed to comply with its obligations under Regulation 2.

166.

Ocwen has failed to comply with the requirements of Regulation X in at least two ways.

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167.

First, Ocwen has failed to implement policies and procedures that are reasonably designed to meet the consumer complaint handling objectives to respond, investigate, and, where appropriate, correct errors. 168.

Per Ocwen’s policy, Ocwen call center personnel are supposed to escalate repeat complaints regarding the same issue to a supervisor or a designated call center employee, known as the borrower’s “Escalation Relationship Manager.” But, due to insufficient policies and procedures and an overreliance on rigid scripting, Ocwen call center personnel have failed to adequately resolve the complaint or escalate the call for investigation and correction of the error. As a result, borrowers have been forced to call Ocwen multiple times about the same complaint before the call center personnel escalate the matter for investigation and error correction. 169.

In April 2015, Ocwen implemented new policies and procedures to address the difficulty its call center personnel had in recognizing and escalating borrower complaints. These policies and procedures, however, were not reasonably designed to handle consumer complaints. For example, instead of requiring Ocwen to identify a complaint the first time a borrower calls in, the new policies and procedures place the burden on the borrower to complain multiple times–at least five times in nine days– before Ocwen will automatically escalate their complaint for resolution to an Escalation Relationship Manager.

170.

As a result, many borrowers have been forced to call Ocwen multiple times before Ocwen investigated and corrected their error. For example, of the more than 450,000 complaints that Ocwen processed from April 2015 through April 2016, approximately 68 percent involved borrowers who contacted Ocwen multiple times within a 15-day period; approximately 40 percent involved borrowers who contacted Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 50 of 93

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Ocwen three or more times within a 15-day period; and approximately 17 percent involved borrowers who contacted Ocwen five or more times within a 15-day period. 171.

Ocwen’s policies and procedures have not been reasonably designed to ensure that its personnel conduct reasonable investigations of the alleged error in complaints. Ocwen’s policies and procedures, for instance, direct Ocwen personnel to rely on the information in REALServicing to investigate complaints. Thus, Ocwen’s ability to appropriately investigate complaints is largely dependent on the accuracy of the information contained within REALServicing. Further, Ocwen’s policies and procedures provide little to no guidance to personnel on how to document the step-bystep basis for their conclusions regarding the validity of an alleged error. 172.

Ocwen’s policies and procedures also provide little or no guidance to personnel about how to correct errors. For example, Ocwen’s policies and procedures do not detail what factors personnel should consider when recommending remediation, including what types of harms and downstream impacts to borrowers they should consider. At best, Ocwen’s policies and procedures identify certain forms of remediation such as fee waivers and credit reporting corrections, but do not inform personnel when these or other forms of remediation are appropriate. Without such guidance, Ocwen personnel are left to their own discretion to determine whether an error has occurred, and, if so, how to correct the error.

173.

Second, as a result of Ocwen’s above policies and procedures, which also apply to NOEs, Ocwen has failed to conduct reasonable investigations and/or, where appropriate, make corrections of errors in borrowers’ complaints and NOEs. Among other things, Ocwen has relied on inaccurate data in REALServicing, and the Ocwen personnel who investigate borrowers’ complaints and NOEs are not required to cross- Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 51 of 93

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reference Ocwen’s known and documented systemic errors, such as the payment processing and application, escrow, and insurance errors, and thus do not consider that information in their investigations. Further, in responding to certain complaints and NOEs, Ocwen has simply parroted back the information in REALServicing, including details set forth in payment and escrow histories, without addressing the errors presented by borrowers.

Ocwen’s consumer complaint and NOE handling failures have 3.

caused significant borrower harm.

174.

Ocwen’s failure to properly investigate consumer complaints and NOEs and correct errors has caused significant consumer harm. 175.

Ocwen’s consumer complaint and NOE failures are illustrated by the experience of several borrowers, including those described in Paragraphs 97, 98, 99, 124, 125, 126, 142, 143, 162, 211, and 212, who complained to Ocwen multiple times in order to try to get Ocwen to correct errors.

176.

One borrower repeatedly contacted Ocwen throughout 2014 to have Ocwen correct an error with her escrow account. When the borrower’s loan was transferred to Ocwen in August 2013, Ocwen set up an escrow account and incorrectly began making disbursements for property taxes and property insurance, even though the borrower had a tax deferment as part of a program for low income-seniors and paid her own property insurance. In July 2014, Ocwen sent the borrower a notice of default, which included an escrow balance of $3,841.92, late fees, and other fees and charges. After the borrower was unable to get Ocwen to resolve her dispute, she submitted, through AARP’s Legal Counsel for the Elderly, a Qualified Written Request and NOE regarding the escrow mistakes and the related errors. Ocwen’s response only contained Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 52 of 93

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generic account information and did not correct the errors. It was only after the borrower’s counsel sent Ocwen another complaint to the Bureau in October 2014 that Ocwen responded, in a letter dated December 17, 2014, in which it stated it would remove the borrower’s escrow balance, waive late fees, and reduce the borrower’s payment amount to $302.43, which was the original and correct amount of the borrower’s payment.

Ocwen has engaged in unlawful foreclosure practices. H.

177.

Ocwen has long touted its ability to service and modify distressed loans, claiming, “helping homeowners is what we do.” In fact, Ocwen has failed to accurately maintain foreclosure-related information necessary to ensure that it provides borrowers with required foreclosure protections. As a result of these and other failures, Ocwen has wrongfully initiated foreclosure proceedings and wrongfully conducted foreclosure sales.

Ocwen’s obligations under Regulation X and the CFPA. 1.

178.

Regulation X provides borrowers with a variety of protections when they apply for a loan modification or other loss mitigation option, such as a short sale, in connection with a mortgage secured by their principal residence. Several of these protections are triggered once the borrower submits an oral or written application for a loss mitigation option.

179.

Under Regulation X, if a servicer receives a loss mitigation application 45 days or more before a foreclosure sale, it must provide the borrower an acknowledgement letter within five days that states whether the application is “complete,” and, if it is not, what additional documents and information the borrower must submit to complete the application (“Acknowledgment Letter”). A loss mitigation Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 53 of 93

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application is complete under Regulation X when the servicer has received all of the information it requires from a borrower to evaluate the borrower’s application for all available loss mitigation options (“Complete Application”). An application is facially complete under Regulation X if a borrower provides the information and documentation that the servicer requests in the Acknowledgment Letter or if no additional information is requested in the Acknowledgment Letter (“Facially Complete Application”). 180.

Regulation X also requires that, if a servicer receives a Complete Application more than 37 days before a foreclosure sale, it must evaluate the borrower for all available loss mitigation options and provide the borrower with a written notice within 30 days indicating, among other things, whether it will offer the borrower any loss mitigation options (“Evaluation Notice”).

181.

Regulation X also includes requirements relating to a servicer’s access to and ability to exchange information with its service providers. Regulation X generally requires a servicer to, among other things, have policies and procedures reasonably designed to ensure that the servicer is providing appropriate servicer personnel with access to accurate and current documents and information reflecting actions performed by its service providers, such as foreclosure attorneys responsible for handling Ocwen’s foreclosure proceedings.

182.

Regulation X also generally prohibits servicers from, among other things, commencing a first notice or filing of a foreclosure (“First Filing”), obtaining a foreclosure judgment, or conducting a foreclosure sale if: (1) the servicer discovers that additional information or corrections to a previously submitted document are required to complete a Facially Complete Application and the borrower has not had a reasonable opportunity to complete the application; (2) the servicer has timely received a Complete Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 54 of 93

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In addition, a servicer is prohibited from engaging in unfair, deceptive, and abusive acts and practices, including in the context of foreclosure activity, under the CFPA.

Ocwen’s deficient foreclosure policies and procedures violate 2.

Regulation X.

184.

Ocwen uses foreclosure attorneys to provide it with various foreclosure services, including commencing and completing foreclosures upon borrowers’ loans, and placing “foreclosure holds” on borrowers’ accounts to prevent the initiation of a foreclosure or obtain a stay or postponent of a foreclosure. Ocwen’s policies and procedures relating to its foreclosure attorneys are deficient, however, as they fail to ensure that Ocwen receives accurate and current information reflecting its foreclosure attorneys’ actions.

185.

From at least 2014 through at least April 2016, Ocwen has been aware that it has not received timely or accurate information from its foreclosure attorneys. For example, in 2014, Ocwen’s auditors found that one of Ocwen’s largest foreclosure law firms in Florida had failed to timely update Ocwen’s system with current foreclosure sale dates for 100 percent of the loan files tested. In response to this finding, the firm explained that it “continues for have periodic, on-going access issues within [Ocwen’s systems], which at times hinders our ability to comply with the several issues noted during the audit.” In another 2014 audit, Ocwen found that another of Ocwen’s Florida Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 55 of 93

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foreclosure law firms had failed to upload documents to Ocwen’s system for 100 percent of the loan files tested.

186.

The deficiency of Ocwen’s policies and procedures was highlighted again in 2015 when Ocwen’s auditors found that its foreclosure law firms had failed to provide Ocwen with timely and accurate information. For example: • In a 2015 audit of one the Ocwen’s foreclosure law firms in Florida referenced in Paragraph 185, Ocwen found that the firm was still not accurately updating Ocwen’s system with the correct foreclosure milestone dates. Ocwen described the impact as follows: “When incorrect data is inputted into the system, Ocwen staff is unaware of the current status of the foreclosure proceedings” and presents “data integrity issues.” In response to the 2015 audit, the firm pointed out that transferred loans may contain incorrect dates, but stated that it could not update those loan files because there was a “hold” placed on transferred loans. • In another 2015 audit, Ocwen found that of one of its Oregon foreclosure firms had failed to timely upload documentation to Ocwen’s system for 80 percent of the loan files tested. The audit report listed the cause as “Some of the Firm personnel are not familiar with [Ocwen’s system] document upload.” • In another 2015 audit of one of its foreclosure firms in New Jersey, Ocwen found that the firm had failed to upload all documents to Ocwen’s systems for 60 percent of the loan files tested “result[ing] in missing documentation [in Ocwen’s system] for SCRA [Servicemembers Civil Relief Act] and PACER checks.” The audit identified the reason for the failure as: “The Firm was unaware of the requirement for filed and or recorded documentation to be uploaded [to Ocwen’s system].” Ocwen’s auditors also described the impact of the failure: “Failure to Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 56 of 93

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upload documents to [Ocwen’s system] affects the [ability of the] servicer to view and ensure all documents completed by the attorney were accurate.” 187.

The audit findings for these firms are not outliers. In March 2016, Ocwen conducted an internal audit of its foreclosure operations and found, for foreclosures initiated between July and December 2015, that:

• “Foreclosure documents are not consistently uploaded on [Ocwen’s system] by attorney firms. In 15 (13%) of 120 foreclosure initiation events reviewed, documents were not uploaded to [Ocwen’s system] by external counsel.” • “Delays occur in uploading foreclosure related documents on [Ocwen’s system]. In 12 (30%) of 40 foreclosure initiation events reviewed, documents were uploaded to [Ocwen’s system] by external counsel between 3 and 11 days after event completion.”

• “Publication dates updated in [Ocwen’s system] by external attorneys do not accurately reflect the event completion date. A review of 30 foreclosures with a ‘Publication Completed’ event date updated in [Ocwen’s system] identified 18 (60%) where documentation did not support the event completion date in [Ocwen’s system].”

188.

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applications. He further testified that he reached out to Ocwen’s Head of Foreclosure to inform him that the Loss Mitigation department needed foreclosure sale dates in the system and asked him to work with Ocwen’s foreclosure attorneys to ensure that they input these dates into Ocwen’s system, but he was unaware of what actions, if any, Ocwen took to ensure that this actually occurred. 189.

In May 2016, Ocwen’s Head of Foreclosure also testified that he was aware that Ocwen’s foreclosure attorneys had not always provided Ocwen with timely and accurate foreclosure information. He further testified that: • Some of Ocwen’s attorney managers tested the accuracy of the data Ocwen’s foreclosure firms entered into Ocwen’s systems, but acknowledged that not all of Ocwen’s attorney managers follow this practice and that the practice was not required by Ocwen’s policies and procedures.

• Ocwen’s system prevents foreclosure attorneys from making any changes to the foreclosure sale date when there is foreclosure hold on an account, and that Ocwen did not have a policy that required its foreclosure attorneys to contact Ocwen with any updated foreclosure sale date information (since they could not make changes in the system) when a foreclosure hold was in place. 190.

As a result of Ocwen’s policies and procedure deficiencies, Ocwen has initiated foreclosures, obtained foreclosure judgments, and conducted foreclosure sales on borrowers’ accounts in which Ocwen had placed a foreclosure hold. As of May 2016, Ocwen has maintained a daily report, which it calls the “Dual Tracking Report,” that tracks the date, identity of the borrower, and reasons why Ocwen initiated a foreclosure, obtained a foreclosure judgment, or conducted a foreclosure sale even though a borrower’s account had a foreclosure hold.

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191.

Below are two charts from one of Ocwen’s Dual Tracking Reports. The first chart catalogues instances where Ocwen initiated a foreclosure proceeding even though Ocwen had placed a foreclosure “hold” on the loan, a process known as “dual tracking.” The chart identifies the reason or root cause for each “[d]ual [t]rack violation,” such as “attorney proceeded while the file was on hold.” The chart shows that, by Ocwen’s own analysis, between November 2015 and April 2016, Ocwen attorneys initiated one hundred and twenty foreclosure proceedings when the subject loan was subject to a foreclosure hold.

192.

The second chart below indicates the reasons that borrowers’ accounts were subject to foreclosure holds. It shows that the vast majority of the foreclosure holds that Ocwen violated were in place because borrowers had submitted a completed loan modification package, and thus were potentially subject to Regulation X foreclosure protections.

Attorney proceeded while the file was on hold Hold not placed within timelines Milestone completed prior to FC initiation RC Pending Timing issue, loss mitigation trigger within 1 business day of milestone Rootcause for Dual Track violation Post Nov 2015 FC Sale First Legal Judgement Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 59 of 93

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Ocwen initiated foreclosures and conducted foreclosure sales in 3.

violation of Regulation X and the CFPA.

193.

Ocwen has initiated First Filings, obtained foreclosure judgments, and conducted foreclosure sales in violation of Regulation X and the CFPA in at least five ways.

194.

First, Ocwen has inappropriately made at least one thousand foreclosure First Filings at the time that it was still evaluating Complete Applications it had previously and timely received from borrowers on or after January 10, 2014. 195.

Second, in numerous instances, Ocwen has inappropriately obtained foreclosure judgments and conducted foreclosure sales on the homes of borrowers who had a mortgage secured by their principal residence, had timely sent Ocwen a Complete Application more than 37 days before a pending foreclosure sale on or after January 10, 2014, and: (1) were still waiting for Ocwen to evaluate their Complete Application; (2) still had time to accept loss mitigation options that Ocwen had offered to them; or (3) were performing upon loss mitigation agreements.

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196.

Third, in numerous instances, Ocwen has inappropriately conducted foreclosure sales on the homes of borrowers who had a mortgage secured by their principal residence and had timely sent Ocwen a Facially Complete Application more than 37 days before a pending foreclosure sale on or after January 10, 2014. After these borrowers submitted Facially Complete Applications, Ocwen determined it needed additional information. Ocwen sent these borrowers a letter requesting that they submit the additional information and gave the borrowers a deadline, usually 30 days, to submit that information, but then foreclosed on the borrowers before that deadline. 197.

Fourth, in numerous instances, Ocwen has inappropriately conducted foreclosure sales on the homes of borrowers before the deadline it provided these borrowers to submit missing documents. These borrowers had submitted incomplete applications for loss mitigation assistance. Ocwen sent the borrowers letters requesting that they submit the missing documents or information and gave the borrowers a deadline, but then foreclosed before that deadline. 198.

Ocwen’s Head of Loss Mitigation has conceded that foreclosing on borrowers before the deadlines it communicated to borrowers to submit additional or missing information is deceptive and confuses borrowers. These representations are material to borrowers and are likely to mislead borrowers acting reasonably under the circumstances. These borrowers reasonably interpret Ocwen’s request for additional or missing information to evaluate the borrowers’ loss mitigation applications to mean that Ocwen will not foreclose on them before the expiration of the deadline Ocwen provided for submitting the additional or missing information. 199.

In an email with the subject “Sale Date before Missing Doc Expiration,” an official in Ocwen’s Loss Mitigation department wrote: Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 61 of 93

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Please confirm if our missing letter states that if they don’t send a complete package we will go ahead with sale irrespective of the missing doc due date. To me that does not sound right, where we inform the borrower to send in documents by a date but go ahead with sale prior to expiration of that date. (Emphasis added.) The Head of Ocwen’s Loss Mitigation Department agreed, responding: If there is no denial on the current instance you should not be going to sale, period. Even though we have disclosure language around 37 days before FC and 7th day at midnight you will get hit with UDAP every single time you do not follow the rules above. You need to think like the customer which is without a denial you will still think you have time. (Emphases added) 200. Fifth, Ocwen has inappropriately conducted foreclosure sales on the homes of borrowers who were performing upon agreements for loss mitigation options, such as a loan modification. The borrowers accepted and were performing upon the terms of the options—for example, by making trial payments according to the terms of a loan modification. Even though the borrowers had been doing everything they were supposed to do, Ocwen unilaterally breached the terms of its loss mitigation agreements with borrowers and foreclosed on their loans.

Ocwen’s foreclosure failures have caused significant borrower 4.

harm.

201.

Aside from the obvious harm to any borrower whose home is wrongfully foreclosed upon, Ocwen’s illegal foreclosure practices have also caused significant financial harm, emotional distress, negative credit reporting, and other harm to borrowers.

OCWEN HAS FAILED TO PROVIDE COMPLETE AND ACCURATE IV.

LOAN INFORMATION TO NEW SERVICERS 202. Since 2015, Ocwen has sold hundreds of thousands of its rights to service borrowers’ loans, also referred to as mortgage servicing rights (“MSRs”), to new Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 62 of 93

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mortgage servicers. Ocwen has failed, however, to provide complete and accurate borrower loan information to the new servicers or to notify new servicers of errors that are likely to impact the accuracy and completeness of the transferred borrower records.

Ocwen’s obligations under Regulation X.

203. Regulation X requires a transferor servicer to maintain policies and procedures reasonably designed to ensure that it can timely transfer all information and documents in its possession or control relating to the transferred loan to the new servicer in a form and manner that ensures the accuracy of the transferred information and documents and that enables the new servicer to comply with applicable laws and the terms of the new servicer’s obligations to the owner or assignee of the mortgage loan (“investor guidelines”).

Ocwen’s failure to comply with Regulation X.

204. Ocwen has failed to comply with Regulation X’s policy and procedure requirements relating to transfers in at least two ways. 205. The first deficiency in Ocwen’s policies and procedures relates to the form and manner in which Ocwen has transferred borrower loan information to new servicers. As part of a loan transfer, Ocwen provides new servicers with raw loan-level borrower data, but does not provide adequate means to interpret that data. In particular, Ocwen’s policies and procedures do not require it to provide new servicers with a complete and accurate data dictionary that defines the more than 10,000 comment codes and flags that Ocwen has used to service borrowers’ loans. Instead, Ocwen’s policy calls for the production of a more limited data dictionary that only includes the current definitions for the comment codes and flags, but omits the historic definitions of comment codes or flags whose use or meaning has changed over time. As a Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 63 of 93

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result, new servicers have no way of knowing the meaning of the codes or flags in borrower account history or how they were used.

206. Ocwen has also provided new servicers with summary reports for certain populations of borrowers, such as those in loss mitigation or foreclosure. But these reports omit critical information that the new servicer needs to provide borrowers with the protections to which they are entitled under applicable law, and Ocwen’s policies and procedures do not require it to provide this information to the new servicer. For example, prior to November 2015, Ocwen failed to provide information for the loans being transferred in a form that new servicers could understand whether borrowers had: • A foreclosure sale date close to the transfer date, which new servicers needed in order to avoid erroneously foreclosing on the borrower, who may have been entitled to protections under Regulation X or other applicable laws; and • Previously filed for bankruptcy and had obtained a discharge in that proceeding, which the new servicer would need to know in order to comply with applicable federal law and bankruptcy court orders.

207. Second, Ocwen’s policies and procedures have failed to ensure that, prior to transferring loans to a new servicer, Ocwen has disclosed known inaccuracies and errors that may or have impacted the accuracy or completeness of the transferred borrower loan records and the new servicer’s ability to comply with applicable law and investor guidelines. Ocwen has not disclosed, for example, errors it tracks in its Risk Convergence Reports or audit findings that Ocwen knew or should have known impacted the accuracy or completeness of the loan information and the new servicer’s ability to comply with applicable law and investor guidelines. Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 64 of 93

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208. Ocwen’s Head of Servicing Transfers testified, for example, that he was not aware if Ocwen had disclosed to new servicers that Ocwen had: • Incorrectly calculated certain borrowers’ reinstatement quotes, including those in demand letters and foreclosure affidavits;

• Failed to credit payments made by up to 10,000 borrowers to satisfy their escrow shortages;

• Failed to make payment changes relating to escrow changes for up to 22,000 borrowers in bankruptcy; and • Initiated unlawful foreclosure proceedings upon borrowers, in violation of Regulation X.

Ocwen’s failure to transfer complete and accurate borrower C.

records has caused significant borrower harm.

209. Ocwen’s failure to transfer complete and accurate borrower records and disclose known errors to new servicers impacts borrowers after their loans have been transferred to a new servicer.

210.

According to Ocwen’s records, from April 2015 to April 2016, Ocwen received more than 6,800 complaints from borrowers related to the transfer of their loans by Ocwen to a new servicer.

211.

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that the borrower had an escrow shortage of $9,164.13, and that, as a result, the borrower’s payment would increase by $777.49, from $1,639.07 to $2,398.54. The borrower contacted Ocwen when the new servicer was unable to explain why the borrower had such a large escrow shortage. In a June 1, 2016 letter, Ocwen admitted that it had made an “error in its escrow application at the time of modification.” As a result, Ocwen only capitalized a portion of the borrower’s total escrow balance when it modified the borrower’s loan. To correct its error and unbeknownst to the borrower, Ocwen reduced the balance in the borrower’s escrow account two days before transferring the loan that left the borrower’s escrow account with a negative balance of $4,440.91. The borrower reports that he was eventually forced to retain an attorney, pay more than $5,000 in legal fees to ensure that Ocwen correct its error, and obtain a new repayment plan with the new servicer to cover the escrow shortage. 212.

Another borrower complained that Ocwen did not transfer complete information about his payments and loan modification to the new servicer. As a result, the new servicer refused to recognize the borrower’s loan modification and stated that the borrower owed more than $10,000 in past due payments. When the borrower complained to Ocwen, it admitted in a letter that the borrower had made his required modification payments but that Ocwen had failed to properly apply the funds. Ocwen also admitted that it had been attempting to correct its payment application error through a reversal request on the borrower’s account so it could reapply the borrowers’ payments, but had incorrectly processed the reversal request. And then before Ocwen could complete its second attempt at a reversal request to fix its error, Ocwen had transferred the loan to the new servicer. Instead of alerting the new servicer to its mistakes, Ocwen had simply transferred the borrower’s loan, leaving the $19,182.69 in Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 66 of 93

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payments that the borrower had made pursuant to his loan modification agreement in a suspense account.

OCWEN HAS FAILED TO SUFFICIENTLY REMEDIATE HARM TO V.

BORROWERS 213.

Ocwen is aware that its servicing failures have caused significant harm to borrowers and that these failures can have devastating consequences. 214.

Despite its awareness of the harm it has caused, Ocwen has had no consistent policy, procedure, or practice for providing borrower remediation, even when it has identified a systemic failure that could harm numerous borrowers. 215.

Ocwen has lacked a systematic process to track and analyze errors it learns of through borrower complaints or NOEs to determine whether other borrowers may have been harmed by the same errors. As a result, Ocwen has typically only corrected errors or provided remediation to those borrowers who have complained (assuming Ocwen recognizes the call as an actual complaint, investigates, and/or makes a correction) or submitted an NOE, but generally has not corrected the same or similar errors for other borrowers who did not complain.

216.

Ocwen also has not had policies or procedures requiring it to determine whether a risk item on its Risk Convergence Report has impacted or harmed borrowers, or whether borrower remediation is required, before it “closes” that risk item. 217.

Instead, Ocwen has focused on operational remediation to correct the error and prevent any future impact on borrowers. As a result, in many instances, Ocwen has failed to identify the borrower population that was impacted by a given risk item or to provide full remediation to that population. Instead, Ocwen generally Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 67 of 93

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provides borrower remediation only when a borrower complains to Ocwen or when a court or regulator requires Ocwen to provide a borrower with relief. 218.

As Ocwen’s former Head of Servicing Compliance testified in May of 2016: The company didn't have a policy or a protocol [for borrower remediation]. And with all of the issues, you saw how many issues there were [on the Risk Convergence Report], there just wasn't an appetite to back up and create an approach to this. Would I have liked that to have happened, I would have loved it, but it did not happen and there wasn't an appetite for it.

219.

Ocwen’s “appetite” for borrower remediation appears to have been further diminished when the remediation could have a significant financial impact on Ocwen. For example, in one email, Ocwen personnel discussed Ocwen’s auditors’ findings that Ocwen lacked “processes to review and ensure compliance with state laws for negative amortization” relating to adjustable rate mortgages, and whether to review impacted loans and provide borrowers with remediation. After analyzing the potential $21 million in costs for Ocwen to remediate, Ocwen declined to do so due to the “substantial, negative financial impact and Legal confirmation that [Privileged material redacted] is sufficient justification to forego the lookback.” 220. Ultimately, Ocwen’s former Head of Compliance conceded in testimony that Ocwen should remediate borrowers who were harmed by Ocwen’s errors and suffered potential harm. When asked if Ocwen did so, she conceded: “Could the company have done more? Absolutely.”

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VIOLATIONS OF THE CONSUMER FINANCIAL PROTECTION ACT 221.

Sections 1031 and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531 and 5536(a)(1)(B), prohibit covered persons from engaging “in any unfair, deceptive, or abusive act or practice.”

222. Acts or practices are unfair under the CFPA if “the act or practice causes or is likely to cause substantial injury to consumers which are not reasonably avoidable by consumers” and “such substantial injury is not outweighed by countervailing benefits to consumers or competition.” 12 U.S.C. § 5531(c).

223. An act or practice is deceptive if it misleads or is likely to mislead the consumer; the consumer’s interpretation is reasonable under the circumstances; and the misleading act or practice is material.

224. Section 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(B), prohibits covered persons from committing any act or omission in violation of a Federal consumer financial law.

225.

Section 1002(14) of the CFPA, 12 U.S.C. § 5481(14), defines the FDCPA, RESPA, TILA, and HPA as Federal consumer financial laws. COUNT I Ocwen’s Use of Inaccurate and Incomplete Information to Service Loans is Unfair

226. The Bureau incorporates by reference the allegations of Paragraphs 1-220. 227.

In numerous instances since January 2014, Ocwen has used inaccurate and incomplete information to service borrowers’ loans because it has input inaccurate and incomplete information about borrowers into its REALServicing system of record, REALServicing has generated inaccurate information about borrowers’ loans due to Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 69 of 93

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system deficiencies, and/or Ocwen’s manual processes have themselves resulted in errors. This inaccurate and incomplete information relates to borrowers’: Loan terms, including interest rate(s), balloon payments, and maturity a.

dates;

Amounts received from and owed by borrowers, including monthly b.

payments and the date Ocwen received the payments, unpaid fees, payoff amounts, and reinstatement amounts;

Escrow amounts, including borrowers’ escrow balances, disbursements c.

made on behalf of borrowers, and escrow shortages; Insurance coverage, disbursements, and amounts due, including d.

premiums Ocwen charged to borrowers for hazard insurance, flood insurance, and purchase mortgage insurance; and/or Loss mitigation and foreclosure information, including information e.

required of borrowers to complete loss mitigation applications, terms of loan modification agreements, and the dates of pending foreclosure sales.

228. Ocwen’s use of inaccurate or incomplete information to service loans causes or is likely to cause substantial injury to consumers, such as the unlawful commencement of foreclosures, unlawful foreclosure sales, improper handling of loss mitigation applications, misapplication of borrowers’ payments, collection and billing of inaccurate and incorrect amounts, imposition of inappropriate fees and charges, inaccurate delinquency statuses, inaccurate negative credit reporting, and/or emotional distress.

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229. These injuries cannot be reasonably avoided by consumers, who do not choose their mortgage servicer, and are not outweighed by countervailing benefits to consumers or competition.

230. Ocwen’s acts and practices as described in Paragraph 227 constitute unfair acts and practices in violation of Sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531(a) and (c) and 5536(a)(1)(B).

COUNT II Ocwen’s Deceptive Acts and Practices Regarding Loan Terms and Status

231.

The Bureau incorporates by reference the allegations of Paragraphs 1-220. 232. In numerous instances since January 2014, in the course of servicing mortgage loans and collecting debts from consumers, Ocwen has represented to borrowers, directly or indirectly, expressly or by implication, that their loans have certain unpaid balances; monthly payments; delinquency statuses; unpaid fees; reinstatement amounts; escrow amounts due; payoff amounts due; insurance amounts due; and/or other amounts due.

233. In truth and fact, in numerous instances the material representations set forth in the above-referenced Paragraph 232 were false, misleading, or were not substantiated at the time the representations were made, including but not limited to representations made where Ocwen had knowledge or reason to believe that: The prior servicer data and records upon which it was relying were a.

inaccurate or missing but it had failed to obtain or review information substantiating the accuracy of the data prior to collecting or foreclosing on borrowers’ loans;

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Its system of record contained inaccurate information due to system b.

errors and limitations, manual entry errors, and incorrect information provided by service providers but it had failed to obtain or review information substantiating the accuracy of the data prior to collecting or foreclosing on borrowers’ loans; and/or Consumers had disputed, challenged, or questioned the validity or c.

accuracy of Ocwen’s information but it had failed to obtain or review information substantiating the accuracy of the information, or failed to consider the consumers’ disputes, prior to collecting or foreclosing on borrowers’ loans.

234. Ocwen’s acts and practices as described in Paragraphs 232-233 constitute deceptive acts and practices in violation of Sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531(a) and 5536(a)(1)(B).

COUNT III Ocwen’s Unfair Foreclosure Practices

235.

The Bureau incorporates by reference the allegations of Paragraphs 1-220. 236. In numerous instances since January 2014, in connection with servicing mortgage loans, Ocwen has unilaterally breached contracts with borrowers by foreclosing on their loans even though the borrowers were performing on agreements on loss mitigation options.

237.

Ocwen’s actions caused or were likely to cause substantial injury to borrowers that borrowers could not reasonably avoid themselves and that are not outweighed by countervailing benefits to borrowers or to competition. Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 72 of 93

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238. Ocwen’s acts and practices as described in Paragraph 236 constitute unfair acts and practices in violation of Sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531(a) and (c) and 5536(a)(1)(B).

COUNT IV Ocwen’s Deceptive Foreclosure Communications

239. The Bureau incorporates by reference the allegations of Paragraphs 1-220. 240. In numerous instances since 2014, in connection with servicing mortgage loans, Ocwen misrepresented, directly or indirectly, expressly or by implication, that borrowers had a certain amount of time, typically 30 days, to submit additional information that Ocwen needed to complete and evaluate their loss mitigation applications and that borrowers would not be foreclosed on while that request was pending.

241.

In truth and in fact, while Ocwen’s requests for additional information it needed to complete and evaluate borrowers’ loss mitigation applications were pending, Ocwen would foreclose on the borrowers.

242. The representations set forth in Paragraphs 240 were false or misleading and were material to borrowers’ decisions relating to their mortgages. 243. Ocwen’s acts and practices as described in Paragraphs 240-241 constitute deceptive acts and practices in violation of Sections 1031 and 1036 of the CFPA. 12 U.S.C. §§ 5531(a) and 5536(a)(1)(B).

COUNT V Ocwen’s Unfair Billing and Processing of Payments for Add-On Products

244. The Bureau incorporates by reference the allegations of Paragraphs 1-220. 245.

In numerous instances since July 2011, in connection with Ocwen’s servicing of a borrower’s mortgage loan, Ocwen enrolled consumers in add-on products Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 73 of 93

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without their consent and then billed, collected, and processed payments from these consumers.

246. Ocwen’s actions caused or were likely to cause substantial injury to borrowers that borrowers could not reasonably avoid themselves and that are not outweighed by countervailing benefits to borrowers or to competition. 247.

Ocwen’s acts and practices as described in Paragraph 245 constitute unfair acts and practices in violation of Sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531(a) and (c) and 5536(a)(1)(B).

COUNT VI Ocwen’s Deceptive Marketing of Add-On Products

248. The Bureau incorporates by reference the allegations of Paragraphs 1-220. 249. In numerous instances since July 2011, while marketing and soliciting borrowers to enroll in add-on products in connection with its servicing of mortgage loans, Ocwen has represented, directly or indirectly, expressly or by implication, that the borrower was receiving a cash voucher or a refund check. 250. In truth and in fact, Ocwen was soliciting the consumer to enroll in add-on products. In numerous instances, Ocwen failed to disclose, or disclose adequately, the material terms and conditions of the offer, including that in order to redeem the voucher or check the borrower had to enroll in an add-on product, which included a monthly fee. In numerous instances, Ocwen also failed to disclose or disclose adequately that in order to redeem the voucher, borrowers had to remain enrolled in the add-on product for at least a year and pay monthly fees, and that the borrowers would receive the value of the voucher in quarterly installments.

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251.

The representations set forth in Paragraphs 249-250, and Ocwen’s failure to disclose, or disclose adequately, the material terms and conditions of the offer, constitute deceptive acts and practices in violation of Sections 1031 and 1036 of the CFPA. 12 U.S.C. §§ 5531(a) and 5536(a)(1)(B).

VIOLATIONS OF THE TRUTH-IN-LENDING ACT 252.

TILA and its implementing regulation, Regulation Z, at 12 C.F.R. § 1026.36(c)(1), prohibit certain acts and practices and contain certain requirements relating to payment processing in connection “with a consumer credit transaction secured by a consumer’s principal dwelling.”

253.

“Consumer credit” as defined by Regulation Z, 12 C.F.R. § 1026.2(a)(12) means, “credit offered or extended to a consumer primarily for personal, family, or household purposes.”

254.

“Credit” as defined by Regulation Z, 12 C.F.R. § 1026.2(a)(14) means “the right to defer payment of debt or to incur debt and defer its payment.” 255.

Ocwen is the servicer of consumer credit secured by consumers’ principal dwellings where it services mortgages that have been extended to consumers primarily for personal, family, or household purposes and secure consumers’ principal residential structures that contains one to four units.

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COUNT VII Ocwen’s Failure to Timely and Appropriately Credit Payments

257.

The Bureau incorporates by reference the allegations of Paragraphs 1-220. 258. As of January 10, 2014, Regulation Z generally requires Ocwen, when it receives a full periodic payment, to credit the payment as of the date of receipt unless the failure to do so does not result in a charge to the borrower or negative reporting. 12 C.F.R. § 1026.36(c)(1)(i). If Ocwen retains a partial payment, or a payment less than the full periodic payment, which it holds in a suspense or unapplied funds account, Ocwen must also, after an accumulation of sufficient funds to cover a periodic payment, treat such funds as a periodic payment. 12 C.F.R. § 1026.36(c)(1)(ii). 259.

Further, under Regulation Z, Ocwen must, subject to certain exceptions, provide borrowers with a monthly periodic statement or billing statement detailing information such as the amount due, how Ocwen will break down and apply monthly payments, all payments received since the last statement, the total of all payments received since the beginning of the current calendar year, all transaction activity since the last statement, and the amount of payments in a suspense or unapplied funds account. 12 C.F.R. § 1026.41(d).

260. In numerous instances since January 10, 2014, Ocwen has failed to timely and appropriately credit full periodic payments made by borrowers as of the date of receipt.

261.

In numerous instances since January 10, 2014, Ocwen has failed to timely and appropriately credit borrowers’ payments it is holding in suspense accounts, where Ocwen, after an accumulation of sufficient funds to cover a periodic payment in Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 76 of 93

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borrowers’ suspense accounts, has failed to treat such funds as a periodic payment as of the date of receipt.

262. In numerous instances since January 10, 2014, Ocwen has failed to send borrowers periodic statements accurately detailing information such as the amount due, how Ocwen will break down and apply monthly payments, all payments received since the last statement, the total of all payments received since the beginning of the current calendar year, all transaction activity since the last statement, and the amount of payments in a suspense or unapplied funds account.

263. The acts and practices described in Paragraphs 260-262 constitute violations of 12 C.F.R. §§ 1026.36(c)(1)(i) and (ii), 1026.41(d), and 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A).

VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 264. Section 808 of the FDCPA, 15 U.S.C. § 1692f, prohibits debt collectors, such as Ocwen, from engaging in unfair or unconscionable means to collect or attempt to collect any debt.

265.

Section 807 of the FDCPA, 15 U.S.C. § 1692e, prohibits debt collectors, such as Ocwen, from using any false, deceptive, or misleading representation or means in connection with the collection of any debt. Section 807(2) prohibits the false representation of the character, amount, or legal status of the debt. Section 807(10) prohibits debt collectors from using any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer. 266. The term “consumer” as defined in Section 803(3) of the FDCPA, 15 U.S.C. § 1692a(3), means “any natural person obligated or allegedly obligated to pay any debt.” Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 77 of 93

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267.

The term “debt” as defined in Section 803(5) of the FDCPA, 15 U.S.C. § 1692a(5), means “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.” 268. The term “debt collector” as defined by Section 803(6) of the FDCPA, 15 U.S.C. § 1692a(6) means, in relevant part, any person who “uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts” or who “regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” It does not include a person collecting debts owed to another to the extent the debts were not in default at the time that the person obtained them. 15 U.S.C. § 1692a(6)(F)(iii). 269. Ocwen acquires servicing rights to some mortgages that are in default at the time of transfer and proceeds to collect on those mortgages. With respect to those debts, Ocwen is a debt collector as defined by the FDCPA because it regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another and its collection activities are covered by the FDCPA. COUNT VIII Ocwen’s Use of Inaccurate and Incomplete Information to Service Loans is Unfair

270. The Bureau incorporates by reference the allegations of Paragraphs 1-220. 271.

In numerous instances since January 2014, Ocwen has used inaccurate and incomplete information, including incorrect data and incomplete or missing documentation, to service borrowers’ loans that were in default when Ocwen acquired Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 78 of 93

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the rights to service such loans. This inaccurate and incomplete information relates to borrowers:

Loan terms, including interest rate(s), balloon payments, principals, a.

including deferred principals, and maturity dates; Amounts received from and owed by borrowers, including monthly b.

payments and the date Ocwen received the payments, unpaid fees, payoff amounts, and reinstatement amounts;

Escrow amounts, including borrowers’ escrow balances, disbursements c.

made on behalf of borrowers, escrow surpluses, and escrow shortages; Insurance coverage, disbursements, and amounts due, including d.

premiums Ocwen charged to borrowers for hazard insurance, flood insurance, and purchase mortgage insurance; and Loss mitigation and foreclosure information, including information e.

required of borrowers to complete loss mitigation applications, terms of loan modification agreements, and the dates of pending foreclosure sales.

272.

Ocwen’s use of inaccurate or incomplete information to service loans causes or is likely to cause substantial injury to consumers, such as the unlawful commencement of foreclosures, unlawful foreclosure sales, improper handling of loss mitigation applications, misapplication of borrowers’ payments, collection and billing of inaccurate and incorrect amounts, imposition of inappropriate late and other fees and charges, inaccurate delinquency statuses, inaccurate negative credit reporting, and/or emotional distress.

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273.

These injuries cannot be reasonably avoided by consumers, who do not choose their mortgage servicer, and are not outweighed by countervailing benefits to consumers or competition.

274.

Ocwen’s acts and practices as described in Paragraph 271 constitute unfair acts and practices in violation of Section 808 of the FDCPA. 15 U.S.C. § 1692f, and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A). COUNT IX Ocwen’s Deceptive Debt Collection Practices

275.

The Bureau incorporates by reference the allegations of Paragraphs 1-220. 276.

In numerous instances since January 2014, Ocwen has represented to borrowers whose loans Ocwen acquired the servicing rights to when the loan was in default, directly or indirectly, expressly or by implication, in communications with borrowers, that their loans have certain unpaid balances; monthly payments; delinquency statuses; unpaid fees; reinstatement amounts; escrow amounts due; payoff amounts due; insurance amounts due; and other amounts due. 277.

In truth and fact, in numerous instances the material representations set forth in the above-referenced Paragraph 276 were false or misleading, or were not substantiated at the time the representations were made, including but not limited to representations made where Ocwen had knowledge or reason to believe that: The prior servicer data and records upon which it was relying were a.

inaccurate or missing but it had failed to obtain or review information substantiating the accuracy of the data prior to collecting or foreclosing on borrowers’ loans;

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Its system of record contained inaccurate information due to system b.

errors and limitations, manual entry errors, and incorrect information provided by service providers but it had failed to obtain or review information substantiating the accuracy of the data prior to collecting or foreclosing on borrowers’ loans; and Consumers had disputed, challenged, or questioned the validity or c.

278. The acts and practices described in Paragraphs 276-277 constitute violations of Sections 807(2) and (10) of the FDCPA, 15 U.S.C. §§ 1692e(2)(A) and 1692e(10) , and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A). VIOLATIONS OF THE REAL SETTLEMENT PROCEDURES ACT 279.

RESPA and its implementing regulation, Regulation X, apply to “federally related mortgage loans,” including the servicing of those loans, the administration of their escrow accounts, error resolution procedures, force-placed insurance, general servicing policies and procedures, and loss mitigation procedures. 280. RESPA and Regulation X apply to the conduct of “servicers.” Regulation X defines a servicer as a person “responsible for servicing of a federally related mortgage loan.” Under Regulation X, “servicing” means “receiving any scheduled periodic payments from a borrower pursuant to the terms of any federally related mortgage loan . . . and making the payments to the owner of the loan or other third parties of principal and interest and such other payments with respect to the amounts received from the Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 81 of 93

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borrower as may be required pursuant to the terms of the mortgage servicing loan documents or servicing contract.”

281.

Ocwen is a servicer under RESPA and Regulation X because it receives payments from borrowers pursuant to the terms of federally related mortgage loans and is responsible for, among other things, distributing the payments to investors who own the borrowers’ loans and, when borrowers’ loans include escrow accounts, to the borrowers’ taxing authorities or insurance companies. COUNT X Ocwen’s Escrow Violations

282. The Bureau incorporates by reference the allegations of Paragraphs 1-220. 283. As of January 10, 2014, Section 6(g) of RESPA, 12 U.S.C. § 2605(g) states that “[i]f the terms of any federally related mortgage loan require the borrower to make payments to the servicer of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the property, the servicer shall make payments from the escrow account for such taxes, insurance premiums, and other charges in a timely manner as such payments become due.”

284. The requirements of Section 6(g) are further explained in Regulation X, 12 C.F.R. § 1024.17(k) and 34(a), which states “[i]f the terms of any federally related mortgage loan require the consumer to make payments to an escrow account, the servicer must pay the disbursements in a timely manner, that is, on or before the deadline to avoid a penalty.”

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285. In numerous instances since January 10, 2014, Ocwen has failed to pay borrowers’ hazard insurance premiums in a timely manner as the payments became due.

286. Section 1024.17 of Regulation X requires Ocwen to: Conduct annual escrow analyses for borrowers, 12 C.F.R. § a.

1024.17(c)(3) and (f)(1);

Provide borrowers with annual escrow statements within 30 days of b.

the completion of the escrow account computation year, 12 C.F.R. § 1024.17(i); and Only collect escrow shortages when a shortage, in fact, exists, 12 C.F.R. c.

§ 1024.17(f)(3).

287. In numerous instances since January 10, 2014, Ocwen has: Failed to timely conduct annual escrow analyses for borrowers and, in a.

some instances, failed to conduct the escrow analyses altogether; Failed to provide borrowers with escrow statements within 30 days of b.

the completion of the escrow account computation year and, in some instances, failed to provide the escrow statements at all; and Collected escrow shortages that did not exist because it failed to timely c.

process borrowers’ escrow shortage payments. 288. The acts and practices described in Paragraphs 285 and 287 constitute violations of Section 6(g) of RESPA and Regulation X, 12 C.F.R. §§ 1024.17(k), 1024.17(c)(3), 1024.17(i), 1024.17(f)(1) and (3), and 1024.34(a) , and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A).

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COUNT XI Ocwen’s Notice of Error Violations

289. The Bureau incorporates by reference the allegations of Paragraphs 1-220. 290. As of January 10, 2014, Section 6(e)(2) and (k)(1)(c) of RESPA, 12 U.S.C. §§ 2605(e)(2) and (k)(1)(c), requires Ocwen to conduct an investigation of a qualified written request and make appropriate corrections to a consumer’s account. Regulation X further explains that a qualified written request that asserts an error relating to the servicing of a mortgage loan is a notice of error (“NOE”) and that a servicer generally must either: (1) correct the error or errors identified by the borrower and provide the borrower with a written notification regarding the correction; or (2) conduct a reasonable investigation of an alleged error and provide the borrower with a written notification that indicates that the servicer has determined no error occurred and provides additional required information. 12 C.F.R. § 1024.35(a) and (e)(1). 291.

In numerous instances since January 10, 2014, Ocwen has failed to make appropriate corrections relating to NOEs when it finds errors in borrowers’ accounts, and has failed to conduct reasonable investigations of NOEs. 292. The acts and practices described in Paragraph 291 constitute violations of Section 6(e)(2) and (k)(1)(c) of RESPA, 12 U.S.C. §§ 2605(e)(2) and (k)(1)(c), and Regulation X, 12 C.F.R. §§ 1024.35(a) and 1024.35(e)(1) , and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A).

COUNT XII Ocwen’s Servicing Policies and Procedures Violations

293. The Bureau incorporates by reference the allegations of Paragraphs 1-220. 294. As of January 10, 2014, pursuant to Regulation X, which was promulgated under Section 19(a) of RESPA, 12 U.S.C. § 2617(a), Ocwen must maintain policies and Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 84 of 93

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procedures reasonably designed to ensure that it achieves the objectives set forth in 12 C.F.R. § 1024.38(b). 12 C.F.R. § 1024.38(a). These objectives include: Providing “accurate and timely disclosures to a borrower as required by a.

[Subpart C of Regulation X] or other applicable law,” 12 C.F.R. § 1024.38(b)(1)(i);

Investigating, responding to, and, as appropriate, making “corrections b.

in response to complaints asserted by a borrower,” 12 C.F.R. § 1024.38(b)(1)(ii);

Upon notification of the death of a borrower, promptly identifying and c.

facilitating “communication with the successor in interest of the deceased borrower with respect to the property secured by the deceased borrower’s mortgage loan,” 12 C.F.R. § 1024.38(b)(1)(vi); Providing Ocwen’s personnel with access to “accurate and current d.

documents and information reflecting actions performed by service providers,” 12 C.F.R. § 1024.38(b)(3)(i); and Timely transferring all information and documents in Ocwen’s e.

possession or control relating to the transferred mortgage loans to a transferee or new servicer “in a form and manner that ensures the accuracy of the information and documents transferred” and enables the new servicer to comply with the new servicers’ obligations to the owner or assignee of the mortgage loan and applicable law, 12 C.F.R. § 1024.38(b)(4)(i).

295.

In numerous instances since January 10, 2014, Ocwen has: Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 85 of 93

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Failed to maintain policies and procedures reasonably designed to a.

ensure that it sends borrowers accurate and timely escrow statements and periodic statements;

Failed to maintain policies and procedures reasonably designed to b.

ensure that it is investigating, responding to, and, as appropriate, making corrections in response to complaints asserted by a borrower; Failed to maintain policies and procedures reasonably designed to c.

ensure that upon notification of the death of a borrower it promptly identifies and facilitates communication with successors, as evidenced by its failure to:

Promptly identify successors, which, in turn, impacted successors’ assumption of the deceased borrower’s loan and ability to obtain loss mitigation assistance; and ii.

Communicate to potential and actual successors Ocwen’s requirements to confirm a person as a successor and obtain loss mitigation assistance;

Failed to maintain policies and procedures reasonably designed to d.

provide appropriate Ocwen personnel with access to accurate and current documents and information reflecting actions performed by Ocwen’s foreclosure attorneys; and/or Failed to maintain policies and procedures reasonably designed to e.

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information and are able to comply with applicable laws by failing, prior to a transfer, to:

Transfer information in a form and manner that ensures new servicers have accurate borrower records and are able to comply with applicable laws; and ii.

Disclose to new servicers known errors or failures that impact or likely impact the accuracy of transferred borrower records and a new servicer’s ability to comply with applicable laws.

296. The acts and practices described in Paragraph 295 constitute violations of Sections 19(a) of RESPA, 12 U.S.C. § 2617(a) and Regulation X, §§ 12 C.F.R. 1024.38(a), 12 C.F.R. 1024.38(b)(1)(i), (ii), and (vi), 1024.38(b)(3)(i), and 1024.38(b)(4)(i), and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A). COUNT XIII Ocwen’s Foreclosure Violations

297.

The Bureau incorporates by reference the allegations of Paragraphs 1-220. 298. As of January 10, 2014, Regulation X, which the Bureau promulgated pursuant to Sections 6(j)(3), 6(k)(1)(C), 6(k)(1)(E) and 19(a) of RESPA, 12 U.S.C. §§ 2605(j)(3), (k)(1)(C), and (k)(1)(E), and 12 U.S.C. § 2617(a), provides borrowers with a variety of protections during their loss mitigation application and foreclosure processes. 299. Under Regulation X, if a servicer receives a loss mitigation application, which is an oral or written request for a loss mitigation option that is accompanied by any information required by a servicer for evaluation for a loss mitigation option (“Loss Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 87 of 93

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Mitigation Application”), from borrowers whose mortgage is secured by their principal residence, certain protections are triggered.

300. Under Regulation X, if a servicer receives a Loss Mitigation Application 45 days or more before a foreclosure sale, it must send the borrower an acknowledgement letter within five days that indicates if the application is complete and, if it is not, states the additional documents and information that the borrower must submit to complete the application (“Acknowledgment Letter”). A Loss Mitigation Application is complete under Regulation X when the servicer has received all of the information it requires from a borrower to evaluate the borrower’s application for all available loss mitigation options (“Complete Application”). An application is facially complete under Regulation X if a borrower provides the information and documentation that the servicer requests in the Acknowledgment Letter or if no additional information is requested in the Acknowledgment Letter (“Facially Complete Application”). 301.

302. Regulation X also generally prohibits servicers from, among other things, commencing a first notice of filing of a foreclosure (“First Filing”), obtaining a foreclosure judgment, or conducting a foreclosure sale if: (1) the servicer discovers that additional information or corrections to a previously submitted document are required to complete a Facially Complete Application and the borrower has not had a reasonable opportunity to complete the application; (2) the servicer has timely received a Complete Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 88 of 93

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Application but has not yet evaluated the application; (3) the time for the borrower to respond to a loss mitigation offer or to appeal a loan modification denial has not expired; or (4) the borrower is performing upon a loss mitigation agreement (e.g., a trial loan modification or short-term payment forbearance program). 303. On or after January 10, 2014, Ocwen received Loss Mitigation Applications from borrowers whose mortgages are secured by their principal residences. 304. On or after January 10, 2014, Ocwen received Complete Applications from borrowers whose mortgages are secured by their principal residences. 305. On or after January 10, 2014, Ocwen received Facially Complete Applications from borrowers whose mortgages are secured by their principal residences. 306. In numerous instances, Ocwen has made First Filings even though Ocwen was still evaluating borrowers’ Complete Applications that it had received on or after January 10, 2014 and more than 37 days before a foreclosure sale. 307. In numerous instances, Ocwen has obtained foreclosure judgments and/or conducted foreclosure sales upon the homes of borrowers from whom it received a Complete Application or Facially Complete Application on or after January 10, 2014 and more than 37 days before a foreclosure sale, and who: (1) were waiting for Ocwen to evaluate their Complete Application; (2) still had time to accept a loss mitigation offer; (3) were performing upon a loss mitigation agreement; or (4) had not been provided with a reasonable opportunity to provide Ocwen with missing information or corrected information required to complete a Facially Complete Application. 308. The acts and practices described in Paragraphs 305-306 constitute violations of Sections 6(j)(3), 6(k)(1)(C), 6(k)(1)(E) and 19(a) of RESPA, 12 U.S.C. §§ 2605(j)(3), (k)(1)(C), and (k)(1)(E), and 12 U.S.C. § 2617(a), and Regulation X, 12 C.F.R. Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 89 of 93

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§§ 1024.41(b)(2)(i)(B), 1024.41(c)(1)(i) and (ii), 1024.41(f)(2), and 1024.41(g) , and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A). VIOLATIONS OF THE HOMEOWNERS PROTECTION ACT 309. Under the Homeowners Protection Act (HPA), servicers are required, under certain conditions, to automatically terminate a mortgagee’s requirement to pay private mortgage insurance on a certain date called the “termination date.” 12 U.S.C. § 4902(b).

310.

A “servicer” as defined by the HPA, 12 U.S.C. § 4901(16), means a servicer as defined in RESPA, 12 U.S.C. § 2605(i)(2). As referenced in Paragraphs 13, 16, and 17, Ocwen is a servicer.

311.

A “mortgagor” as defined by the HPA, 12 U.S.C. § 4901(11), means the “original borrower under a residential mortgage or his or her successors or assignees.” 312.

A “residential mortgage” as defined by the HPA, 12 U.S.C. § 4901(14), means a “mortgage loan, or other evidence of a security interest with respect to a singlefamily dwelling that is the principal residence of the mortgagor.” 313.

“Private mortgage insurance” as defined by the HPA, 12 U.S.C. § 4901(10), means “mortgage insurance other than mortgage insurance made available under the National Housing Act, 12 U.S.C. § 1701, title 38, or title V of the Housing Act of 1949, 42 U.S.C. 1471 et seq.”

314.

The “termination date” as defined by the HPA, 12 U.S.C. § 4901(18), means the date when:

With respect to a fixed rate mortgage, the date on which the a.

principal balance of the mortgage, based solely on the initial amortization schedule for that mortgage, and irrespective of the Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 90 of 93

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outstanding balance for that mortgage on that date, is first scheduled to reach 78 percent of the original value of the property securing the loan; and With respect to an adjustable rate mortgage, the date on which the b.

principal balance of the mortgage, based solely on the amortization schedule then in effect for that mortgage, and irrespective of the outstanding balance for that mortgage on that date, is first scheduled to reach 78 percent of the original value of the property securing the loan.

COUNT XIV Ocwen’s Violations of the HPA

315.

The Bureau incorporates by reference the allegations of Paragraphs 1-220. 316.

Ocwen is the servicer for mortgagors or the original borrowers under a residential mortgage with respect to single-family dwellings that are their principal residences.

317.

In numerous instances since January 2014, Ocwen has failed to automatically terminate private mortgage insurance for borrowers who were current or became current on their mortgage as of their termination date. 318.

The acts and practices described in Paragraph 316 constitute violations of Section 4901(b) of the HPA, 12 U.S.C. § 4901(b) , and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A).

Prayer for Relief Wherefore, the Bureau, pursuant to Sections 1054 and 1055 of the CFPA, 12 U.S.C. §§ 5564 and 5565, and the Court’s own equitable powers, requests that the Court: Case 9:17-cv-80495-XXXX Document 1 Entered on FLSD Docket 04/20/2017 Page 91 of 93

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1. Permanently enjoin Defendants from committing future violations of the CFPA, FDCPA, RESPA, TILA, and HPA, and enter such other injunctive relief as appropriate, including ordering that, if any Defendant is found to be in material non-compliance with any injunction entered by the Court, the Defendant must claw back any non-salary bonuses or other compensation it has paid, or stock option it has granted, to any officer or director of the Defendant in connection with the time period during which the Defendant was not in compliance; 2. Award such relief as the Court finds necessary to redress injury to consumers, including, but not limited to, rescission or reform of contracts; refund of moneys; restitution; and payment of damages or other monetary relief; 3. Award such relief as the Court finds necessary to disgorge the Defendants of unlawful gains;

4. Impose civil money penalties against the Defendants; 5. Order the Defendants to pay costs and fees incurred in prosecuting this action; and 6. Award additional relief as the Court may deem just and proper.

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Dated: April 20, 2017 Respectfully submitted,

Attorneys for Plaintiff Consumer Financial Protection Bureau

ANTHONY ALEXIS

Enforcement Director

CARA PETERSEN Deputy Enforcement Director For Litigation

GABRIEL O’MALLEY Assistant Litigation Deputy

/s/ Jean Healey_______ Jean Healey E-mail: [email protected] Phone: 202-435-7514 Facsimile: (202) 435-7722 1700 G Street NW Washington, DC 20552

Jan Singelmann E-mail: [email protected] Phone: 202-435-9670 Facsimile: (202) 435-7722 1700 G Street NW Washington, DC 20552

Atur Desai E-mail: [email protected] Phone: 202-435-7978 Facsimile: (202) 435-7722 1700 G Street NW Washington, DC 20552

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Judgment (Aug. 2021)

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

CASE NO. 17-CIV-80495-MARRA

CONSUMER FINANCIAL PROTECTION BUREAU,

Plaintiff,

OCWEN FINANCIAL CORPORATION, OCWEN MORTGAGE SERVICING, INC., OCWEN LOAN SERVICING, LLC and PHH MORTGAGE CORPORATION,

Defendants.

____________________________/

FINAL JUDGMENT

In accordance with the requirement for filing a separate document pursuant to Federal Rule of Civil Procedure 58(a), and based on the reasons set forth in the Court’s March 4, 2021 Order Granting in Part the Defendants’ Motion for Summary Judgment as to Counts 1-9 of the Plaintiff’s Amended Complaint, based on res judicata [DE 764], and in light of the Plaintiff’s subsequently filed Second Amended Complaint, dropping Count 10 in its entirety and limiting the claims set forth in Count 1 through 9 to allegations of violations for the time period of January 2014 through February 26, 2017 [DE 775], the Court now enters Final Judgment in the above-captioned matter in favor of the Defendants.

It is accordingly ORDERED AND ADJUDGED:

FINAL SUMMARY JUDGMENT is here entered against the Plaintiff, CONSUMER FINANCIAL PROTECTION BUREAU, and in favor of all Defendants, OCWEN Case 9:17-cv-80495-KAM Document 777 Entered on FLSD Docket 04/21/2021 Page 1 of 2

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FINANCIAL CORPORATION, OCWEN MORTGAGE SERVICING, INC., OCWEN LOAN SERVICING, LLC and PHH MORTGAGE CORPORATION, who shall go hence without day.

The Court reserves jurisdiction to award costs. The Clerk of Court is directed to CLOSE this case. All pending motions are denied as moot.

DONE AND ORDERED in Chambers at West Palm Beach, Florida this 20th day of April, 2021.

KENNETH A. MARRA United States District Judge

Copies to:

All parties

Case 9:17-cv-80495-KAM Document 777 Entered on FLSD Docket 04/21/2021 Page 2 of 2

Amended complaint (Aug. 2021)

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA WEST PALM BEACH DIVISION

Case No. 9:17-CV-80495

CONSUMER FINANCIAL PROTECTION BUREAU,

Plaintiff,

vs.

OCWEN FINANCIAL CORPORATION,

a Florida corporation,

OCWEN MORTGAGE SERVICING, INC.,

a U.S. Virgin Islands corporation,

OCWEN LOAN SERVICING, LLC, a Delaware limited liability company, and

PHH MORTGAGE CORPORATION, a New Jersey corporation, as successor-in-interest to Ocwen Loan Servicing, LLC,

Defendants.

______________________________________________

AMENDED COMPLAINT

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things, Ocwen has improperly calculated loan balances, misapplied borrower payments, failed to correctly process escrow and insurance payments, and failed to properly investigate and make corrections in response to consumer complaints. Ocwen has compounded these failures by illegally foreclosing upon borrowers’ loans and selling loan servicing rights to servicers without fully disclosing or correcting errors in borrowers’ loan files.

The Bureau brings this action against the Defendants under: (1) Sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531, 5536; (2) Sections 807(2)(a), 807(10), and 808 of the Fair Debt Collection Practices Act (the “FDCPA”), 15 U.S.C. §§ 1692e(2)(a), 1692e(10), and 1692f; (3) Sections 6 and 19 of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2605, 2617, and the regulations promulgated thereunder at Regulation X, 12 C.F.R. part 1024 (“Regulation X”); (4) Section 105(a) of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1604(a), and the regulations promulgated thereunder at Regulation Z, 12 C.F.R. part 1026 (“Regulation Z”); and (5) Section 3(b) of the Homeowners Protection Act of 1998 (the “HPA”), 12 U.S.C. § 4902(b). 3.

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The Bureau is an independent agency of the United States created by the CFPA. 12 U.S.C. § 5491(a). The Bureau is charged with enforcing Federal consumer financial laws. 12 U.S.C. §§ 5563, 5564.

Ocwen Financial Corporation (“OFC”) is a publicly-traded Florida corporation that maintains its principal place of business in West Palm Beach, Florida. Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 3 of 87

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At all times relevant to this complaint, OFC has done business in this District and throughout the United States.

11.

12.

Ocwen Loan Servicing, LLC (“OLS”) is a Delaware limited liability company that maintained its principal place of business in West Palm Beach, Florida. At all times relevant to this complaint, OLS has done business in this District and throughout the United States. As detailed in Ocwen’s Corporate Disclosure filed in the instant action (Doc. 451), OLS merged with PHH Mortgage Corporation (“PHH”) on June 1, 2019, and PHH is the successor by merger to OLS. For purposes of this Amended Complaint, references to OLS are to OLS with respect to the period from January 1, 2014 to June 1, 2019, and PHH, in its role as successor in interest to OLS, with respect to the period from June 1, 2019 on.

13.

OFC, through its subsidiaries, originates and services loans. OFC, OMS, and OLS (collectively “Ocwen”) engage in servicing activities for “federally related mortgage loans,” namely loans secured by liens on one-to-four-family residential properties that were, for example: (1) originated by a lender regulated by the federal government, (2) insured or assisted in any way by the federal government, (3) intended to be sold to Fannie Mae, Freddie Mac, or Ginnie Mae (“GSEs”), or (4) originated by a creditor that originates or invests in residential real estate loans aggregating more than $1,000,000 per year. Among other things, for these federally related mortgage loans, Ocwen receives and processes borrower payments, makes payments of principal and Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 4 of 87

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interest to the owners of the loans, administers loss mitigation processes, and manages foreclosures. Ocwen also acquires and collects upon borrowers’ mortgage debts that are in default.

14.

OFC, the parent and publicly-traded company, wholly owns all of the common stock of its primary operating subsidiary, OMS. OMS wholly owned the stock of another of OFC’s primary operating subsidiaries, OLS, from January 1, 2014 until June 1, 2019. All three entities share and have shared key executives, such as Ronald Faris, Timothy Hayes, Michael Bourque, and John Patrick Cox. All three entities, through OFC, file a consolidated financial statement with OFC’s public disclosures. 15.

OFC controls, directs, operates, and participates in mortgage servicing activities, including the daily cashiering, escrow, insurance, loss mitigation, foreclosure, call center, and consumer complaint operations for Ocwen’s loans. OFC enters into agreements for products and services that are necessary for Ocwen to service mortgage loans and collect debt. OFC has contracted for such products and services, including a system of record and related technology services, for and on behalf of Ocwen’s affiliates, which include OMS and OLS.

16.

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17.

OFC, OMS, and OLS are, and have been at all times relevant to this Complaint, “covered persons,” as that term is defined by 12 U.S.C. § 5481(6)(A), because they offer or provide a consumer financial product or service for use by consumers primarily for personal, family, or household purposes, or that is delivered, offered, or provided in connection with such a product or service by: servicing mortgage loans; and collecting on consumers’ mortgage debts. 12 U.S.C. § 5481(15)(A)(i) and (x). 19.

OFC is, and has been at all times relevant to this Complaint, a “related person” because, as described in Paragraph 14, it is the direct and indirect shareholder of all OMS and OLS stock, and is thus a “controlling shareholder” and “shareholder … or other person … who materially participates in the conduct of the affairs” of OMS and OLS, which are covered persons. 12 U.S.C. § 5481(25)(C)(i) and (ii). OFC is thus “deemed to [be] a covered person for all purposes of any provision of Federal consumer financial law.” 12 U.S.C. § 5481(25)(B). OMS is, and has been at all times relevant to this Complaint, a “related person” because, as described in Paragraph 14, it owned all of OLS’s stock from January 1, 2014 until June 1, 2019 and is thus a “controlling shareholder” and a “shareholder…or other person…who materially participates in the conduct of the affairs” of OLS, which is a covered person. 12 U.S.C. § 5481(25)(C)(i) and (ii). OMS is thus “deemed to [be] a covered person for all purposes of any provision of Federal consumer financial law.” 12 U.S.C. § 5481(25)(B). 20.

OFC and OMS are, and have been at all times relevant to this Complaint, service providers to OLS because, as described in Paragraphs 15 and 16, OFC and OMS Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 6 of 87

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have provided material services to OLS. 12 U.S.C. § 5481(26)(A). OFC and OMS have also controlled and participated in the design, operation, and maintenance of OLS’s mortgage servicing activities. 12 U.S.C. § 5481(26)(A)(i). 21.

OLS, OMS, and OFC operate as a “common enterprise.” OLS, OMS, and OFC have conducted the business practices described below through interconnected companies that have common business functions, employees, and office locations. OFC and OMS control (either formally or informally) and operate OLS’s mortgage servicing activities. OFC and OMS also contract for critical mortgage servicing operations for and on behalf of OLS. OFC, OMS, and OLS also file consolidated financial statements and share employees and offices. Accordingly, an act by one entity constitutes an act by each entity comprising the “common enterprise,” and OFC, OMS, and OLS are each jointly and severally liable for the acts and practices alleged below. 22.

As described in Paragraphs 13–21, OFC and OMS have directed and controlled OLS’s mortgage servicing activities and authorized OLS to service Ocwen’s loans. Employees of OFC and OMS have knowledge of and control, or have the ability to control, the activities of OLS discussed herein. OFC and OMS, as OLS’s principals, are liable for the actions of their agent, OLS.

FACTUAL ALLEGATIONS I.

BACKGROUND A.

Company background.

23.

William Erbey formed Ocwen in 1988. He served as the Company’s Chief Executive Officer until 2010. Ronald Faris succeeded Erbey and served as Ocwen’s Chief Executive Officer until June 2018.

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24.

Between 2010 and the first quarter of 2014, Ocwen’s residential servicing portfolio grew from 351,595 loans with an aggregate unpaid principal balance of approximately $50 billion to 2,861,918 loans with an aggregate unpaid principal balance of approximately $465 billion. Ocwen’s largest acquisition during this time period was its 2013 purchase of Residential Capital, LLC’s (“Residential Capital”) servicing platform and its mortgage servicing rights to 1,740,000 loans with an aggregate unpaid principal balance of approximate $183.1 billion. As of December 31, 2016, Ocwen serviced approximately 1,393,766 loans with an aggregate unpaid principal balance of approximately $209 billion. It services mortgages securing borrowers’ principal residences located in all fifty states and the District of Columbia. 25.

Ocwen has also routinely acquired debts that were in default at the time of acquisition. In the instance of the Residential Capital acquisition, over 10% of those loans were delinquent when Ocwen acquired them and boarded them to its system. 26.

From 2014 to the present, Ocwen has regularly collected or attempted to collect on debts owed or due to another at the time of collection. The vast majority of loans that Ocwen services or subservices are owned by others, such as trusts holding GSE–insured loans and other investors. According to Ocwen’s filings with the SEC, as of December 2014, Ocwen serviced or subserviced over 2.4 million loans for others, as of December 2015 Ocwen serviced over 1.6 million loans for others, and as of December 2016 Ocwen serviced over 1.3 million loans for others. 27.

Borrowers do not choose their mortgage servicer and have no control over whether and how Ocwen services their loans or collects upon their debts. Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 8 of 87

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Ocwen’s REALServicing System of Record.

28.

29.

Servicers also respond to borrower inquiries, handle loss mitigation requests, and initiate foreclosure proceedings, among other functions. 30.

31.

From 2009 through 2019, Ocwen used a proprietary system of record, REALServicing, and its related sub-systems (collectively “REALServicing”). 32.

In 2009, Ocwen spun off its internal technology department into a separate company, Altisource Portfolio Solutions (“Altisource”). As a result of this spinoff, Altisource owned and maintained the REALServicing platform. Ocwen contracted with Altisource for technology services. In 2012 and 2013, while Erbey was the Chairman of the Boards and had a substantial ownership share of both Altisource and Ocwen, Ocwen extended this technology-services contract through 2025. 33.

No other mortgage servicer has used REALServicing since 2014. Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 9 of 87

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II.

OCWEN HAS SERVICED LOANS BASED ON INACCURATE AND INCOMPLETE BORROWER LOAN INFORMATION 34.

Ocwen loaded inaccurate and incomplete information into REALServicing and serviced loans using this information. 36.

When Ocwen acquires servicing rights for loans, it moves, or “boards,” the records for those loans from the prior servicers’ systems of record onto REALServicing. 37.

As described in Paragraph 24, between 2010 and 2014, Ocwen acquired the rights to service millions of residential loans, including more than 1.7 million Residential Capital loans. Ocwen input inaccurate and incomplete loan information and payment data from these acquisitions into REALServicing. Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 10 of 87

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Ocwen boarded inaccurate and incomplete loan and payment data from prior servicers into REALServicing.

38.

As of December 2013, Ocwen had a backlog of more than 400,000 transferred loans that remained unverified. It did not finish verifying and making corrections to critical data fields for these loans until August 31, 2014. Due to this backlog, Ocwen also delayed verifying the 1.7 million Residential Capital loans it previously acquired in 2013, and which it moved from Residential Capital’s servicing platform and boarded onto REALServicing on a rolling basis beginning in early 2014. Ocwen did not even begin the verification process for the Residential Capital loans until September 1, 2014; at that time, Ocwen was servicing more than 1.1 million unverified Residential Capital loans on REALServicing. By the end of 2014, when Ocwen completed boarding Residential Capital loans onto REALServicing, the verification Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 11 of 87

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backlog had grown to more than 1.3 million unverified Residential Capital loans. As of April 2016, Ocwen still had a backlog of more than 263,000 unverified Residential Capital loans.

41.

42.

As of 2014, in addition to boarding loans with inaccurate loan information, Ocwen identified certain types of loans, such as adjustable rate mortgages and home equity lines of credit, that had inaccuracies that affected the amounts Ocwen charged to borrowers.

As a result of Ocwen’s verification failures, Ocwen has serviced thousands of loans based on incorrect information.

43.

44.

According to Ocwen, which tracked the results of its verification of loans from 2014 through at least September 2017, a significant percentage of the loans it ultimately verified contained errors or incomplete information and required corrections. For example, in April 2014, Ocwen reported that 72 percent of the loans it verified that month contained errors or incomplete information and required corrections in Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 12 of 87

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REALServicing. In March 2016, 90 percent of the loans Ocwen verified contained errors or incomplete information that required corrections. 45.

As a result of the findings of its verification process, from September 2014 until April 2016, Ocwen determined that it needed to make more than 870,000 corrections in REALServicing, including, more than: 43,000 corrections to the maximum late fees a borrower could be charged (under state law); 31,000 corrections to loans’ maturity dates; 27,000 corrections to loan terms; 24,000 corrections to loans’ first interest rate cap maximum; and 5,000 corrections to loans’ interest rates. 46.

47.

In 2015, Ocwen’s outside consultant identified additional deficiencies in Ocwen’s loan boarding process, such as:

• “High volume of loans error out of the automated process for unknown reasons requiring manual revision”;

• “Limited available data fields cause various groups to use and reuse same fields for different information”; and Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 13 of 87

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• “Limited system functionality in place to accommodate SCRA [Servicemembers Civil Relief Act] requirements (e.g., unable to stop fees if fee was in place prior to customer becoming SCRA eligible).”

Ocwen’s reliance on its deficient servicing platform, REALServicing, has exacerbated its use of inaccurate loan information.

Ocwen and its outside consultant have concluded that REALServicing is failing.

48.

Ocwen’s own senior leadership has repeatedly recognized and acknowledged REALServicing’s failures.

49.

For example, in an internal communication in 2014 with Ocwen’s Chief Executive Officer, Ocwen’s head of Servicing described Ocwen’s technology as: An absolute train wreck. I know there’s no shot in hell, but if I could change systems tomorrow I would. I can’t tell you the number of hours I and others spend on basic servicing technology blocking and tackling. I’m not talking about differentiators here. I’m talking about getting system to stay online, escrow analysis to work, letters to print, etc. It’s ridiculous. (Emphasis added.) 50.

Ocwen’s former head of Servicing Compliance testified in May 2016 that she was “absolutely” concerned that Ocwen could not service loans on REALServicing in compliance with applicable laws when she worked at the company between 2014 and 2015. She testified that she, other members of the Compliance Department, and the leaders of Servicing Operations, Loss Mitigation, and other Ocwen business units “frequently” and “loudly” raised this concern. In determining the root cause of various issues, she explained, “the answer would almost always be REALServicing and the processes that we’re using, would be the answer we would get from the Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 14 of 87

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business . . . . [It was a] commonality across all of [the business units] . . . . Everything in servicing, every department in servicing.”

51.

These senior leaders’ conclusions are not outliers. Between 2014 and 2016, Ocwen assessed REALServicing and also hired an outside consultant to do the same. Both Ocwen and its consultant concluded that REALServicing lacks the basic system architecture and design necessary to properly service loans. 52.

54.

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55.

56.

REALServicing’s deficiencies impact Ocwen’s ability to lawfully service loans.

57.

REALServicing suffers from fundamental system architecture and design flaws, including a lack of properly managed data, lack of automation, and lack of capacity. These flaws have adversely impacted the accuracy of the information that Ocwen uses to service loans—and, thus, Ocwen’s ability to service loans—in a number of ways.

58.

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59.

Ocwen employees also do not understand how changes to certain codes impact other codes or work processes. Ocwen’s former Head of Compliance, who worked at Ocwen from August of 2013 until September of 2015, testified in May 2016 that during his tenure at Ocwen he repeatedly requested information on the meaning and basic descriptive information of comment codes; how Ocwen’s business units used them; and what downstream activities the codes trigger and what upstream activities trigger the codes. He further testified that “neither Ocwen nor Altisource could provide that information.” Further, he testified that Ocwen’s use of thousands of REALServicing comment codes was “antiquated” and that it was “inappropriate” that Ocwen did not have a data dictionary to define these codes and describe their impact on other activities.

60.

61.

Third, REALServicing has lacked the capacity to process the large number of loans that Ocwen has acquired and, in part as a result, it has not been functional for lengthy periods of time. After Ocwen’s large 2013 and 2014 loan acquisitions, Ocwen’s personnel reported “high incidents of system unavailability.” For example, for the year of 2014, Ocwen’s officials reported that its loss mitigation system “was down approximately 17,000 work hours.” In internal communications in 2014, Ocwen’s Head Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 17 of 87

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of Loss Mitigation expressed exasperation about the unavailability of Ocwen’s loan modification systems:

Ocwen has relied excessively on manual data entry and reports to address REALServicing’s failures.

63.

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automation and other system deficiencies, but these reports are of limited use for at least two reasons.

65.

First, as Ocwen’s former Head of Compliance testified, the reports are only effective to the extent that they are based on accurate and complete data. But Ocwen’s former Head of Servicing Compliance, who worked for Ocwen from April of 2014 until August 2015, testified in May 2016 that REALServicing lacks the necessary data to generate effective control reports and detect problems. She explained, for example, that when generating a control report using a certain field in REALServicing, that field is “used about five different ways” so the report generates a “whole mish-mash of information” that does not help Ocwen personnel understand whether an exception or error occurred.

66.

67.

Ocwen’s use of inaccurate and incomplete information has harmed borrowers.

68.

Ocwen’s use of inaccurate and incomplete information to service loans and collect upon borrower debts resulting from its boarding of inaccurate and incomplete Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 19 of 87

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information into REALServicing, REALServicing’s deficiencies, and Ocwen’s errorprone manual processes have caused or are likely to have caused borrowers substantial harm, and resulted in Ocwen communicating, orally and in writing, information to borrowers that it knew or had a reason to know was inaccurate. 69.

• With respect to loan modification processes: “[u]pon review of a [loan modification] package, terms are found to be incorrect approximately 80% of the time (e.g., NPV miscalculation, final modification date incorrect)”; • With respect to foreclosure data: “[d]ata between REALResolution [the REALServicing application for foreclosures] and REALServicing is not always in sync due to lack of adequate system mapping”; and Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 20 of 87

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• With respect to the payment of borrower taxes: “[a]lthough tax assessment information is supposed to be used to project more accurate payments, REALServicing automatically uses last years billing amount, even if installments for the current year are different.”

70.

More generally, Ocwen has serviced borrowers’ loans, collected upon borrower debts, and communicated, orally and in writing, with borrowers using inaccurate and incomplete information, including information relating to borrowers’ loan terms, amounts received from and owed by borrowers, escrow amounts, insurance amounts, and/or loss mitigation information. As set forth above and below in Section III, because Ocwen has serviced loans and collected borrower debts based on inaccurate and incomplete information, it has, among other things, collected or attempted to collect inaccurate amounts from borrowers, failed to timely pay borrowers’ insurance premiums, provided borrowers with loan modifications with inaccurate terms, and initiated wrongful foreclosure proceedings upon borrowers’ loans. Further, Ocwen failed to obtain or review information substantiating the accuracy of borrower loan data prior to collecting upon borrowers’ debts and foreclosing upon their loans, even though Ocwen knew it boarded inaccurate information, had system and manual errors creating inaccurate information, and numerous borrowers complained about and disputed the information Ocwen was using.

71.

Ocwen’s use of inaccurate and incomplete borrower and loan information to service loans and collect upon borrower debts does not benefit consumers or competition. Such a practice does not result in cost savings, enhanced customer service, or other benefit to consumers or competition.

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III.

OCWEN’S SERVICING FAILURES HAVE HARMED BORROWERS IN AT LEAST SIX DISTINCT WAYS A.

Ocwen has mishandled borrowers’ payments and miscalculated amounts due.

72.

Ocwen routinely serviced loans and collected borrower debts using inaccurate and incomplete information. It failed to accurately credit amounts received from borrowers, failed to calculate accurate amounts due from borrowers, and sent borrowers inaccurate communications, such as billing statements, that incorporated inaccurate information about payments and amounts owed. 73.

Each day, Ocwen cashiering personnel manually enter, pull, and match entries in REALServicing for more than 45,000 borrower-related transactions, including 5,000 payment transactions and more than 40,000 disbursements. Ocwen’s internal business units requested that Ocwen automate REALServicing to process borrowers’ payments and disbursements for taxes and insurance. They explained that, “due to the volume[,]” there is an “immense need to automate this reconciliation” to ensure “no risk for data loss or corruption.”

74.

Ocwen’s obligations under Regulation Z, the CFPA, and the FDCPA.

75.

A borrower’s mortgage contract specifies how Ocwen must calculate amounts due and credit any payments (e.g., to principal and interest first, then to any late or default fees). Under Regulation Z, a servicer generally must provide a borrower Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 22 of 87

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with a periodic statement each month that details, among other things, the amount the borrower must pay that month, how the servicer will break down and apply the borrower’s monthly payment, all transaction activity since the last statement, and the amount of payments in a suspense or unapplied funds account. 76.

In addition to the requirements under Regulation Z, a servicer is prohibited from engaging in unfair, deceptive, and abusive acts and practices related to payment crediting and debt collection activities under the CFPA and FDCPA. 2.

Ocwen failed to comply with its obligations under Regulation Z, the CFPA, and the FDCPA with respect to borrowers’ payments and statements of amounts due.

77.

Ocwen has violated the CFPA, FDCPA, and/or Regulation Z in three main ways with respect to borrowers’ payments and statements of amounts due that Ocwen communicated to borrowers.

78.

First, since at least 2014, Ocwen has committed numerous payment processing errors by its personnel and lockbox vendor that have resulted in Ocwen’s using inaccurate information about the amounts it received from borrowers when servicing borrowers’ loans.

79.

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• Ocwen processed multiple payments (2 or more checks in one envelope) in ways that “cause misapplication of physical payments by applying as an individual payment instead of combined multi-payment”;

• Ocwen’s lockbox vendor’s failed to image correspondence received with payments, resulting in payments not being correctly identified “until a borrower claim is received. Ultimately, this results in delays in payment posting process, late fee assessment, and negative credit reporting”; and • Where borrower payments by wire are manually entered and converted by Ocwen personnel into REALServicing: “[s]ometimes the file conversion does not convert the data properly and the data needs to be reviewed, corrected and uploaded to REALServicing by Cashiering” and “[e]rrors can occur during this manual process.”

80.

Second, Ocwen has used inaccurate information about the amounts borrowers owe to service their loans and collect upon their debts. These errors were especially common with respect to loans whose terms adjusted or loans for which borrowers had sought the protections of bankruptcy. 81.

As a result of Ocwen’s failure to timely verify information that it had received from prior servicers, when Ocwen loaded incorrect loan terms into its system, Ocwen miscalculated the amounts due from borrowers for certain of those loans. These errors were especially common with respect to loans whose terms adjusted or home equity lines of credit and Ocwen knew the loan terms it loaded had significant inaccuracies that affected Ocwen’s calculations of the amounts due from such borrowers.

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82.

Likewise, for borrowers in bankruptcy, Ocwen has failed to process and apply payments correctly in accordance with certain bankruptcy requirements, leading it to service loans and collect upon borrowers’ debts using inaccurate amounts. By 2016, Ocwen had concluded that REALServicing was broken in a number of ways that adversely affected borrowers whose loans were subject to bankruptcy protections, including that:

• “There is no connection between the proof of claim as determined in Equator/REALResolution [the system Ocwen uses to process bankruptcy] and the pre-petition arrearage balances in REALServicing. The proof of claim figures need to become the REALServicing arrearage balances”; and • “The process of converting a bankruptcy trustee payment to a payment batch is highly manual and, therefore, both inefficient and at risk of error. Ocwen receives funds from bankruptcy trustees that, generally, need to be applied to borrower accounts as either pre-petition payments, post-petition payments, or bankruptcy interests. There are some cases where, due to loan status, funds from the trustee are not applied as payment, but are applied to miscellaneous suspense or other non-payment accounts. Ocwen receives funds from bankruptcy trustees in a single check that usually covers multiple accounts. Ocwen needs to apply the funds across the different loans.”

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83.

Further, Ocwen also identified numerous other instances where it miscalculated borrowers’ amounts due, such as payoff or reinstatement amounts, because of a wide variety of Ocwen’s servicing failures. For example, in May 2016 Ocwen determined that, due to a failed attempt in 2014 to fix a REALServicing technology flaw, it was charging incorrect amounts to borrowers and was “not being compliant with the terms dictated in the note” which “directly impact the monthly account statement sent to the borrowers.”

84.

Third, Ocwen has communicated inaccurate information about amounts borrowers owed or that Ocwen received, as described in Paragraphs 78–83. Ocwen communicated such information orally and in writing, including in monthly periodic and billing statements, and quotes to borrowers. These representations are material to borrowers managing their mortgages and are likely to mislead borrowers acting reasonably under the circumstances.

Ocwen’s payment processing failures have caused significant borrower harm.

85.

Ocwen’s use of inaccurate payment information and amounts due have significantly harmed borrowers. Ocwen has charged borrowers improper late fees; reported inaccurate, negative payment information to credit reporting agencies; subjected borrowers to collection calls based on inaccurate information; and wrongly threatened borrowers with foreclosure. This conduct has harmed borrowers financially and caused borrowers frustration and emotional distress. 86.

Even when Ocwen has identified a payment error, in many instances it has not properly corrected the error. Pursuant to Ocwen’s policies and procedures, its Cashiering Department corrects identified errors through a “reversal request” or Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 26 of 87

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correction to a borrower’s account. In many instances, however, Ocwen’s personnel have not made the reversal request in a timely or accurate manner. 87.

88.

Not surprisingly, given Ocwen’s significant problems crediting and applying borrower payments, a large number of borrowers have complained about Ocwen’s payment processing.

89.

From April 2015 to April 2016 alone, Ocwen received complaints from more than 68,000 borrowers related to its processing of payments. Ocwen determined it made numerous errors in the following categories: “Payments Not Applied Correctly”; “Funds Not Applied Correctly”; “Reversal Requests”; “Late and NSF Fees”; “Payment Missing – Not Applied to Account”; “Chargeback Issue – Borrower Disputes Charged Back Item”; “Fee Assessed Improperly”; “Payment Not Processed Timely”; “ACH Drafted Incorrectly (Incorrect Date, Multiple Drafts, etc.)”; “Payoff Overage”; “ACH Payment – Chargeback”; and “Incorrect Data in the Account Statement.” 90.

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91.

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92.

Ocwen has botched borrowers’ escrow accounts.

93.

Ocwen has also failed to perform basic tasks associated with managing borrowers’ escrow accounts. Specifically, due to systems failures, control lapses, and excessive reliance on manual processes, Ocwen has failed to conduct escrow analyses or accurate escrow analyses; failed to timely send borrowers accurate escrow statements; and failed to properly account for and apply borrower escrow shortage payments. Many of these servicing failures also led Ocwen to use inaccurate escrow-related information. Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 29 of 87

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94.

As of April 2016, Ocwen managed escrow accounts for more than 78 percent of the loans it services. In 2014, Ocwen hired consultants to review and report upon its escrow practices. The resulting report identified more than three million “documented CFPB violations” during 2014, including Ocwen’s failure to: provide escrow statements or accurate escrow statements to borrowers; conduct escrow analyses or accurate escrow analyses; and accurately impose hazard and flood insurance. 1.

Ocwen’s obligations under RESPA, the CFPA, and the FDCPA. 95.

In addition, the CFPA and FDCPA prohibit servicers from engaging in unfair, deceptive, and abusive acts and practices related to escrow and debt collection activities.

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Ocwen has failed to comply with its obligations under RESPA, the CFPA, and the FDCPA with respect to escrow accounts. 97.

Ocwen has failed to comply with RESPA, the CFPA, and/or the FDCPA in at least five ways related to escrow accounts, including when servicing federally related mortgage loans.

98.

First, as of mid-2014, Ocwen had failed to conduct annual escrow analyses within the required time period for up to 230,000 delinquent borrowers, up to 60,000 borrowers who had filed for bankruptcy, and other borrowers, in violation of Regulation X.

99.

According to the head of Ocwen’s Escrow Department, until at least July or August of 2014, Ocwen did not conduct these annual analyses for borrowers in delinquency. For those borrowers for whom Ocwen failed to timely analyze escrow accounts, Ocwen used inaccurate monthly escrow amounts to service their loans and collect upon their debts, and sent to borrowers monthly billing or annual statements with inaccurate monthly escrow amounts.

100. Ocwen’s failure to conduct escrow analyses for borrowers also impacted the accuracy of its borrowers’ payoff and reinstatement quotes. Because REALServicing’s calculation of borrowers’ payoff and reinstatement quotes—the amount they need to pay to respectively payoff or reinstate their loan to become current—depends in part on borrowers’ escrow balances, REALServicing miscalculated the payoff and reinstatement quotes for many of the loans for which Ocwen did not conduct an escrow analysis. Ocwen’s failure to conduct escrow analyses resulted in Ocwen providing thousands of borrowers with inaccurate reinstatement quotes. Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 31 of 87

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101.

In some instances, Ocwen failed to perform or timely perform escrow analyses during the pendency of a Chapter 13 bankruptcy, resulting in Ocwen’s using inaccurate escrow amounts to service loans and collect upon debts. Further, Ocwen failed to service its loans in accordance with bankruptcy protections and has attempted to collect purported escrow shortages or arrears in violation of bankruptcy orders and rules.

102.

In June 2016, Ocwen’s Head of Bankruptcy testified that more than 22,000 borrowers in bankruptcy were impacted by Ocwen’s failure to conduct a timely escrow analysis and that Ocwen was currently attempting to remediate these borrowers. Ocwen’s consumer complaint data indicates that, for the year of April 2015 to April 2016, at least 8,000 of these 22,000 impacted borrowers complained to Ocwen. 103.

Second, in many instances, even when Ocwen has performed escrow analyses on borrowers’ accounts, Ocwen has either: (1) failed to send escrow statements to borrowers, including borrower were not delinquent, in foreclosure, or in bankruptcy at the time of the escrow analysis, because of REALServicing system deficiencies; or (2) sent inaccurate escrow statements.

104.

For example, in mid-2014, Ocwen performed escrow analyses for an estimated 10,000 to 20,000 borrowers but then failed to generate or timely send the required escrow statements to these borrowers within the required year. 105.

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Escrow notices not compliant with RESPA, not sent timely or not sent at all are huge and are the foundation for all else. These are, by the way, the three biggest borrower communication issues across the board for Ocwen - required content not included, letter not sent, or letter not sent timely. This is estimated to impact 800,000 borrowers or 52% of the Ocwen customer base. (Emphases added.) 106.

Third, Ocwen has failed to timely process escrow shortage payments—i.e., payments that borrowers made at Ocwen’s request to satisfy a shortage or deficiency in their escrow accounts—that Ocwen needed to pay the borrowers’ insurance or tax disbursements, in violation of Regulation X.

107.

Since at least 2014, Ocwen personnel have emailed its Escrow Department or manually entered a comment code in REALServicing when the borrower has paid an escrow shortage to request that the Escrow Department manually remove the shortage portion from the borrower’s monthly escrow payment. Errors in these processes caused Ocwen to collect shortages that borrowers had already paid. For instance, as Ocwen’s auditors found in a March 30, 2016 audit, Ocwen did not have adequate controls over the entry of the comment code and therefore Ocwen did not catch when its personnel failed to manually enter the appropriate escrow shortage receipt comment code. This resulted in “the continued collection of escrow shortage amounts” that borrowers already paid. Specifically, Ocwen failed to timely process escrow shortage payments for thousands of borrowers, resulting in Ocwen collecting or attempting to collect inaccurate escrow shortage amounts that borrowers did not, in fact, owe because they already paid them.

108. Fourth, when servicing borrowers’ loans and collecting upon their debts, Ocwen also used inaccurate information as to whether borrowers had an escrow Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 33 of 87

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account; whether borrowers’ escrow amounts were properly accounted for in borrowers’ loan modification payment amounts (e.g., borrowers’ modified monthly mortgage payments) before borrowers accepted the newly modified mortgage payments; and whether borrowers who filed for bankruptcy protection were being charged accurate amounts. Ultimately, this led to Ocwen using inaccurate escrow-related information to calculate amounts that borrowers owe, such as monthly payments. 109.

In the bankruptcy context, for example, Ocwen has failed to generate accurate escrow amounts. In late 2014, the Head of Ocwen’s Escrow Department wrote in an email, which was forwarded to Ocwen’s Chief Executive Officer: I've stressed importance of getting the BK escrow balance issues fixed, but no confirmation of root cause or target correction date . . . . It's a system issue because a bucket that determines the amount of money that a customer sends for their monthly payment can change with no record of why on the system . . . . Please help get the importance across on this issue. If this is not fixed, I cannot recommend that we move to analyze BK for the portfolio. Even with a control report to catch them, there is still risk the balance will be wrong when you actually analyze the account. (Emphases added.) 110.

Fifth, Ocwen has communicated inaccurate escrow-related information, including amounts that borrowers owe, as described in Paragraphs 98–110. Ocwen communicated such information orally and in writing, including in monthly periodic, billing, and escrow statements, and quotes, to borrowers. These representations are Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 34 of 87

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material to borrowers managing their mortgages and are likely to mislead borrowers acting reasonably under the circumstances. 3.

Ocwen’s escrow failures have caused significant borrower harm. 112.

Ocwen’s escrow errors have caused significant harm to borrowers, including the costs and emotional distress that borrowers suffer when attempting to get Ocwen to correct its mistakes.

113.

115.

One borrower contacted Ocwen multiple times to complain about an incorrect, inflated escrow deficiency. The borrower had previously filed for bankruptcy, and by a bankruptcy court order on June 1, 2015, his account was deemed current with Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 35 of 87

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an escrow deficiency of $530.67. Despite the court order, Ocwen continued to report an escrow deficiency of $8,468.03. The borrower complained repeatedly to Ocwen, but to no avail. In March 2016, the borrower filed a complaint against Ocwen with the Bureau and the Texas Attorney General. In a response letter dated June 3, 2016, Ocwen acknowledged that, per the June 1, 2015 court order, the borrower’s account should have been deemed current with an escrow shortage of only $530.67. Ocwen also admitted that it had sent the borrower two escrow statements that reflected an “incorrect escrow account balance deficiency” and apologized for any “frustrations [the borrower had] incurred as a result of the error.” Ocwen agreed to make corrections to the borrower’s account, run a new escrow analysis, waive all fees and expenses that Ocwen had charged to the account, and amend any negatively reported credit information.

116.

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117.

In a letter dated February 10, 2017, Ocwen admitted to multiple errors in the process:

• Ocwen explained that the increase in the borrower’s principal balance when his loan was modified was because the borrower had a negative escrow balance of $88,124.55 and $124,912.71 had been capitalized during modification. But Ocwen did not explain why the borrower’s principal balance had increased to $161,000. • Ocwen admitted, though, that the negative escrow balance was wrong and based on erroneous charges it imposed on the borrower for lender-placed flood and hazard insurance: “When the modification was completed the calculations used Lenders Placed Flood Insurance and Lenders Placed Hazard Insurance for multiple years that were not necessarily due.” • As a result of these erroneous charges, Ocwen determined that the borrower actually had a positive escrow balance or surplus of $36,788.16 in his escrow account, not a negative escrow balance or deficiency of more than $88,000. 118.

This borrower’s experience also illustrates the types of harm that Ocwen’s errors impose on borrowers. The borrower described the ordeal as follows: I spent one full day a week for the last three and a half years dealing with Ocwen, this includes calling the company mainly waiting on the phone on hold and talking to individuals at their call center . . . and faxing and emailing. Recently I have spent a large amount of time and money dealing with the foreclosure proceedings. The costs and time included attorney fees and paying for my own counsel, which cost between Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 37 of 87

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$6,000 and $8,000, to respond to the Notice of Foreclosure, amongst other costs.

Ocwen has mishandled borrowers’ hazard insurance. 120.

Ocwen has failed to make timely payments of borrowers’ hazard insurance premiums and serviced loans based on inaccurate insurance data that has led to wrongful insurance premium charges.

Ocwen’s obligations under RESPA, the CFPA, and the FDCPA. 121.

Ocwen has failed to comply with its RESPA, CFPA, and FDCPA obligations with respect to hazard insurance.

123.

Ocwen has failed to comply with RESPA, the CFPA, and FDCPA in at least four ways related to hazard insurance, including when servicing federally related mortgage loans.

124.

First, in numerous instances since January 10, 2014, Ocwen has failed to timely disburse payments to hazard insurance companies on behalf of escrowed borrowers whose payments were not more than 30 days overdue. For example, due to syncing and updating failures between REALServicing and Ocwen’s insurance vendor’s Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 38 of 87

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system, Ocwen’s insurance vendor did not recognize that numerous Ocwen borrowers had escrow accounts and therefore failed to make disbursements to these borrowers’ insurance companies before the deadline for a penalty. 125.

In other instances, incorrect account data in REALServicing, such as whether an account was escrowed for insurance and insurance payee information, has resulted in Ocwen making untimely and incorrect disbursements for borrowers’ insurance policies. Ocwen, for example, made double payments (out of borrowers’ accounts) for the same insurance policy on thousands of accounts, disbursed premiums to wrong payees, and failed to timely disburse funds to pay thousands of insurance premiums. Ocwen also made untimely and duplicate tax disbursements from escrow accounts, as well. These failures, as well as those detailed in Paragraph 124, led Ocwen to service loans and collect debt with additional inaccurate information, such as monthly amounts that borrowers owed.

126.

Second, Ocwen’s failures to timely disburse money to pay borrowers’ hazard insurance policies also resulted in the lapse of hazard insurance coverage for more than 10,000 borrowers. As of March 2015, more than: • 1,500 of these borrowers were able to reinstate their insurance policy, but had to pay a higher premium;

• 3,000 of these borrowers received letters from Ocwen indicating that it was going to impose force-placed insurance on their loans because they lacked hazard insurance;

• 500 of these borrowers had force-placed insurance imposed on their loans by Ocwen; and • 100 of these borrowers were foreclosed upon by Ocwen. Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 39 of 87

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127.

128.

Third, Ocwen used inaccurate data about whether borrowers were in flood zones to charge borrowers for flood insurance premiums for insurance policies that borrowers were not required to maintain.

129.

In early 2014, a large bank servicer who transferred the subservicing rights of its loans to Ocwen audited a sample of loans where Ocwen had force-placed flood insurance policies on borrowers’ properties. For approximately half of the loans it tested, the large bank servicer found that Ocwen had imposed force-placed flood insurance on borrowers’ homes, despite the fact that the large bank’s records indicated that the borrowers already had their own flood insurance policies in place. 130.

131.

In early 2015, when Ocwen audited flood zone data among its various service providers, it found more than 3,000 loans for which the flood-zone-related data in REALServicing was inaccurate. In July of 2015, Ocwen’s auditors also concluded that Ocwen “lacks sufficient controls to ensure lender-placed flood insurance policies do not exceed regulatory required coverage amounts.” Ocwen’s auditors also reviewed a sample of 40 loans where the property was located in a flood zone and noted: “there were several loans where the lender-placed flood insurance policy amounts exceeded the Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 40 of 87

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required statutory or investor minimum coverage. Further, there were instances where gap insurance policies were created, even though the customer independently purchased sufficient flood coverage.” Ocwen’s use of inaccurate flood insurance data led to Ocwen servicing loans and collecting upon debts using inaccurate escrow-related information to calculate amounts that borrowers owe, such as monthly payments. 132.

Fourth, Ocwen has communicated inaccurate information about amounts that borrowers owe, based on Ocwen’s use of inaccurate hazard and flood insurance information, as set forth in Paragraphs 124–131. Ocwen communicated such information orally and in writing, including in monthly periodic, billing, and escrow statements. These representations are material to borrowers managing their mortgages and are likely to mislead borrowers acting reasonably under the circumstances. 3.

Ocwen’s insurance failures have caused significant borrower harm.

133.

For example, one borrower complained to Ocwen that it had erroneously force-placed flood insurance on his property. According to the borrower, he had to take out a loan to pay the more than $4,300 cost of the flood insurance policy. In a May 3, 2016 letter, Ocwen admitted that “[i]n review of the account, [the force-placed flood Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 41 of 87

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insurance policy] was due to an incorrect loan number provided by the insurance company.”

135.

Another borrower’s experience highlights the difficulty borrowers have had in getting Ocwen to correct its insurance errors, as well as the downstream effects these errors can have on borrowers’ escrow accounts and payments amounts. This borrower complained to Ocwen multiple times about her escrow payments, but was not able to resolve her complaints until she submitted a complaint through her state regulator. In a May 8, 2015 letter responding to the borrower and the state regulator, Ocwen admitted that it had made a “duplicative disbursement for windstorm hazard insurance,” resulting in the borrower being overcharged for insurance. In addition, Ocwen conceded that the duplicate wind insurance payment had caused her escrow balance to appear artificially low, which resulted in Ocwen incorrectly increasing the borrower’s monthly payment to account for the purported shortage. D.

Ocwen has mishandled borrowers’ private mortgage insurance. 136.

Ocwen has also failed to timely cancel borrower’s private mortgage insurance (“PMI”) in connection with “residential mortgage transactions.” A residential mortgage transaction is a loan originated after July 29, 1999, secured by a single-family dwelling that is the borrower’s principal residence, to finance the acquisition, construction or refinancing of that dwelling. Borrowers are generally required to purchase PMI when they obtain a mortgage but have a down payment of less than 20 percent, or when they refinance their mortgage but have less than 20 percent equity in their property.

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Ocwen’s obligations under the HPA, CFPA, and FDCPA. 137.

Under the HPA, servicers are required to automatically terminate a borrower’s requirement to pay PMI in connection with a residential mortgage transaction on the “termination date,” which is the date when the principal balance of the mortgage is first scheduled to reach 78 percent of the original value of the property or, if the borrower is not current as of the termination date, the first day of the first month beginning after the date that the borrower becomes current on the loan. 138.

Ocwen has failed to comply with its HPA, CFPA, and FDCPA obligations with respect to private mortgage insurance. 139.

Since 2014, Ocwen has failed to comply with the HPA, CFPA, and/or FDCPA in three ways.

140.

First, Ocwen has failed to comply with the HPA by failing to automatically terminate borrowers’ PMI in connection with residential mortgage transactions on the termination date. Ocwen ultimately overcharged borrowers millions for PMI premiums, which Ocwen later refunded to borrowers.

141.

Second, Ocwen used inaccurate or missing termination dates and manual workarounds to service borrowers’ loans, which led to Ocwen’s failure to timely terminate PMI and charging borrowers for PMI premiums that they were not required to pay.

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142.

Third, Ocwen has communicated inaccurate information about the PMI premiums that borrowers owe, as set forth in Paragraphs 140 and 141, orally and in writing, including in monthly periodic and billing statements. These representations are material to borrowers managing their mortgages and are likely to mislead borrowers acting reasonably under the circumstances.

Ocwen has failed to protect borrowers when it has made servicing errors.

143.

Ocwen’s errors at every loan servicing stage have made it even more important that the company adequately investigate and respond to borrower complaints. These functions can act as a “safety net” to catch borrowers before they are further harmed by a servicer’s unlawful conduct. Here, too, Ocwen has failed borrowers. Since April 2015, Ocwen has received more than 580,000 complaints from more than 300,000 different borrowers.

144.

Since 2014, Ocwen has routinely failed to reasonably investigate, and, when appropriate, make corrections in response to borrower complaints. These failures have caused serious harm to consumers.

Ocwen’s obligations under RESPA.

145.

Under RESPA and Regulation X, servicers are required to have policies and procedures that are reasonably designed to ensure that Ocwen investigates, responds to, and, as appropriate, makes corrections in response to complaints by borrowers.

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Ocwen has failed to comply with its obligations under RESPA with respect to consumer complaint handling.

146.

Ocwen has failed to implement policies and procedures that are reasonably designed to meet the consumer complaint handling objectives to respond, investigate, and, where appropriate, correct errors in three ways. 147.

First, Ocwen’s policies and procedures were not reasonably designed to identify and respond to consumer complaints. Per Ocwen’s policy, Ocwen call center personnel are supposed to escalate repeat complaints regarding the same issue to a supervisor or a designated call center employee, known as the borrower’s “Escalation Relationship Manager.” But, due to insufficient policies and procedures and an overreliance on rigid scripting, Ocwen call center personnel have failed to adequately resolve the complaint or escalate the call for investigation and correction of the error. As a result, borrowers have been forced to call Ocwen multiple times about the same complaint before the call center personnel escalate the matter for investigation and error correction.

148.

In April 2015, Ocwen implemented new policies and procedures to address the difficulty its call center personnel had in identifying and escalating borrower complaints. These policies and procedures, however, were not reasonably designed to handle consumer complaints. For example, instead of requiring Ocwen to identify a complaint the first time a borrower calls in, the new policies and procedures place the burden on the borrower to complain multiple times–at least five times in nine days– before Ocwen will automatically escalate the borrower’s complaint for resolution to an Escalation Relationship Manager.

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149.

As a result, many borrowers have been forced to call Ocwen multiple times before Ocwen investigated and corrected their error. For example, of the more than 450,000 complaints that Ocwen processed from April 2015 through April 2016, approximately 68 percent involved borrowers who contacted Ocwen multiple times within a 15–day period; approximately 40 percent involved borrowers who contacted Ocwen three or more times within a 15-day period; and approximately 17 percent involved borrowers who contacted Ocwen five or more times within a 15-day period. 150.

Second, Ocwen’s policies and procedures have not been reasonably designed to ensure that its personnel conduct reasonable investigations of the alleged error in complaints. Ocwen’s policies and procedures, for instance, direct Ocwen personnel to rely on the information in REALServicing to investigate complaints. Thus, Ocwen’s ability to appropriately investigate complaints is largely dependent on the accuracy of the information contained within REALServicing and Ocwen has relied upon inaccurate data in REALServicing in investigating consumer complaints. 151.

Further, Ocwen’s policies and procedures have not required Ocwen personnel who investigate borrowers’ complaints to cross-reference the errors raised in those complaints to Ocwen’s known and documented systemic errors, such as the payment processing and application, escrow, and insurance errors. Thus, such personnel do not consider that information in their investigations. In responding to certain borrower complaints, Ocwen has simply parroted back the information in REALServicing, including details set forth in payment and escrow histories, without addressing the errors presented by borrowers’ complaints. 152.

Third, Ocwen’s policies and procedures have not been reasonably designed to ensure its personnel correct the errors they identify. Ocwen’s policies and procedures Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 46 of 87

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provide personnel little or no guidance on how to correct identified errors. For example, Ocwen’s policies and procedures do not detail what factors personnel should consider when recommending remediation, including what types of harms and downstream impacts to borrowers they should consider. At best, Ocwen’s policies and procedures identify certain forms of remediation such as fee waivers and credit reporting corrections, but do not inform personnel when these or other forms of remediation are appropriate. Without any such guidance, Ocwen personnel are left to their own discretion to determine whether an error has occurred, and, if so, how to correct the error.

Ocwen’s consumer complaint handling failures have caused significant borrower harm.

153.

Ocwen’s failure to properly investigate consumer complaints and correct errors has caused significant consumer harm.

154.

Ocwen’s consumer complaint failures are illustrated by the experience of several borrowers, including those described in Paragraphs 90–92, 115–119, 134–135, 155, and 190–191, who complained to Ocwen multiple times in order to try to get Ocwen to correct errors.

155.

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After the borrower was unable to get Ocwen to resolve her dispute, she submitted, through AARP’s Legal Counsel for the Elderly, a Qualified Written Request and notice of error regarding the escrow mistakes and the related errors. Ocwen’s response only contained generic account information and did not correct the errors. It was only after the borrower’s counsel sent Ocwen another complaint to the Bureau in October 2014 that Ocwen responded, in a letter dated December 17, 2014, in which it stated it would remove the borrower’s escrow balance, waive late fees, and reduce the borrower’s payment amount to $302.43, which was the original and correct amount of the borrower’s payment.

Ocwen has engaged in unlawful foreclosure practices. 156.

Ocwen’s obligations under RESPA and the CFPA.

157.

RESPA and Regulation X provide borrowers with a variety of protections when they apply for a loan modification or other loss mitigation option, such as a short sale, in connection with a mortgage secured by their principal residence. Several of these protections are triggered once the borrower submits an oral or written application for a loss mitigation option.

158.

First, under Regulation X, servicers are required to have policies and procedures that are reasonably designed to ensure that Ocwen receives accurate and Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 48 of 87

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current information reflecting actions performed by its foreclosure attorneys. This is to ensure, among other things, that Ocwen can comply with applicable protections for borrowers.

159.

Second, under Regulation X, if a servicer receives a loss mitigation application 45 days or more before a foreclosure sale or before a sale is scheduled, it must provide the borrower an acknowledgement letter within five days that states whether the application is “complete,” and, if it is not, what additional documents and information the borrower must submit to complete the application (“Acknowledgment Letter”).

160.

When the servicer has received all of the information it requires from a borrower, whose loan secures her principal residence, to evaluate the borrower’s application for all available loss mitigation options, the loss mitigation application is considered complete under Regulation X (“Complete Application”). 161.

Regulation X also requires that, if a servicer receives a Complete Application more than 37 days before a foreclosure sale is scheduled or before a sale is scheduled, it must evaluate the borrower for all available loss mitigation options and provide the borrower with a written notice within 30 days indicating, among other things, whether it will offer the borrower any loss mitigation options (“Evaluation Notice”). After a borrower receives the Evaluation Notice, she may have further protections if she accepts a loss mitigation offer or appeals a denial of a loss mitigation offer as set forth in the Evaluation Notice.

162.

Regulation X also generally prohibits servicers from, among other things, commencing a first notice or filing of a foreclosure (“First Filing”), obtaining a foreclosure judgment, or conducting a foreclosure sale if, among other things: the Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 49 of 87

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servicer has received a Complete Application but has not yet provided the borrower with an Evaluation Notice.

163.

From January 10, 2014 until October 19, 2017, the above Regulation X protections did not apply if Ocwen had already complied with the requirements of 12 C.F.R. § 1024.41 for a Complete Application. In other words, if Ocwen received a Complete Application and complied with all requirements set forth in 12 C.F.R. § 1024.41, then a subsequent loss mitigation application would not be subject to Regulation X’s requirements. Thus, the term “First Complete Application” refers to Complete Applications that Ocwen received on or after January 10, 2014, more than 37 days before a foreclosure sale was scheduled or before a sale was scheduled, and for which Ocwen had not previously complied with the requirements of 12 C.F.R. § 1024.41 for a Complete Application.

164.

In addition, a servicer is prohibited from engaging in unfair, deceptive, and abusive acts and practices, including in the context of foreclosure activity, under the CFPA.

Ocwen failed to obtain accurate and current foreclosure information from its foreclosure attorneys.

165.

Ocwen uses foreclosure attorneys to provide it with various foreclosure services, including commencing and completing foreclosures upon borrowers’ loans, and placing “foreclosure holds” on borrowers’ accounts to prevent the initiation of a foreclosure or obtain a stay or postponement of a foreclosure. Ocwen’s policies and procedures relating to its foreclosure attorneys are deficient, however, as they fail to ensure that Ocwen obtains accurate and current information reflecting its foreclosure attorneys’ actions.

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166.

From at least 2014 through at least April 2016, Ocwen has been aware that it has not received timely or accurate information from its foreclosure attorneys. For example, in 2014, Ocwen’s auditors found that one of Ocwen’s largest foreclosure law firms in Florida had failed to timely update Ocwen’s system with current foreclosure sale dates for 100 percent of the loan files tested. In response to this finding, the firm explained that it “continues for have periodic, on-going access issues within [Ocwen’s systems], which at times hinders our ability to comply with the several issues noted during the audit.” In another 2014 audit, Ocwen found that another of Ocwen’s Florida foreclosure law firms had failed to upload documents to Ocwen’s system for 100 percent of the loan files tested.

167.

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the loan files tested. The audit report listed the cause as “Some of the Firm personnel are not familiar with [Ocwen’s system] document upload.” • In another 2015 audit of one of its foreclosure firms in New Jersey, Ocwen found that the firm had failed to upload all documents to Ocwen’s systems for 60 percent of the loan files tested “result[ing] in missing documentation [in Ocwen’s system] for SCRA [Servicemembers Civil Relief Act] and PACER checks.” The audit identified the reason for the failure as: “The Firm was unaware of the requirement for filed and or recorded documentation to be uploaded [to Ocwen’s system].” Ocwen’s auditors also described the impact of the failure: “Failure to upload documents to [Ocwen’s system] affects the [ability of the] servicer to view and ensure all documents completed by the attorney were accurate.” 168.

• “Publication dates updated in [Ocwen’s system] by external attorneys do not accurately reflect the event completion date. A review of 30 foreclosures with a ‘Publication Completed’ event date updated in [Ocwen’s system] identified 18 Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 52 of 87

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(60%) where documentation did not support the event completion date in [Ocwen’s system].”

169.

Key Ocwen personnel have also been aware that Ocwen’s foreclosure attorneys’ failure to provide accurate and current information has negatively impacted Ocwen’s ability to service loans. In December 2015, Ocwen’s Head of Loss Mitigation testified that he became aware earlier in 2015 that Ocwen’s systems had missing or inaccurate foreclosure sale dates. He explained that Ocwen Loss Mitigation employees rely on the foreclosure sale date to, among other things, determine how many days to grant borrowers to return missing documents in connection with their loss mitigation applications. He further testified that he reached out to Ocwen’s Head of Foreclosure to inform him that the Loss Mitigation department needed foreclosure sale dates in the system and asked him to work with Ocwen’s foreclosure attorneys to ensure that they input these dates into Ocwen’s system, but he was unaware of what actions, if any, Ocwen took to ensure that this actually occurred.

170.

• Ocwen’s system prevents foreclosure attorneys from making any changes to the foreclosure sale date when there is foreclosure hold on an account, and that Ocwen did not have a policy that required its foreclosure attorneys to contact Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 53 of 87

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Ocwen with any updated foreclosure sale date information (since they could not make changes in the system) when a foreclosure hold was in place. 171.

172.

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173.

The second chart below indicates the reasons that borrowers’ accounts were subject to foreclosure holds. It shows that the vast majority of the foreclosure holds that Ocwen violated were in place because borrowers had submitted a completed loan modification package, and thus were potentially subject to Regulation X foreclosure protections.

Attorney proceeded while the file was on hold Hold not placed within timelines Milestone completed prior to FC initiation RC Pending Timing issue, loss mitigation trigger within 1 business day of milestone Rootcause for Dual Track violation Post Nov 2015 FC Sale First Legal Judgement Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 55 of 87

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Ocwen failed to comply with its Regulation X and CFPA obligations with respect to its foreclosure practices, policies, and procedures.

174.

Ocwen has violated Regulation X and/or the CFPA in at least three ways, including when servicing federally related mortgage loans. 175.

First, in violation of Regulation X, Ocwen has failed to maintain policies and procedures that were reasonably designed to ensure Ocwen could provide its personnel with accurate and current documents, and information reflecting actions performed by its foreclosure attorneys. Ocwen repeatedly failed to obtain current and accurate information from its foreclosure attorneys, such as foreclosure sale and publication dates, among other information and documentation. Ocwen knew that such failures were impacting its ability to place or timely place foreclosure holds on borrower accounts, resulting in harm or potential harm to borrowers. 176.

Second, in violation of Regulation X, Ocwen received First Complete Applications from borrowers on or after January 10, 2014 and before any foreclosure Hold Reason in Pre FC —Post Oct 2015 Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 56 of 87

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sale was scheduled, and, even though Ocwen was still evaluating First Complete Applications and had yet to send borrowers Evaluation Notices, Ocwen commenced First Filings against these borrowers.

177.

Third, in violation of the CFPA, Ocwen has inappropriately conducted numerous foreclosure sales on the homes of borrowers before the deadline it provided these borrowers to submit missing documents. These borrowers had submitted incomplete applications for loss mitigation assistance. Ocwen sent the borrowers letters requesting that they submit the missing documents or information and gave the borrowers a deadline, but then foreclosed before that deadline. 178.

Ocwen’s head of Loss Mitigation has conceded that foreclosing on borrowers before the deadlines it communicated to borrowers to submit additional or missing information is deceptive and confuses borrowers. These representations are material to borrowers and are likely to mislead borrowers acting reasonably under the circumstances. These borrowers reasonably interpret Ocwen’s request for additional or missing information to evaluate the borrowers’ loss mitigation applications to mean that Ocwen will not foreclose on them before the expiration of the deadline Ocwen provided for submitting the additional or missing information. 179.

In an email with the subject “Sale Date before Missing Doc Expiration,” an official in Ocwen’s Loss Mitigation department wrote: Please confirm if our missing letter states that if they don’t send a complete package we will go ahead with sale irrespective of the missing doc due date. To me that does not sound right, where we inform the borrower to send in documents by a date but go ahead with sale prior to expiration of that date. (Emphasis added.) The Head of Ocwen’s Loss Mitigation Department agreed, responding: Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 57 of 87

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If there is no denial on the current instance you should not be going to sale, period. Even though we have disclosure language around 37 days before FC and 7th day at midnight you will get hit with UDAP every single time you do not follow the rules above. You need to think like the customer which is without a denial you will still think you have time. (Emphases added) 4.

Ocwen’s foreclosure failures have caused significant borrower harm.

180. Aside from the obvious harm to any borrower whose home is wrongfully foreclosed upon, Ocwen’s illegal foreclosure practices have also caused significant financial harm, emotional distress, negative credit reporting, and other harm to borrowers.

IV.

OCWEN HAS FAILED TO PROVIDE COMPLETE AND ACCURATE LOAN INFORMATION TO NEW SERVICERS 181.

Since 2014, Ocwen has sold hundreds of thousands of its rights to service borrowers’ loans, also referred to as mortgage servicing rights (“MSRs”), to new mortgage servicers. Ocwen has failed, however, to provide complete and accurate borrower loan information to the new servicers or to notify new servicers of errors that are likely to impact the accuracy and completeness of the transferred borrower records. A.

Ocwen’s obligations under RESPA.

182.

As of January 10, 2014, RESPA and Regulation X require a transferor servicer to maintain policies and procedures reasonably designed to ensure that it can timely transfer all information and documents in its possession or control relating to the transferred loan to the new servicer in a form and manner that ensures the accuracy of the transferred information and documents and that enables the new servicer to comply with applicable laws and the terms of the new servicer’s obligations to the owner or assignee of the mortgage loan (“investor guidelines”). Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 58 of 87

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Ocwen failed to comply with RESPA with respect to MSR transfers.

183.

Ocwen has failed to comply with RESPA and Regulation X’s policy and procedure requirements relating to transfers in at least three ways when servicing federally related mortgage loans.

184.

First, Ocwen lacked policies and procedures relating to its sale of mortgage servicing rights (“outbound servicing transfers”) from January 10, 2014 until July 10, 2015 and engaged in outbound servicing transfers during that time period. On July 10, 2015, Ocwen issued its first version of a policy and procedure relating to outbound servicing transfers.

185.

Second, Ocwen failed to transfer complete and accurate borrower loss mitigation and foreclosure information that new servicers need to provide borrowers with protections to which they are entitled. For example, prior to November 2015, Ocwen failed to provide information for the loans being transferred in a form that new servicers could understand whether borrowers had: • A foreclosure sale date close to the transfer date, which new servicers needed in order to avoid erroneously foreclosing on the borrower, who may have been entitled to protections under Regulation X or other applicable laws; and • Previously filed for bankruptcy and had obtained a discharge in that proceeding, which the new servicer would need to know in order to comply with applicable federal law and bankruptcy court orders.

186.

Third, Ocwen failed to disclose known inaccuracies and errors that may or have impacted the accuracy or completeness of the transferred borrower loan records and the new servicer’s ability to comply with applicable law and Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 59 of 87

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investor guidelines. Ocwen has not disclosed, for example, errors it tracks in its Risk Convergence Reports or audit findings that Ocwen knew or should have known impacted the accuracy or completeness of the loan information and the new servicer’s ability to comply with applicable law and investor guidelines. 187.

Ocwen’s Head of Servicing Transfers testified, for example, that he was not aware if Ocwen had disclosed to new servicers that Ocwen had: • Incorrectly calculated certain borrowers’ reinstatement quotes, including those in demand letters and foreclosure affidavits;

• Failed to credit payments made by up to 10,000 borrowers to satisfy their escrow shortages;

Ocwen’s failure to transfer complete and accurate borrower records has caused significant borrower harm.

188.

Ocwen’s failure to transfer complete and accurate borrower records and disclose known errors to new servicers impacts borrowers after their loans have been transferred to a new servicer.

189.

According to Ocwen’s records, from April 2015 to April 2016, Ocwen received more than 6,800 complaints from borrowers related to the transfer of their loans by Ocwen to a new servicer.

190.

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transferring the borrower’s loan to a new servicer. In June 2014, Ocwen approved the borrower for a loan modification agreement that reduced his monthly payment to $1,639.07. Around November 2015, Ocwen transferred the borrower’s loan to a new servicer. In March 2016, the new servicer conducted an escrow analysis and determined that the borrower had an escrow shortage of $9,164.13, and that, as a result, the borrower’s payment would increase by $777.49, from $1,639.07 to $2,398.54. The borrower contacted Ocwen when the new servicer was unable to explain why the borrower had such a large escrow shortage. In a June 1, 2016 letter, Ocwen admitted that it had made an “error in its escrow application at the time of modification.” As a result, Ocwen only capitalized a portion of the borrower’s total escrow balance when it modified the borrower’s loan. To correct its error and unbeknownst to the borrower, Ocwen reduced the balance in the borrower’s escrow account two days before transferring the loan that left the borrower’s escrow account with a negative balance of $4,440.91. The borrower reports that he was eventually forced to retain an attorney, pay more than $5,000 in legal fees to ensure that Ocwen correct its error, and obtain a new repayment plan with the new servicer to cover the escrow shortage. 191.

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payments, but had incorrectly processed the reversal request. And then before Ocwen could complete its second attempt at a reversal request to fix its error, Ocwen had transferred the loan to the new servicer. Instead of alerting the new servicer to its mistakes, Ocwen had simply transferred the borrower’s loan, leaving the $19,182.69 in payments that the borrower had made pursuant to his loan modification agreement in a suspense account.

OCWEN HAS FAILED TO SUFFICIENTLY REMEDIATE HARM TO BORROWERS 192.

Ocwen is aware that its servicing failures have caused significant harm to borrowers and that these failures can have devastating consequences. 193.

Ocwen has lacked a systematic process to track and analyze errors it learns of through borrower complaints or notices of error to determine whether other borrowers may have been harmed by the same errors. As a result, Ocwen has typically only corrected errors or provided remediation to those borrowers who have complained (assuming Ocwen recognizes the call as an actual complaint, investigates, and/or makes a correction) or submitted an notice of error, but generally has not corrected the same or similar errors for other borrowers who did not complain. 195.

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196.

Instead, Ocwen has focused on operational remediation to correct the error and prevent any future impact on borrowers. As a result, in many instances, Ocwen has failed to identify the borrower population that was impacted by a given risk item or to provide full remediation to that population. Instead, Ocwen generally provides borrower remediation only when a borrower complains to Ocwen or when a court or regulator requires Ocwen to provide a borrower with relief. 197.

Ultimately, Ocwen’s former Head of Compliance conceded in testimony that Ocwen should remediate borrowers who were harmed by Ocwen’s errors and suffered potential harm. When asked if Ocwen did so, she conceded: “Could the company have done more? Absolutely.”

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VIOLATIONS OF THE CONSUMER FINANCIAL PROTECTION ACT 200. Sections 1031 and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531 and 5536(a)(1)(B), prohibit covered persons from engaging “in any unfair, deceptive, or abusive act or practice.”

201.

Acts or practices are unfair under the CFPA if “the act or practice causes or is likely to cause substantial injury to consumers which are not reasonably avoidable by consumers” and “such substantial injury is not outweighed by countervailing benefits to consumers or competition.” 12 U.S.C. § 5531(c). 202. An act or practice is deceptive if it misleads or is likely to mislead the consumer; the consumer’s interpretation is reasonable under the circumstances; and the misleading act or practice is material.

203. Section 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(B), prohibits covered persons from committing any act or omission in violation of a Federal consumer financial law.

204. Section 1002(14) of the CFPA, 12 U.S.C. § 5481(14), defines the FDCPA, RESPA, TILA, and HPA as Federal consumer financial laws. COUNT I Ocwen’s Use of Inaccurate and Incomplete Information to Service Loans is Unfair

205. The Bureau incorporates by reference the allegations of Paragraphs 10– 155, and 190–199.

206. In numerous instances since January 2014, Ocwen has serviced loans and collected debts from borrowers, as alleged in Paragraphs 24–26. Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 64 of 87

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207. In numerous instances since January 2014, Ocwen has used inaccurate and incomplete information to service borrowers’ loans and collect upon borrowers’ debts because:

a. It has input inaccurate and incomplete information about borrowers into its REALServicing system of record, as set forth in Paragraphs 34– 47, 68–70, 81, 125, 128–131, 134–135, and 141; b. REALServicing has generated inaccurate information about borrowers’ loans due to system deficiencies and errors, as set forth in Paragraphs 34–35, 48–62, 68–70, 78–79, 82–83, 93, 100, 109; and 124; c. Ocwen’s manual processes have themselves resulted in errors, as set forth in Paragraphs 34–35, 63–70, 73–74, 78–79, 82, 93, 107, and 110; 208. This inaccurate and incomplete information relates to borrowers’: a. Loan terms, including interest rate(s), balloon payments, and maturity dates, as set forth in Paragraphs 34–47, 62, 69, 70, and 81; b. Amounts received from and owed by borrowers, including monthly payments, payoff amounts, and reinstatement amounts, as set forth in Paragraphs 69–70, 72, 78–83, 85–94, 98–103, 105–110, 114–119, 124– 125, 128–131, 133–136, 140–142, 155, and 190–191; c. Escrow amounts, including borrowers’ monthly escrow amounts and escrow shortages, as set forth in Paragraphs 69–70, 82, 93–94, 98– 103, 105–110, 114–119, 131, 135, 155, and 190; d. Insurance coverage, disbursements, and amounts due, including premiums Ocwen charged to borrowers for hazard insurance, flood insurance, and purchase mortgage insurance, as set forth in Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 65 of 87

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Paragraphs 69–70, 94, 116–120, 124–125, 128–131, 133–135, 140–142, 155; and/or e. Loss mitigation information, including terms of loan modification agreements, as set forth in Paragraphs 62, 69–70, 108, 116–119, and 190–191.

209. Ocwen’s use of inaccurate or incomplete information to service loans and collect upon borrowers’ debts causes or is likely to cause substantial injury to consumers, such as the unlawful commencement of foreclosures, unlawful foreclosure sales, improper handling of loss mitigation applications, misapplication of borrowers’ payments, collection and billing of inaccurate and incorrect amounts, imposition of inappropriate fees and charges, inaccurate delinquency statuses, inaccurate negative credit reporting, and/or emotional distress, as set forth in Paragraphs 35, 68–70, 79, 85–92, 112–119, 133–135, 155, 190–191, and 208.

210.

These injuries cannot be reasonably avoided by consumers, who do not choose their mortgage servicer, as set forth in Paragraphs 27, 70, 86–92, 114–119, 133– 135, 143–144, 146–155, and 190–199.

211.

These injuries are not outweighed by countervailing benefits to consumers or competition, as set forth in Paragraphs 35, 68–71, 79, 85–92, 112–119, 133–135, 155, 190–199, and 208.

212.

Ocwen’s acts and practices as described in Paragraphs 205–211 constitute unfair acts and practices in violation of Sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531(a) and (c) and 5536(a)(1)(B).

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COUNT II Ocwen’s Deceptive Acts and Practices Regarding Loan Terms and Status

213.

The Bureau incorporates by reference the allegations of Paragraphs 10– 155, and 190–199.

214.

In numerous instances since January 2014, Ocwen has serviced loans and collected upon debts from borrowers, as alleged in Paragraphs 24–26. 215.

Ocwen has represented to borrowers, directly or indirectly, expressly or by implication, that their loans have:

a. certain monthly amounts due, as alleged in Paragraphs 70, 72, 80–94, 98–103, 105–111, 114–119, 124–125, 128–132, 134–135, 140–142, 155, and 190–191;

b. certain reinstatement amounts due, as alleged in Paragraphs 70, 83– 84, and 100;

c. certain payoff amounts due, as alleged in Paragraphs 70, 83–84, 89, 92, and 100;

In truth and fact, in numerous instances the material representations set forth in the above-referenced Paragraph 215 were false, misleading, or were not substantiated at the time the representations were made, including but not limited to representations made where Ocwen had knowledge or reason to believe that: Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 67 of 87

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a. The prior servicer data and records upon which it was relying were inaccurate or missing but it had failed to obtain or review information substantiating the accuracy of the data prior to collecting or foreclosing on borrowers’ loans, as alleged in Paragraphs 34–47, 68–70, 81, and 84;

b. Its system of record contained inaccurate information due to system errors and limitations, manual entry errors, and incorrect information provided by service providers but it had failed to obtain or review information substantiating the accuracy of the data prior to collecting or foreclosing on borrowers’ loans, as alleged in Paragraphs 34–35, 48–70, 72–74, 78–79, 82–84, 93–94, 99–101, 103–105; 107–111, 124– 125, 128–132, 134–135, 141–142, and 155; and/or c. Consumers had disputed, challenged, or questioned the validity or accuracy of Ocwen’s information but it had failed to obtain or review information substantiating the accuracy of the information, or failed to consider the consumers’ disputes, prior to collecting or foreclosing on borrowers’ loans, as alleged in Paragraphs 70, 88–92, 114–119, 133– 135, 143–144, 146–155, and 190–191.

217.

Ocwen’s acts and practices as described in Paragraphs 213–216 constitute deceptive acts and practices in violation of Sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531(a) and 5536(a)(1)(B).

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COUNT III Ocwen’s Deceptive Foreclosure Communications

218.

The Bureau incorporates by reference the allegations of Paragraphs 10–22, 156, 169, and 177–180.

219.

In numerous instances since 2014, in connection with servicing mortgage loans, Ocwen misrepresented, directly or indirectly, expressly or by implication, that borrowers had a certain amount of time, typically 30 days, to submit additional information that Ocwen needed to complete and evaluate their loss mitigation applications and that borrowers would not be foreclosed on while that request was pending.

220. In truth and in fact, while Ocwen’s requests for additional information it needed to complete and evaluate borrowers’ loss mitigation applications were pending, Ocwen would foreclose on the borrowers.

221.

The representations set forth in Paragraphs 219–220 were false or misleading and were material to borrowers’ decisions relating to their mortgages. 222. Ocwen’s acts and practices as described in Paragraphs 218–221 constitute deceptive acts and practices in violation of Sections 1031 and 1036 of the CFPA. 12 U.S.C. §§ 5531(a) and 5536(a)(1)(B).

VIOLATIONS OF THE TRUTH-IN-LENDING ACT 223. TILA and its implementing regulation, Regulation Z, at 12 C.F.R. § 1026.36(c)(1), prohibit certain acts and practices and contain certain requirements relating to payment processing in connection “with a consumer credit transaction secured by a consumer’s principal dwelling.”

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224. “Consumer credit” as defined by Regulation Z, 12 C.F.R. § 1026.2(a)(12) means, “credit offered or extended to a consumer primarily for personal, family, or household purposes.”

225. “Credit” as defined by Regulation Z, 12 C.F.R. § 1026.2(a)(14) means “the right to defer payment of debt or to incur debt and defer its payment.” 226. A “dwelling” as defined by Regulation Z, 12 C.F.R. § 1026.2(a)(19), means a “residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.” 227.

COUNT IV Ocwen’s Periodic Statement Failures

228. The Bureau incorporates by reference the allegations of Paragraphs 10–22 68, 70, 72, 80–94, 98–103, 114–119, 124–125, 128–132, 134–136, 139, 141–142, 155, 190–191, and 227.

229. Since January 10, 2014, Regulation Z generally has required that Ocwen must, subject to certain exceptions, provide borrowers with a monthly periodic statement or billing statement detailing information such as the amount due, how Ocwen will break down and apply monthly payments, all payments received since the last statement, the total of all payments received since the beginning of the current Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 70 of 87

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calendar year, all transaction activity since the last statement, and the amount of payments in a suspense or unapplied funds account. 12 C.F.R. § 1026.41(d). 230. In numerous instances since January 10, 2014, Ocwen has failed to send borrowers periodic statements accurately detailing required information such as the monthly payment amount due, as described in Paragraphs 68, 70, 72, 80–94, 98–103, 106–108, 111, 114–119, 124–125, 128–132, 134–136, 141–142, 155, and 190–191. 231.

The acts and practices described in Paragraphs 228–230 constitute violations of 12 C.F.R. § 1026.41(d), and 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A).

VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 232. Section 808 of the FDCPA, 15 U.S.C. § 1692f, prohibits debt collectors, such as Ocwen, from engaging in unfair or unconscionable means to collect or attempt to collect any debt.

233. Section 807 of the FDCPA, 15 U.S.C. § 1692e, prohibits debt collectors, such as Ocwen, from using any false, deceptive, or misleading representation or means in connection with the collection of any debt. Section 807(2) prohibits the false representation of the character, amount, or legal status of the debt. Section 807(10) prohibits debt collectors from using any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer. 234. The term “consumer” as defined in Section 803(3) of the FDCPA, 15 U.S.C. § 1692a(3), means “any natural person obligated or allegedly obligated to pay any debt.” 235. The term “debt” as defined in Section 803(5) of the FDCPA, 15 U.S.C. § 1692a(5), means “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 71 of 87

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are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.” 236. The term “debt collector” as defined by Section 803(6) of the FDCPA, 15 U.S.C. § 1692a(6) means, in relevant part, any person who “uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts” or who “regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” It does not include a person collecting debts owed to another to the extent the debts were not in default at the time that the person obtained them. 15 U.S.C. § 1692a(6)(F)(iii). 237.

Ocwen acquires servicing rights to some mortgages that are in default at the time of transfer and proceeds to collect on those mortgages. With respect to those debts, Ocwen is a debt collector as defined by the FDCPA because it regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another and its collection activities are covered by the FDCPA. COUNT V Ocwen’s Use of Inaccurate and Incomplete Information to Service Loans is Unfair

238. The Bureau incorporates by reference the allegations of Paragraphs 10– 155, 190–199, and 237.

239. Ocwen has routinely acquired, including since 2014, the servicing rights to mortgages that are in default at the time of transfer and, in connection with those mortgages, it regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another, as alleged in Paragraphs 24–26. 240. With respect to the loans described in Paragraph 239, in numerous instances since January 2014, Ocwen has used inaccurate and incomplete information, Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 72 of 87

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including incorrect data and incomplete or missing documentation, to collect upon borrowers’ debts because:

This inaccurate and incomplete information relates to: a. Loan terms, including interest rate(s), balloon payments, and maturity dates, as set forth in Paragraphs 34–47, 62, 69, 70, and 81; b. Amounts received from and owed by borrowers, including monthly payments, payoff amounts, and reinstatement amounts, as set forth in Paragraphs 69–70, 72, 78–83, 85–94, 98–103, 105–110, 114–119, 124– 125, 128–131, 133–136, 140–142, 155, and 190–191; c. Escrow amounts, including borrowers’ monthly escrow amounts and escrow shortages, as set forth in Paragraphs 69–70, 82, 93–94, 98– 103, 105–110, 114–119, 131, 135, 155, and 190; d. Insurance coverage, disbursements, and amounts due, including premiums Ocwen charged to borrowers for hazard insurance, flood insurance, and purchase mortgage insurance, as set forth in Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 73 of 87

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242. Ocwen’s use of this inaccurate or incomplete information to collect upon debts causes or is likely to cause substantial injury to consumers, such as the unlawful commencement of foreclosures, unlawful foreclosure sales, improper handling of loss mitigation applications, misapplication of borrowers’ payments, collection and billing of inaccurate and incorrect amounts, imposition of inappropriate fees and charges, inaccurate delinquency statuses, inaccurate negative credit reporting, and/or emotional distress, as set forth in Paragraphs 35, 68–70, 79, 85–92, 112–119, 133–135, 155, 190– 191, and 241.

243. These injuries cannot be reasonably avoided by consumers, who do not choose their mortgage servicer, as set forth in Paragraphs 27, 70, 86–92, 114–119, 133– 135, 143–144, 146–155, and 190–199.

244. These injuries are not outweighed by countervailing benefits to consumers or competition, as set forth in Paragraphs 35, 68–71, 79, 85–92, 112–119, 133–135, 155, 190–199, and 241.

245. Ocwen’s acts and practices as described in Paragraphs 238–244 constitute unfair or unconscionable means to collect or attempt to collect a debt in violation of Section 808 of the FDCPA. 15 U.S.C. § 1692f, and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A).

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COUNT VI Ocwen’s Deceptive Debt Collection Practices

246. The Bureau incorporates by reference the allegations of Paragraphs 10– 155, 190–199, and 237.

247.

Ocwen has routinely acquired, including since 2014, the servicing rights to some mortgages that are in default at the time of transfer and, in connection with those mortgages, it regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another, as alleged in Paragraphs 24–26. 248. Ocwen has represented to borrowers, directly or indirectly, expressly or by implication, that their debts referenced in Paragraph 247 include: a. certain monthly amounts due, as alleged in Paragraphs 70, 72, 80–94, 98–103, 105–111, 114–119, 124–125, 128–132, 134–135, 140–142, 155, and 190–191;

b. certain reinstatement amounts due, as alleged in Paragraphs 70, 83– 84, and 100;

c. certain payoff amounts due, as alleged in Paragraphs 70, 83–84, 89, 92, and 100;

d. certain escrow amounts due, as alleged in Paragraphs 69, 70, 93–94, 98–103, 105–111, 114–119, 132, 135, 155, and 190; e. certain insurance amounts due, as alleged in Paragraphs 70, 94, 116– 120, 124–125, 128–132, 134–135, 140–142, and 155. 249. In truth and fact, in numerous instances the material representations set forth in the above-referenced Paragraph 248 were false, misleading, or were not Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 75 of 87

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substantiated at the time the representations were made, including but not limited to representations made where Ocwen had knowledge or reason to believe that: a. The prior servicer data and records upon which it was relying were inaccurate or missing but it had failed to obtain or review information substantiating the accuracy of the data prior to collecting on borrowers’ debt or foreclosing on borrowers’ loans, as alleged in Paragraphs 34– 47, 68–70, 81, and 84;

b. Its system of record contained inaccurate information due to system errors and limitations, manual entry errors, and incorrect information provided by service providers but it had failed to obtain or review information substantiating the accuracy of the data prior to collecting on borrowers’ debt or foreclosing on borrowers’ loans, as alleged in Paragraphs 34–35, 48–70, 72–74, 78–79, 82–84, 93–94, 99–101, 103–105; 107–111, 124–125, 128–132, 134–135, 141–142, and 155; and/or c. Consumers had disputed, challenged, or questioned the validity or accuracy of Ocwen’s information but it had failed to obtain or review information substantiating the accuracy of the information, or failed to consider the consumers’ disputes, prior to collecting on borrowers’ debt or foreclosing on borrowers’ loans, as alleged in Paragraphs 70, 88–92, 114–119, 133–135, 143–144, 146–155, and 190–191. 250. The acts and practices described in Paragraphs 246–249 constitute violations of Sections 807(2) and (10) of the FDCPA, 15 U.S.C. §§ 1692e(2)(A) and 1692e(10), and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A). Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 76 of 87

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VIOLATIONS OF THE REAL SETTLEMENT PROCEDURES ACT 251.

RESPA and its implementing regulation, Regulation X, apply to “federally related mortgage loans,” including the servicing of those loans, the administration of their escrow accounts, error resolution procedures, force-placed insurance, general servicing policies and procedures, and loss mitigation procedures. 252. RESPA and Regulation X apply to the conduct of “servicers.” Regulation X defines a servicer as a person “responsible for servicing of a federally related mortgage loan.” Under Regulation X, “servicing” means “receiving any scheduled periodic payments from a borrower pursuant to the terms of any federally related mortgage loan . . . and making the payments to the owner of the loan or other third parties of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the mortgage servicing loan documents or servicing contract.”

253. Ocwen is a servicer under RESPA and Regulation X because it receives payments from borrowers pursuant to the terms of federally related mortgage loans and is responsible for, among other things, distributing the payments of principal and interest to investors who own the borrowers’ loans and, when borrowers’ loans include escrow accounts, to the borrowers’ taxing authorities or insurance companies. COUNT VII Ocwen’s Escrow Violations

254. The Bureau incorporates by reference the allegations of Paragraphs 10–22, 93–94, 97–107, 112–114, 120, 123–127, and 253.

255.

As of January 10, 2014, Section 6(g) of RESPA, 12 U.S.C. § 2605(g) states that “[i]f the terms of any federally related mortgage loan require the borrower to make Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 77 of 87

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payments to the servicer of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the property, the servicer shall make payments from the escrow account for such taxes, insurance premiums, and other charges in a timely manner as such payments become due.”

256. The requirements of Section 6(g) are further explained in Regulation X, 12 C.F.R. § 1024.17(k) and 34(a), which states “[i]f the terms of any federally related mortgage loan require the consumer to make payments to an escrow account, the servicer must pay the disbursements in a timely manner, that is, on or before the deadline to avoid a penalty, as long as the borrower’s payment is not more than 30 days overdue.”

257.

In numerous instances since January 10, 2014, Ocwen has failed to pay hazard insurance premiums in a timely manner on behalf of escrowed borrowers whose payments were no more than 30 days overdue, as alleged in Paragraphs 120 and 123– 127.

258. Section 1024.17 of Regulation X requires Ocwen to: a. Conduct annual escrow analyses for borrowers, 12 C.F.R. § 1024.17(c)(3) and (f)(1);

b. Provide borrowers with annual escrow statements within 30 days of the completion of the escrow account computation year, 12 C.F.R. § 1024.17(i); and c. Only collect escrow shortages when a shortage, in fact, exists, 12 C.F.R. § 1024.17(f)(3).

259. In numerous instances since January 10, 2014, Ocwen has: Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 78 of 87

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a. Failed to timely conduct annual escrow analyses for borrowers and, in some instances, failed to conduct the escrow analyses altogether, as set forth in Paragraphs 93–94, 97–102, and 112–114; b. Failed to provide borrowers who were not delinquent, in foreclosure, or in bankruptcy with escrow statements within 30 days of the completion of the escrow account computation year and, in some instances, failed to provide the escrow statements at all, as alleged in Paragraphs 93– 94, 97, and 103–105; and c. Collected escrow shortages that did not exist because it failed to timely process borrowers’ escrow shortage payments, as alleged in Paragraphs 93, 97, and 106–107.

260. The acts and practices described in Paragraphs 254, 257, and 259 constitute violations of Section 6(g) of RESPA and Regulation X, 12 C.F.R. §§ 1024.17(k), 1024.17(c)(3), 1024.17(i), 1024.17(f)(1) and (3), and 1024.34(a) , and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A). COUNT VIII Ocwen’s Servicing Policies and Procedures Violations

261.

The Bureau incorporates by reference the allegations of Paragraphs 10–22, 143–144, 146–156, 165–175, 180–181, 183–191, and 253. 262. As of January 10, 2014, pursuant to Regulation X, which was promulgated under Section 19(a) of RESPA, 12 U.S.C. § 2617(a), Ocwen must maintain policies and procedures reasonably designed to ensure that it achieves the objectives set forth in 12 C.F.R. § 1024.38(b). 12 C.F.R. § 1024.38(a). These objectives include: Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 79 of 87

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a. Investigating, responding to, and, as appropriate, making “corrections in response to complaints asserted by a borrower,” 12 C.F.R. § 1024.38(b)(1)(ii);

b. Providing Ocwen’s personnel with access to “accurate and current documents and information reflecting actions performed by service providers,” 12 C.F.R. § 1024.38(b)(3)(i); and c. Timely transferring all information and documents in Ocwen’s possession or control relating to the transferred mortgage loans to a transferee or new servicer “in a form and manner that ensures the accuracy of the information and documents transferred” and enables the new servicer to comply with the new servicers’ obligations to the owner or assignee of the mortgage loan and applicable law, 12 C.F.R. § 1024.38(b)(4)(i).

263. In numerous instances since January 10, 2014, Ocwen has failed to maintain policies and procedures reasonably designed to ensure that it is investigating, responding to, and, as appropriate, making corrections in response to complaints asserted by a borrower, as alleged in Paragraphs 143–144 and 146–155. 264. In numerous instances since January 10, 2014, Ocwen has failed to maintain policies and procedures reasonably designed to ensure its personnel had access to accurate and current documents and information reflecting actions performed by service providers, namely Ocwen’s foreclosure attorneys, as alleged in Paragraphs 156, 165–175, and 180, because Ocwen repeatedly failed to obtain from its foreclosure attorneys accurate and current information, such as scheduled foreclosure sale and publication dates. Ocwen also knew that such failures were impacting its ability to place Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 80 of 87

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or timely place foreclosure holds on borrower accounts, resulting in harm or potential harm to borrowers.

265. In numerous instances since January 10, 2014, Ocwen has failed to maintain policies and procedures reasonably designed to ensure that it could transfer all information and documents in a form and manner that ensures new servicers have complete and accurate information and are able to comply with applicable laws by, as alleged in Paragraphs 181, and 183–191, failing to: a. maintain any such policies and procedures relating to mortgage servicing rights it transferred;

b. transfer complete and accurate borrower loss mitigation and foreclosure information that new servicers need to provide borrowers with protections to which they are entitled; and c. disclose known inaccuracies and errors that may or have impacted the accuracy or completeness of the transferred borrower loan records and the new servicer’s ability to comply with applicable law and investor guidelines.

266. The acts and practices described in Paragraphs 261, and 263–265 constitute violations of Sections 19(a) of RESPA, 12 U.S.C. § 2617(a) and Regulation X, §§ 12 C.F.R. 1024.38(a), 12 C.F.R. 1024.38(b)(1)(ii), and 1024.38(b)(4)(i), and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A). COUNT IX Ocwen’s Foreclosure Violations

267.

The Bureau incorporates by reference the allegations of Paragraphs 10–22, 156, 174, 176, 180, and 253.

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268. As of January 10, 2014, Regulation X, which the Bureau promulgated pursuant to Sections 6(j)(3), 6(k)(1)(C), 6(k)(1)(E) and 19(a) of RESPA, 12 U.S.C. §§ 2605(j)(3), (k)(1)(C), and (k)(1)(E), and 12 U.S.C. § 2617(a), provides borrowers with a variety of protections during their loss mitigation application and foreclosure processes. 269. Under Regulation X, if a servicer receives a loss mitigation application, which is an oral or written request for a loss mitigation option that is accompanied by any information required by a servicer for evaluation for a loss mitigation option (“Loss Mitigation Application”), from borrowers whose mortgage is secured by their principal residence, certain protections are triggered.

270. Under Regulation X, if a servicer receives a Loss Mitigation Application 45 days or more before a foreclosure sale or before a sale is scheduled, it must send the borrower an acknowledgement letter within five days that indicates if the application is complete and, if it is not, states the additional documents and information that the borrower must submit to complete the application (“Acknowledgment Letter”). A Loss Mitigation Application is complete under Regulation X when the servicer has received all of the information it requires from a borrower to evaluate the borrower’s application for all available loss mitigation options (“Complete Application”). 271.

Regulation X also requires that, if a servicer receives a Complete Application more than 37 days before a foreclosure sale is scheduled or before a sale is scheduled, it must evaluate the borrower for all available loss mitigation options and provide the borrower with a written notice within 30 days indicating, among other things, whether it will offer the borrower any loss mitigation options (“Evaluation Notice”). After a borrower receives the Evaluation Notice, she may have further Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 82 of 87

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protections if she accepts a loss mitigation offer or appeal a denial of a loss mitigation offer set forth in the Evaluation Notice.

272.

Regulation X also generally prohibits servicers from, among other things, commencing a first notice of filing of a foreclosure (“First Filing”) if the servicer has timely received a Complete Application but has not yet evaluated the application and sent the borrower an Evaluation Notice.

273.

From January 10, 2014 until October 10, 2016, the above Regulation X protections described in paragraphs 269–272 do not apply if Ocwen has already complied with the requirements of 12 C.F.R. § 1024.41 for a Complete Application. In other words, if Ocwen received a Complete Application and complied with all requirements set forth in 12 C.F.R. § 1024.41, then a subsequent loss mitigation application would not be subject to Regulation X’s requirements. Thus, the term “First Complete Application” refers to Complete Applications that Ocwen received on or after January 10, 2014 and for which Ocwen had not previously complied with the requirements of 12 C.F.R. § 1024.41 for a Complete Application. 274.

On or after January 10, 2014 and before any foreclosure sale dates were scheduled, Ocwen received Loss Mitigation Applications from borrowers whose mortgages are secured by their principal residences. 275.

On or after January 10, 2014 and before any foreclosure sale dates were scheduled, Ocwen received First Complete Applications from borrowers whose mortgages are secured by their principal residences. 276.

As set forth in Paragraphs 156, 174, 176, and 180, in numerous instances on or after January 10, 2014 and before any foreclosure sale dates were scheduled, Ocwen received borrowers’ First Complete Applications. Ocwen commenced First Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 83 of 87

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Filings on these First Complete Applications even though Ocwen was still evaluating the Applications, namely, Ocwen had not yet sent the borrower an Evaluation Notice. 277.

The acts and practices described in Paragraphs 267, and 274–276 constitute violations of Sections 6(j)(3), 6(k)(1)(C), 6(k)(1)(E) and 19(a) of RESPA, 12 U.S.C. §§ 2605(j)(3), (k)(1)(C), and (k)(1)(E), and 12 U.S.C. § 2617(a), and Regulation X, 12 C.F.R. §§ 1024.41(b)(2)(i)(B), 1024.41(c)(1)(i) and (ii), 1024.41(f)(2), and 1024.41(g) , and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A). VIOLATIONS OF THE HOMEOWNERS PROTECTION ACT 278. Under the Homeowners Protection Act (HPA), servicers are required, under certain conditions, to automatically terminate a requirement to pay private mortgage insurance in connection with a residential mortgage transaction on a certain date called the “termination date.” 12 U.S.C. § 4902(b). 279.

A “servicer” as defined by the HPA, 12 U.S.C. § 4901(16), means a servicer as defined in RESPA, 12 U.S.C. § 2605(i)(2). As referenced in Paragraphs 13, 16, and 17, Ocwen is a servicer.

280. A “mortgagor” as defined by the HPA, 12 U.S.C. § 4901(11), means the “original borrower under a residential mortgage or his or her successors or assignees.” 281.

A “residential mortgage transaction” as defined by the HPA, 12 U.S.C. § 4901(14), means a “transaction consummated on or after [July 29, 1999], in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against a single-family dwelling that is the principal residence of the mortgagor to finance the acquisition, initial construction, or refinancing of that dwelling.” Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 84 of 87

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282. “Private mortgage insurance” as defined by the HPA, 12 U.S.C. § 4901(10), means “mortgage insurance other than mortgage insurance made available under the National Housing Act, 12 U.S.C. § 1701, title 38, or title V of the Housing Act of 1949, 42 U.S.C. 1471 et seq.”

283. The “termination date” as defined by the HPA, 12 U.S.C. § 4901(18), means the date when:

a. With respect to a fixed rate mortgage, the date on which the principal balance of the mortgage, based solely on the initial amortization schedule for that mortgage, and irrespective of the outstanding balance for that mortgage on that date, is first scheduled to reach 78 percent of the original value of the property securing the loan; and b. With respect to an adjustable rate mortgage, the date on which the principal balance of the mortgage, based solely on the amortization schedule then in effect for that mortgage, and irrespective of the outstanding balance for that mortgage on that date, is first scheduled to reach 78 percent of the original value of the property securing the loan. COUNT X Ocwen’s Violations of the HPA

284. The Bureau incorporates by reference the allegations of Paragraphs 10–22 136, 140–141, and 279.

285. Ocwen is the servicer for residential mortgage transactions. 286. In numerous instances since January 2014, Ocwen has failed to automatically terminate private mortgage insurance in connection with residential Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 85 of 87

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mortgage transactions on the termination date, namely the date when the principal balance of the mortgage was first scheduled to reach 78 percent of the original value of the property or, if the borrower was not current as of the termination date, the first day of the first month beginning after the date that the borrower became current on the loan, as alleged in Paragraphs 136, and 140–141.

287. The acts and practices described in Paragraph 284-286 constitute violations of Section 4902(b) of the HPA, 12 U.S.C. § 4902(b), and § 1036(a)(1)(A) of the CFPA, 12 U.S.C § 5536(a)(1)(A).

Prayer for Relief Wherefore, the Bureau, pursuant to Sections 1054 and 1055 of the CFPA, 12 U.S.C. §§ 5564 and 5565, and the Court’s own equitable powers, requests that the Court: 1. Permanently enjoin Defendants from committing future violations of the CFPA, FDCPA, RESPA, TILA, and HPA, and enter such other injunctive relief as appropriate, including ordering that, if any Defendant is found to be in material non-compliance with any injunction entered by the Court, the Defendant must claw back any non-salary bonuses or other compensation it has paid, or stock option it has granted, to any officer or director of the Defendant in connection with the time period during which the Defendant was not in compliance; 2. Award such relief as the Court finds necessary to redress injury to consumers, including, but not limited to, rescission or reform of contracts; refund of moneys; restitution; and payment of damages or other monetary relief; 3. Award such relief as the Court finds necessary to disgorge the Defendants of unlawful gains;

4. Impose civil money penalties against the Defendants; Case 9:17-cv-80495-KAM Document 481 Entered on FLSD Docket 10/04/2019 Page 86 of 87

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5. Order the Defendants to pay costs and fees incurred in prosecuting this action; and 6. Award additional relief as the Court may deem just and proper.

Dated: October 4, 2019

Respectfully submitted,

Attorneys for Plaintiff Consumer Financial Protection Bureau

CARA PETERSEN Acting Enforcement Director

JOHN WELLS Deputy Enforcement Director For Litigation

JAMES T. SUGARMAN Assistant Litigation Deputy

/s/ Jean M. Healey_______ Jean M. Healey Email: [email protected] Phone: 202-435-7514 Facsimile: (202) 435-7722 1700 G Street NW Washington, DC 20552

Atur Desai

[email protected] Shirley Chiu [email protected] Tianna Baez [email protected] Amanda Roberson [email protected] Stephanie Brenowitz [email protected] Erin Mary Kelly [email protected] James Savage [email protected] Greg Nodler [email protected] Michael Posner [email protected] Doug Wilson [email protected]

1700 G Street NW Washington, DC 20552 Facsimile: (202) 435-7722

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Amended complaint (Aug. 2021)

PDF of this document (84 pages)

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA WEST PALM BEACH DIVISION

CASE NO. 9:17-CV-80495-MARRA-MATTHEWMAN

CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff, v.

OCWEN FINANCIAL CORPORATION;

OCWEN MORTGAGE SERVICING, INC.;

OCWEN LOAN SERVICING, LLC; and PHH MORTGAGE CORPORATION,

Defendants.

SECOND AMENDED COMPLAINT

The Consumer Financial Protection Bureau (“Bureau”) brings this action against Ocwen Financial Corporation, Ocwen Mortgage Servicing, Inc., Ocwen Loan Servicing, LLC, and PHH Mortgage Corporation as successor-in-interest to Ocwen Loan Servicing, LLC (collectively “Ocwen” or “Defendants”) under Sections 1054 and 1055 of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5564, 5565. Ocwen is one of the largest mortgage servicers in the United States. The Company specializes in servicing the loans of distressed borrowers. It committed numerous violations of Federal consumer financial laws from January 1, 2014 through February 26, 2017 (“Relevant Time Period”) that harmed borrowers. Among other things, Ocwen improperly calculated loan balances, misapplied borrower payments, failed to correctly process escrow and insurance payments, and failed to properly investigate and make corrections in response to consumer complaints. Ocwen compounded these failures by Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 1 of 84

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illegally foreclosing upon borrowers’ loans and selling loan servicing rights to servicers without fully disclosing or correcting errors in borrowers’ loan files. 2.

The Bureau brings this action against the Defendants under: (1) Sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531, 5536; (2) Sections 807(2)(a), 807(10), and 808 of the Fair Debt Collection Practices Act (the “FDCPA”), 15 U.S.C. §§ 1692e(2)(a), 1692e(10), and 1692f; (3) Sections 6 and 19 of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2605, 2617, and the regulations promulgated thereunder at Regulation X, 12 C.F.R. part 1024 (“Regulation X”); and (4) Section 105(a) of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1604(a), and the regulations promulgated thereunder at Regulation Z, 12 C.F.R. part 1026 (“Regulation Z”). 3.

Venue is proper in this district under 28 U.S.C. § 1391(b) and 12 U.S.C. § 5564(f) because Defendants are located in or do business in this district and part of the events that gave rise to the claims took place in this district. Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 2 of 84

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PLAINTIFF 6.

The Bureau is an independent agency of the United States created by the CFPA. 12 U.S.C. § 5491(a). The Bureau is charged with enforcing Federal consumer financial laws. 12 U.S.C. §§ 5563, 5564.

The FDCPA, RESPA, and TILA are Federal consumer financial laws. 12 U.S.C. § 5481(14). Under Section 1036 of the CFPA, it is unlawful for any covered person “to offer or provide to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A). Violations of the FDCPA, RESPA, and TILA are therefore violations of Section 1036 of the CFPA. 12 U.S.C. § 5536(a)(1)(A).

Ocwen Financial Corporation (“OFC”) is a publicly-traded Florida corporation that maintains its principal place of business in West Palm Beach, Florida. At all times during the Relevant Time Period, OFC did business in this District and throughout the United States.

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11.

Ocwen Mortgage Servicing, Inc. (“OMS”) is a United States Virgin Island corporation that maintains its principal place of business in the United States Virgin Islands. At all times during the Relevant Time Period, OMS did business in this District and throughout the United States.

12.

Ocwen Loan Servicing, LLC (“OLS”) was a Delaware limited liability company that maintained its principal place of business in West Palm Beach, Florida. At all times during the Relevant Time Period, OLS did business in this District and throughout the United States. As detailed in Ocwen’s Corporate Disclosure filed in the instant action (Doc. 451), OLS merged with PHH Mortgage Corporation (“PHH”) on June 1, 2019, and PHH is the successor by merger to OLS. For purposes of this Second Amended Complaint, all references to PHH are in its role as successor in interest to OLS.

13.

At all times during the Relevant Time Period, OFC, through its subsidiaries, originated and serviced loans. OFC, OMS, and OLS (collectively “Ocwen”) engaged in servicing activities for “federally related mortgage loans,” namely loans secured by liens on one-to-four-family residential properties that were, for example: (1) originated by a lender regulated by the federal government, (2) insured or assisted in any way by the federal government, (3) intended to be sold to Fannie Mae, Freddie Mac, or Ginnie Mae (“GSEs”), or (4) originated by a creditor that originates or invests in residential real estate loans aggregating more than $1,000,000 per year. Among other things, for these federally related mortgage loans, Ocwen received and processed borrower payments, made payments of principal and interest to the owners of the loans, administered loss mitigation processes, and managed foreclosures. Ocwen also acquired and collected upon borrowers’ mortgage debts that were in default. Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 4 of 84

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14.

At all times during the Relevant Time Period, OFC, the parent and publicly-traded company, wholly owned all of the common stock of its primary operating subsidiary, OMS. At all times during the Relevant Time Period, OMS wholly owned the stock of another of OFC’s primary operating subsidiaries, OLS. During the Relevant Time period, all three entities shared key executives, such as Ronald Faris, Timothy Hayes, Michael Bourque, and John Patrick Cox. All three entities, through OFC, filed a consolidated financial statement with OFC’s public disclosures. 15.

At all times during the Relevant Time Period, OFC controlled, directed, operated, and participated in mortgage servicing activities, including the daily cashiering, escrow, insurance, loss mitigation, foreclosure, call center, and consumer complaint operations for Ocwen’s loans. OFC also entered into agreements for products and services that were necessary for Ocwen to service mortgage loans and collect debt. OFC contracted for such products and services, including a system of record and related technology services, for and on behalf of Ocwen’s affiliates, which included OMS and OLS.

16.

At all times during the Relevant Time Period, OMS also engaged in servicing loans. OMS was licensed by numerous state regulators to service loans and collect mortgage debts. OMS entered into agreements for products and services that were necessary for Ocwen to service mortgage loans and collect debt. OMS contracted for such products and services, including a system of record and related technology services used by OLS and OFC. OLS also represented, in an August 23, 2016 Consent Order with the State of Washington Department of Financial Institutions, that OMS engaged in the servicing or subservicing of OLS loans. Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 5 of 84

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17.

At all times during the Relevant Time Period, OLS also engaged in servicing loans. OLS was licensed by numerous state regulators to service loans and collect upon borrowers’ mortgage debts. OLS was also the owner of the mortgage servicing rights for the loans that Ocwen serviced.

18.

During the Relevant Time period, OFC, OMS, and OLS were “covered persons,” as that term is defined by 12 U.S.C. § 5481(6)(A), because they offered or provided a consumer financial product or service for use by consumers primarily for personal, family, or household purposes, or that was delivered, offered, or provided in connection with such a product or service by: servicing mortgage loans and collecting on consumers’ mortgage debts. 12 U.S.C. § 5481(15)(A)(i) and (x). 19.

During the Relevant Time Period, OFC was a “related person” because, as described in Paragraph 14, it was the direct and indirect shareholder of all OMS and OLS stock, and was thus a “controlling shareholder” and “shareholder . . . or other person … who materially participates in the conduct of the affairs” of OMS and OLS, which were covered persons. 12 U.S.C. § 5481(25)(C)(i) and (ii). OFC is thus “deemed to [be] a covered person for all purposes of any provision of Federal consumer financial law.” 12 U.S.C. § 5481(25)(B). During the Relevant Time period, OMS was a “related person” because, as described in Paragraph 14, it owned all of OLS’s stock at all times during the Relevant Time Period, and was thus a “controlling shareholder” and a “shareholder . . . or other person . . . who materially participates in the conduct of the affairs” of OLS, which was a covered person. 12 U.S.C. § 5481(25)(C)(i) and (ii). OMS is thus “deemed to [be] a covered person for all purposes of any provision of Federal consumer financial law.” 12 U.S.C. § 5481(25)(B).

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20.

During the Relevant Time Period, OFC and OMS were service providers to OLS because, as described in Paragraphs 15 and 16, OFC and OMS provided material services to OLS. 12 U.S.C. § 5481(26)(A). OFC and OMS also controlled and participated in the design, operation, and maintenance of OLS’s mortgage servicing activities. 12 U.S.C. § 5481(26)(A)(i).

21.

During the Relevant Time Period, OLS, OMS, and OFC operated as a “common enterprise.” OLS, OMS, and OFC conducted the business practices described below through interconnected companies that had common business functions, employees, and office locations. OFC and OMS controlled (either formally or informally) and operated OLS’s mortgage servicing activities. OFC and OMS also contracted for critical mortgage servicing operations for and on behalf of OLS. OFC, OMS, and OLS also filed consolidated financial statements and shared employees and offices. Accordingly, an act by one entity constituted an act by each entity comprising the “common enterprise,” and OFC, OMS, and OLS are each jointly and severally liable for the acts and practices alleged below.

22.

During the Relevant Time Period, as described in Paragraphs 13–21, OFC and OMS directed and controlled OLS’s mortgage servicing activities and authorized OLS to service Ocwen’s loans. Employees of OFC and OMS had knowledge of and controlled, or had the ability to control, the activities of OLS discussed herein. OFC and OMS, as OLS’s principals, are liable for the actions of their agent, OLS.

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FACTUAL ALLEGATIONS

BACKGROUND

Company background.

23.

William Erbey formed Ocwen in 1988. He served as the Company’s Chief Executive Officer until 2010. Ronald Faris succeeded Erbey and served as Ocwen’s Chief Executive Officer until June 2018.

24.

Between 2010 and the first quarter of 2014, Ocwen’s residential servicing portfolio grew from 351,595 loans with an aggregate unpaid principal balance of approximately $50 billion to 2,861,918 loans with an aggregate unpaid principal balance of approximately $465 billion. Ocwen’s largest acquisition during this time period was its 2013 purchase of Residential Capital, LLC’s (“Residential Capital”) servicing platform and its mortgage servicing rights to 1,740,000 loans with an aggregate unpaid principal balance of approximate $183.1 billion. As of December 31, 2016, Ocwen serviced approximately 1,393,766 loans with an aggregate unpaid principal balance of approximately $209 billion. During the Relevant Time Period, it serviced mortgages securing borrowers’ principal residences located in all fifty states and the District of Columbia.

25.

During the Relevant Time Period, Ocwen also routinely acquired debts that were in default at the time of acquisition. In the instance of the Residential Capital acquisition, over 10% of those loans were delinquent when Ocwen acquired them and boarded them to its system.

26.

During the Relevant Time Period, Ocwen regularly collected or attempted to collect on debts owed or due to another at the time of collection. The vast majority of loans that Ocwen serviced or subserviced were owned by others, such as trusts holding Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 8 of 84

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GSE–insured loans and other investors. According to Ocwen’s filings with the SEC, as of December 2014 Ocwen serviced or subserviced over 2.4 million loans for others, as of December 2015 Ocwen serviced over 1.6 million loans for others, and as of December 2016 Ocwen serviced over 1.3 million loans for others. 27.

Borrowers do not choose their mortgage servicer and had no control over whether and how Ocwen serviced their loans or collected upon their debts.

Ocwen’s REALServicing System of Record.

28.

29.

Servicers also respond to borrower inquiries, handle loss mitigation requests, and initiate foreclosure proceedings, among other functions. 30.

31.

From 2009 through at least February 26, 2017, Ocwen used a proprietary system of record, REALServicing, and its related sub-systems (collectively “REALServicing”).

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32.

No other mortgage servicer has used REALServicing since 2014. II.

OCWEN SERVICED LOANS BASED ON INACCURATE AND INCOMPLETE BORROWER LOAN INFORMATION 34.

As set forth in greater detail below, Ocwen serviced loans and collected upon debts based on inaccurate and incomplete borrower loan information during the Relevant Time Period. Ocwen often input inaccurate and incomplete information, or failed to input accurate or complete information, about borrowers’ loans into its REALServicing system of record. Even when the information in REALServicing was accurate, REALServicing generated inaccurate information about borrowers’ loans due to system deficiencies. Because of these system deficiencies, Ocwen relied upon manual processes and workarounds that themselves resulted in errors in borrowers’ loan information.

35.

Ocwen’s use of inaccurate and incomplete information during the Relevant Time Period to collect mortgage, tax, and insurance payments, communicate with borrowers about loss mitigation issues, proceed with foreclosures, and when selling the servicing rights of borrowers’ loans to new servicers resulted in significant harm to borrowers.

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Ocwen loaded inaccurate and incomplete information into REALServicing and serviced loans using this information. 36.

When Ocwen acquired servicing rights for loans, it moved, or “boarded,” the records for those loans from the prior servicers’ systems of record onto REALServicing.

37.

Ocwen boarded inaccurate and incomplete loan and payment data from prior servicers onto REALServicing.

38.

In many instances, the systems of record that other servicers used contained data fields that were different from the data fields in REALServicing. To check whether it was correctly boarding loan data from the prior servicers’ systems onto REALServicing, during the Relevant Time Period, Ocwen verified critical loan data fields—such as interest rate, property type, and unpaid principal balance—by matching them with the information in the borrower’s loan documentation. If the information in REALServicing did not match what Ocwen found in the documents, Ocwen was supposed to correct the error in REALServicing.

39.

To ensure the loan data it was using to service loans were complete and accurate, Ocwen sought to complete this loan verification process within 60 days of boarding the loan onto REALServicing. During the Relevant Time Period, however, Ocwen did not complete this process within 60 days. Instead, it relied on unverified loan information for months—and often for more than a year—to service hundreds of thousands of loans.

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40.

As of December 2013, Ocwen had a backlog of more than 400,000 transferred loans that remained unverified. It did not finish verifying and making corrections to critical data fields for these loans until August 31, 2014. Due to this backlog, Ocwen also delayed verifying the 1.7 million Residential Capital loans it previously acquired in 2013, and which it moved from Residential Capital’s servicing platform and boarded onto REALServicing on a rolling basis beginning in early 2014. Ocwen did not even begin the verification process for the Residential Capital loans until September 1, 2014; at that time, Ocwen was servicing more than 1.1 million unverified Residential Capital loans on REALServicing. By the end of 2014, when Ocwen completed boarding Residential Capital loans onto REALServicing, the verification backlog had grown to more than 1.3 million unverified Residential Capital loans. As of April 2016, Ocwen still had a backlog of more than 263,000 unverified Residential Capital loans.

41.

In November 2014, Ocwen determined that it was taking, on average, 261 days to complete its verification process for each loan it boarded. In some cases, the verification process took more than a year, far beyond Ocwen’s expected 60-day time period.

42.

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As a result of Ocwen’s verification failures, Ocwen serviced thousands of loans based on incorrect information. 43.

Because Ocwen failed to verify the accuracy and completeness of borrowers’ loan data during its expected 60-day time period after boarding, it delayed correcting any loan data errors or incomplete loan information. As a result of the delay— in many instances, more than a year—Ocwen serviced a significant number of loans based on inaccurate loan information during the Relevant Time Period. 44.

According to Ocwen, which tracked the results of its verification of loans, a significant percentage of the loans it ultimately verified during the Relevant Time Period contained errors or incomplete information and required corrections. For example, in April 2014, Ocwen reported that 72 percent of the loans it verified that month contained errors or incomplete information and required corrections in REALServicing. In March 2016, 90 percent of the loans Ocwen verified contained errors or incomplete information that required corrections. 45.

As a result of the findings of its verification process, from September 2014 until April 2016, Ocwen determined that it needed to make more than 870,000 corrections in REALServicing, including more than: 43,000 corrections to the maximum late fees a borrower could be charged (under state law); 31,000 corrections to loans’ maturity dates; 27,000 corrections to loan terms; 24,000 corrections to loans’ first interest rate cap maximum; and 5,000 corrections to loans’ interest rates. 46.

Even when Ocwen completed its verification process and identified inaccuracies in loan data, in many instances, Ocwen failed during the Relevant Time Period to accurately correct the errors in REALServicing. For example, in November 2014, Ocwen conducted an internal audit and found that its loan verification personnel Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 13 of 84

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were not properly correcting or updating the information in REALServicing in 63 percent of loans the audit team reviewed. The audit found that Ocwen personnel failed to properly correct critical data fields such as loan maturity date, loan term, first payment date, balloon term, and first interest rate cap. 47.

In 2015, Ocwen’s outside consultant identified additional deficiencies in Ocwen’s loan boarding process, such as:

• “High volume of loans error out of the automated process for unknown reasons requiring manual revision”;

Ocwen’s reliance on its deficient servicing platform, REALServicing, exacerbated its use of inaccurate loan information.

Ocwen and its outside consultant concluded that REALServicing was failing.

48.

Ocwen’s own senior leadership repeatedly recognized and acknowledged REALServicing’s failures.

49.

For example, in an internal communication in 2014 with Ocwen’s Chief Executive Officer, Ocwen’s head of Servicing described Ocwen’s technology as: An absolute train wreck. I know there’s no shot in hell, but if I could change systems tomorrow I would. I can’t tell you the number of hours I and others spend on basic servicing technology blocking and tackling. I’m not talking about differentiators here. I’m talking about getting Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 14 of 84

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system to stay online, escrow analysis to work, letters to print, etc. It’s ridiculous. (Emphasis added.) 50.

Ocwen’s former head of Servicing Compliance testified in May 2016 that she was “absolutely” concerned that Ocwen could not service loans on REALServicing in compliance with applicable laws when she worked at the company between 2014 and 2015. She testified that she, other members of the Compliance Department, and the leaders of Servicing Operations, Loss Mitigation, and other Ocwen business units “frequently” and “loudly” raised this concern. In determining the root cause of various issues, she explained, “the answer would almost always be REALServicing and the processes that we’re using, would be the answer we would get from the business . . . . [It was a] commonality across all of [the business units] . . . . Everything in servicing, every department in servicing.”

51.

These senior leaders’ conclusions were not outliers. Between 2014 and 2016, Ocwen assessed REALServicing and also hired an outside consultant to do the same. Both Ocwen and its consultant concluded that REALServicing lacked the basic system architecture and design necessary to properly service loans. 52.

During the Relevant Time Period, Ocwen also tracked its regulatory violations, risk areas, and other failures in spreadsheets named “Risk Convergence Reports.” Each regulatory violation, risk item, or failure identified in the reports included a description of the issue, the date Ocwen identified the issue, whether the issue was dependent on Altisource, the status of any technology fix or other operational remediation, and other information.

53.

Each item in the Risk Convergence Reports was assigned a risk rating, ranging from “R1” to “R5.” “R1” was the highest risk rating, which Ocwen defined as: Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 15 of 84

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“Potential adverse impact of over $5 million”; “Actual or high possibility for fraud, waste or abuse”; “Breach of company policy or procedures (frequent, repeat, or disregarding policy)”; “Noncompliance with the law or regulation”; or “Material errors or irregularities are a reasonable possibility.”

54.

According to Ocwen’s list of items in the Risk Convergence Reports, during the Relevant Time Period the risk items often resulted from and continued due to REALServicing failures or system limitations. When, for example, Ocwen conducted its first on-site audit of Altisource and REALServicing in 2014, Ocwen auditors concluded that, although 70 percent of the items contained within the Risk Convergence Reports related to “technology projects and enhancements” that Altisource was responsible for, little progress had been made to resolve the items due to Altisource’s “lack of priority.” 55.

56.

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REALServicing’s deficiencies impacted Ocwen’s ability to lawfully service loans.

57.

During the Relevant Time Period, REALServicing suffered from fundamental system architecture and design flaws, including a lack of properly managed data, lack of automation, and lack of capacity. These flaws adversely impacted the accuracy of the information that Ocwen used to service loans—and, thus, Ocwen’s ability to service loans—in a number of ways.

58.

First, with respect to Ocwen’s data management, REALServicing required the use of more than 10,000 comment codes and flags. Yet, during the Relevant Time Period, Ocwen lacked a complete data dictionary defining its comment codes, flags, and data fields. As a result, Ocwen personnel did not share a common understanding of what these comment codes or flags meant or how Ocwen personnel should use them. 59.

Ocwen employees also did not understand how changes to certain codes impacted other codes or work processes. Ocwen’s former Head of Compliance, who worked at Ocwen from August of 2013 until September of 2015, testified in May 2016 that during his tenure at Ocwen he repeatedly requested information on the meaning and basic descriptive information of comment codes, how Ocwen’s business units used them, what downstream activities the codes triggered, and what upstream activities triggered the codes. He further testified that “neither Ocwen nor Altisource could provide that information.” Further, he testified that Ocwen’s use of thousands of REALServicing comment codes was “antiquated” and that it was “inappropriate” that Ocwen did not have a data dictionary to define these codes and describe their impact on other activities.

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60.

Second, REALServicing lacked the necessary automation and functionality to handle basic servicing operations. In 2015, an Ocwen consultant concluded that REALServicing had limited workflows and lacked automation. As detailed in the next subsection and Section III, in certain areas, such as payment processing and escrow, this lack of automation resulted in significant and excessive manual workarounds that created errors in borrowers’ accounts.

61.

Third, REALServicing lacked the capacity to process the large number of loans that Ocwen acquired and, in part as a result, it was not functional for lengthy periods of time. After Ocwen’s large 2013 and 2014 loan acquisitions, Ocwen’s personnel reported “high incidents of system unavailability.” For example, for the year of 2014, Ocwen’s officials reported that its loss mitigation system “was down approximately 17,000 work hours.” In internal communications in 2014, Ocwen’s Head of Loss Mitigation expressed exasperation about the unavailability of Ocwen’s loan modification systems:

Fourth, REALServicing suffered from various bugs, defects, and failures. For example, in 2014, due to programming errors and data not properly converting among REALServicing applications, Ocwen sent more than 1,800 borrowers permanent loan modification agreements that contained incorrect interest rate, principal payment, maturity date, and balloon payment information.

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Ocwen relied excessively on manual data entry and reports to address REALServicing’s failures.

63.

Because of REALServicing’s failures and limitations, Ocwen resorted to manual processes, which themselves resulted in errors during the Relevant Time Period. In 2015, Ocwen’s consultant reached the following conclusions—which Ocwen conceded were correct—after analyzing REALServicing and interviewing Ocwen business leaders: • “[Ocwen’s] lack of business process automation has resulted in excessive manual processes to address gaps”;

Ocwen created reports—typically referred to as “control reports”—to catch errors and mistakes or data that REALServicing could not process due to a lack of automation and other system deficiencies, but these reports were of limited use for at least two reasons.

65.

First, as Ocwen’s former Head of Compliance testified in May 2016, the reports were only effective to the extent that they were based on accurate and complete data. But Ocwen’s former Head of Servicing Compliance, who worked for Ocwen from April of 2014 until August 2015, testified in May 2016 that REALServicing lacked the necessary data to generate effective control reports and detect problems. She explained, for example, that when generating a control report using a certain field in REALServicing, that field was “used about five different ways” so the report generated a Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 19 of 84

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“whole mish-mash of information” that did not help Ocwen personnel understand whether an exception or error occurred.

66.

Second, Ocwen’s manual workarounds and processes introduced the risk of human error. As Ocwen’s former Head of Compliance testified, the concern that such manual processes could result in human error is “one of the sort of classic reasons one automates a manual process.” Other former and current Ocwen business unit leaders reiterated this point.

67.

For these reasons, Ocwen’s controls were ineffective during the Relevant Time Period. As Ocwen’s former Head of Servicing Compliance testified: “[E]very business unit in the entire organization” lacked sufficient controls to prevent mistakes and to detect when mistakes occurred.

Ocwen’s use of inaccurate and incomplete information harmed borrowers.

68.

During the Relevant Time Period, Ocwen’s use of inaccurate and incomplete information to service loans and collect upon borrower debts resulting from its boarding of inaccurate and incomplete information into REALServicing, REALServicing’s deficiencies, and Ocwen’s error-prone manual processes caused or was likely to cause borrowers substantial harm, and resulted in Ocwen’s communicating, orally and in writing, information to borrowers that it knew or had a reason to know was inaccurate.

69.

Ocwen was aware of this substantial harm or likelihood of substantial harm. In 2015, Ocwen’s outside consultant conducted interviews with Ocwen business leaders. These leaders identified 67 failures—or “pain points”—representing “functional Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 20 of 84

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and/or technical deficiencies” that “stemm[ed] from systematic and manual processes,” including the following:

• With respect to escrow: a “technical gap causing escrow analysis to be calculated incorrectly” and a “[m]anual bankruptcy workaround for loans acquired already in bankruptcy, causes information to be deleted from history as new information is updated. This information should be disclosed to the borrower in order to calculate[ ] escrow accurately”;

• With respect to insurance disbursements: “no systematic controls exist [ ] to prevent duplicate disbursements in REALServicing resulting in 6k - 12k incidents per year. Personnel must manually remove necessary codes (e.g., paid in full, service released)”;

• With respect to loan modification processes: “[u]pon review of the [loan modification] package, terms are found to be incorrect approximately 80% of the time (e.g., NPV miscalculation, final modification date incorrect)”; • With respect to foreclosure data: “[d]ata between REALResolution [the REALServicing application for foreclosures] and REALServicing is not always in sync due to lack of adequate system mapping”; and • With respect to the payment of borrower taxes: “[a]lthough tax assessment information is supposed to be used to project more accurate payments, REALServicing automatically uses last year[’]s billing amount, even if installments for the current year are different.” 70.

More generally, during the Relevant Time Period, Ocwen serviced borrowers’ loans, collected upon borrower debts, and communicated, orally and in writing, with borrowers using inaccurate and incomplete information, including Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 21 of 84

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information relating to borrowers’ loan terms, amounts received from and owed by borrowers, escrow amounts, insurance amounts, and/or loss mitigation information. As set forth above and below in Section III, because Ocwen serviced loans and collected borrower debts based on inaccurate and incomplete information, during the Relevant Time Period it, among other things, collected or attempted to collect inaccurate amounts from borrowers, failed to timely pay borrowers’ insurance premiums, provided borrowers with loan modifications with inaccurate terms, and initiated wrongful foreclosure proceedings upon borrowers’ loans. Further, Ocwen failed to obtain or review information substantiating the accuracy of borrower loan data prior to collecting upon borrowers’ debts and foreclosing upon their loans, even though Ocwen knew it boarded inaccurate information, had system and manual errors that created inaccurate information, and numerous borrowers complained about and disputed the information Ocwen was using.

71.

Ocwen’s use of inaccurate and incomplete borrower and loan information during the Relevant Time Period to service loans and collect upon borrower debts did not benefit consumers or competition. Such a practice did not result in cost savings, enhanced customer service, or other benefits to consumers or competition.

OCWEN’S SERVICING FAILURES HARMED BORROWERS IN AT LEAST SIX DISTINCT WAYS

Ocwen mishandled borrowers’ payments and miscalculated amounts due.

72.

During the Relevant Time Period, Ocwen routinely serviced loans and collected borrower debts using inaccurate and incomplete information. During the Relevant Time Period, it also failed to accurately credit amounts received from borrowers, failed to calculate accurate amounts due from borrowers, and sent borrowers Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 22 of 84

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inaccurate communications, such as billing statements, that incorporated inaccurate information about payments and amounts owed.

73.

Each day, Ocwen cashiering personnel manually entered, pulled, and matched entries in REALServicing for more than 45,000 borrower-related transactions, including 5,000 payment transactions and more than 40,000 disbursements. Ocwen’s internal business units requested that Ocwen automate REALServicing to process borrowers’ payments and disbursements for taxes and insurance. They explained that, “due to the volume[,]” there was an “immense need to automate this reconciliation” to ensure “no risk for data loss or corruption.”

74.

As Ocwen’s former Head of Compliance testified, Ocwen had a higher risk profile in the mortgage servicing industry due its heavy use of manual processes in its Cashiering Unit, which handled credits to (e.g., borrowers’ payments) and debits from (e.g., disbursements for taxes or insurances) a borrower’s loan balance.

Ocwen’s obligations under Regulation Z, the CFPA, and the FDCPA.

75.

A borrower’s mortgage contract specifies how Ocwen must calculate amounts due and credit any payments (e.g., to principal and interest first, then to any late or default fees). Under Regulation Z, a servicer generally must provide a borrower with a periodic statement each month that details, among other things, the amount the borrower must pay that month, how the servicer will break down and apply the borrower’s monthly payment, all transaction activity since the last statement, and the amount of payments in a suspense or unapplied funds account. Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 23 of 84

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76.

Ocwen failed to comply with its obligations under Regulation Z, the CFPA, and the FDCPA with respect to borrowers’ payments and statements of amounts due.

77.

Ocwen violated the CFPA, FDCPA, and/or Regulation Z in three main ways during the Relevant Time Period with respect to borrowers’ payments and statements of amounts due that Ocwen communicated to borrowers. 78.

First, during the Relevant Time Period, Ocwen committed numerous payment processing errors by its personnel and lockbox vendor that resulted in Ocwen’s using inaccurate information about the amounts it received from borrowers when servicing borrowers’ loans.

79.

Specifically, Ocwen identified numerous errors related to payments it received from borrowers and its processing of those payments, including: • Ocwen was unable to accurately record the date when it received a borrower’s physical payment, which, as Ocwen detailed in its Risk Convergence Reports, could result in “delayed payment posting, incorrect payment effective dating, late fees assessment, and negative credit reporting”; • Ocwen processed multiple payments (2 or more checks in one envelope) in ways that “cause[d] misapplication of physical payments by applying as an individual payment instead of combined multi-payment”;

• Ocwen’s lockbox vendors failed to image correspondence received with payments, resulting in payments not being correctly identified “until a borrower Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 24 of 84

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claim [was] received. Ultimately, this result[ed] in delays in payment posting process, late fee assessment, and negative credit reporting”; and • Where borrower payments by wire were manually entered and converted by Ocwen personnel into REALServicing: “[s]ometimes the file conversion [did] not convert the data properly and the data need[ed] to be reviewed, corrected and uploaded to REALServicing by Cashiering” and “[e]rrors [could] occur during this manual process.”

80.

Second, Ocwen used inaccurate information about the amounts borrowers owed to service their loans and collect upon their debts. These errors were especially common with respect to loans whose terms adjusted or loans for which borrowers had sought the protections of bankruptcy.

81.

As a result of Ocwen’s failure to timely verify information that it had received from prior servicers, when Ocwen loaded incorrect loan terms onto its system, Ocwen miscalculated the amounts due from borrowers for certain of those loans. These errors were especially common with respect to loans whose terms adjusted or home equity lines of credit. Ocwen knew the loan terms it loaded had significant inaccuracies that affected Ocwen’s calculations of the amounts due from such borrowers. 82.

Likewise, for borrowers in bankruptcy, Ocwen failed to process and apply payments correctly in accordance with certain bankruptcy requirements, leading it to service loans and collect upon borrowers’ debts using inaccurate amounts. By 2016, Ocwen concluded that REALServicing was broken in a number of ways that adversely affected borrowers whose loans were subject to bankruptcy protections, including that: • “When REALServicing makes a contractual payment using pre- or post-petition funds, the payment covers only the principal and interest component. Escrow is Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 25 of 84

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not paid. This is contrary to what a bankruptcy court expects. Payments should only be made for the full contractual amount, including the escrow (as calculated for the due date of the payment to be made)”;

• “There is no connection between the proof of claim as determined in Equator/REALResolution [the system Ocwen used to process bankruptcies] and the pre-petition arrearage balances in REALServicing. The proof of claim figures need to become the REALServicing arrearage balances”; and • “The process of converting a bankruptcy trustee payment to a payment batch is highly manual and, therefore, both inefficient and at risk of error. Ocwen receives funds from bankruptcy trustees that, generally, need to be applied to borrower accounts as either pre-petition payments, post-petition payments, or bankruptcy interests. There are some cases where, due to loan status, funds from the trustee are not applied as payment, but are applied to miscellaneous suspense or other non-payment accounts. Ocwen receives funds from bankruptcy trustees in a single check that usually covers multiple accounts. Ocwen needs to apply the funds across the different loans.”

83.

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84.

Third, Ocwen communicated inaccurate information about amounts borrowers owed or that Ocwen received, as described in Paragraphs 78–83. Ocwen communicated such information orally and in writing, including in monthly periodic and billing statements, and quotes to borrowers. These representations were material to borrowers managing their mortgages and were likely to mislead borrowers acting reasonably under the circumstances.

Ocwen’s payment processing failures caused significant borrower harm.

85.

Ocwen’s use of inaccurate payment information and amounts due significantly harmed borrowers. Ocwen charged borrowers improper late fees; reported inaccurate, negative payment information to credit reporting agencies; subjected borrowers to collection calls based on inaccurate information; and wrongly threatened borrowers with foreclosure. This conduct harmed borrowers financially and caused borrowers frustration and emotional distress.

86.

Even when Ocwen identified a payment error, in many instances it did not properly correct the error. Pursuant to Ocwen’s policies and procedures, its Cashiering Department corrected identified errors through a “reversal request” or correction to a borrower’s account. In many instances, however, Ocwen’s personnel did not make the reversal request in a timely or accurate manner.

87.

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88.

Not surprisingly, given Ocwen’s significant problems crediting and applying borrower payments, a large number of borrowers complained about Ocwen’s payment processing.

89.

From April 2015 to April 2016 alone, Ocwen received complaints from more than 68,000 borrowers related to its processing of payments. Ocwen determined it made numerous errors in the following categories: “Payments Not Applied Correctly”; “Funds Not Applied Correctly”; “Reversal Requests”; “Late and NSF Fees”; “Payment Missing – Not Applied to Account”; “Chargeback Issue – Borrower Disputes Charged Back Item”; “Fee Assessed Improperly”; “Payment Not Processed Timely”; “ACH Drafted Incorrectly (Incorrect Date, Multiple Drafts, etc.)”; “Payoff Overage”; “ACH Payment – Chargeback”; and “Incorrect Data in the Account Statement.” 90.

The experience of one consumer trying to prepay her mortgage in April 2016 is illustrative of Ocwen’s payment processing errors. According to the consumer, she sent Ocwen two checks—one for principal and interest, and one check for her escrow payment—on or around April 2, 2016 to prepay her May 2016 mortgage payment. Even though the borrower stated that she sent the checks in the same envelope, Ocwen records indicate that it received and processed the payments on different days. In addition, when the borrower received her May 2016 mortgage statement, she reported that Ocwen misapplied her April 2016 principal and interest payment into a suspense account. As a result, even though the borrower had sent Ocwen funds in advance to prepay her mortgage, the consumer reported that Ocwen changed her status to delinquent in May 2016, charged her late fees, and made disruptive and embarrassing collection calls to her at her home and work.

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91.

Another borrower complained that Ocwen began rejecting her monthly payments in November of 2014, even though she had been making full payments pursuant to a September 2014 loan modification. The borrower stated that when she contacted Ocwen, an Ocwen case manager told her that Ocwen’s systems had rejected the payment because the modified payment amount that Ocwen recorded in its system was a few cents different than the modified monthly payment amount that Ocwen told the borrower to pay in a letter approving her loan modification. After supposedly fixing this issue, the borrower reported that Ocwen then began misapplying her payments to the previous month (e.g., claiming the borrower made her January 2015 payment in February 2015). As a result, the borrower began receiving delinquency notices and eventually a notice of default from Ocwen indicating that she had a past due balance of $2,446.66. The borrower reported that she made repeated attempts to get Ocwen to correct its mistakes, but as of October 2016, Ocwen had still not fixed them. According to the borrower, this ordeal caused her a significant amount of stress and embarrassment: “It is very embarrassing to come home and see a notice on my door of an impending foreclosure especially when I have made and continue to make my mortgage payments to Ocwen.”

92.

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not able to get Ocwen to address the matter until he submitted a complaint to the Bureau and the Texas Attorney General. In a letter dated September 28, 2016, Ocwen admitted that “the figures on the payoff statement sent on September 8, 2016 were incorrect.” In the letter, Ocwen stated that it had generated a new payoff statement with a corrected payoff amount of $84,569.90—more than $55,000 less than the payoff quote Ocwen provided to the borrower a few weeks earlier. Ocwen did not explain, though, how the error had occurred in the first place. According to the borrower, due to the payoff discrepancy, he had to delay the pending sale of the property and the sale fell through. He had to find another buyer for his property, which he later did.

Ocwen botched borrowers’ escrow accounts.

93.

Ocwen also failed during the Relevant Time Period to perform basic tasks associated with managing borrowers’ escrow accounts. Specifically, due to systems failures, control lapses, and excessive reliance on manual processes, Ocwen failed to conduct escrow analyses or accurate escrow analyses; failed to timely send borrowers accurate escrow statements; and failed to properly account for and apply borrower escrow shortage payments. Many of these servicing failures also led Ocwen to use inaccurate escrow-related information.

94.

As of April 2016, Ocwen managed escrow accounts for more than 78 percent of the loans it serviced. In 2014, Ocwen hired consultants to review and report upon its escrow practices. The resulting report identified more than three million “documented CFPB violations” during 2014, including Ocwen’s failure to: provide escrow statements or accurate escrow statements to borrowers; conduct escrow analyses or accurate escrow analyses; and accurately impose hazard and flood insurance. Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 30 of 84

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Ocwen’s obligations under RESPA, the CFPA, and the FDCPA. 95.

In addition, the CFPA and FDCPA prohibit servicers from engaging in unfair, deceptive, and abusive acts and practices related to escrow and debt collection activities.

Ocwen failed to comply with its obligations under RESPA, the CFPA, and the FDCPA with respect to escrow accounts. 97.

Ocwen failed to comply with RESPA, the CFPA, and/or the FDCPA during the Relevant Time Period in at least five ways related to escrow accounts, including when servicing federally related mortgage loans.

98.

First, as of mid-2014, Ocwen failed to conduct annual escrow analyses within the required time period for up to 230,000 delinquent borrowers, up to 60,000 borrowers who had filed for bankruptcy, and other borrowers, in violation of Regulation X.

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99.

100.

Ocwen’s failure to conduct escrow analyses for borrowers also impacted the accuracy of its borrowers’ payoff and reinstatement quotes. Because REALServicing’s calculation of borrowers’ payoff and reinstatement quotes—the amount they need to pay to respectively pay off or reinstate their loans to become current—depended in part on borrowers’ escrow balances, REALServicing miscalculated the payoff and reinstatement quotes for many of the loans for which Ocwen did not conduct an escrow analysis. Ocwen’s failure to conduct escrow analyses resulted in Ocwen’s providing thousands of borrowers with inaccurate reinstatement quotes. 101.

In some instances, Ocwen failed to perform or timely perform escrow analyses during the pendency of a Chapter 13 bankruptcy, resulting in Ocwen’s using inaccurate escrow amounts to service loans and collect upon debts. Further, Ocwen failed to service its loans in accordance with bankruptcy protections and attempted to collect purported escrow shortages or arrears in violation of bankruptcy orders and rules.

102.

In June 2016, Ocwen’s Head of Bankruptcy testified that more than 22,000 borrowers in bankruptcy were impacted by Ocwen’s failure to conduct a timely escrow analysis and that Ocwen was attempting to remediate these borrowers. Ocwen’s Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 32 of 84

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consumer complaint data indicate that, for the year of April 2015 to April 2016, at least 8,000 of these 22,000 impacted borrowers complained to Ocwen. 103.

Second, in many instances, even when Ocwen performed escrow analyses on borrowers’ accounts, Ocwen either: (1) failed to send escrow statements to borrowers, including borrowers who were not delinquent, in foreclosure, or in bankruptcy at the time of the escrow analysis, because of REALServicing system deficiencies; or (2) sent inaccurate escrow statements. 104.

When Ocwen sent escrow statements, in many instances, the escrow statements contained inaccurate information pertaining to the borrowers’ account histories, escrow balances, and escrow payments. In September of 2014, Ocwen’s then Head of Servicing Compliance acknowledged this failure in internal emails: Escrow notices not compliant with RESPA, not sent timely or not sent at all are huge and are the foundation for all else. These are, by the way, the three biggest borrower communication issues across the board for Ocwen - required content not included, letter not sent, or letter not sent timely. This is estimated to impact 800,000 borrowers or 52% of the Ocwen customer base. (Emphases added.) 106.

Third, Ocwen failed to timely process escrow shortage payments—i.e., payments that borrowers made at Ocwen’s request to satisfy a shortage or deficiency in their escrow accounts—that Ocwen needed to pay the borrowers’ insurance or tax disbursements, in violation of Regulation X. Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 33 of 84

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107.

During the Relevant Time Period, Ocwen personnel emailed its Escrow Department or manually entered a comment code in REALServicing when the borrower paid an escrow shortage to request that the Escrow Department manually remove the shortage portion from the borrower’s monthly escrow payment. Errors in these processes caused Ocwen to collect shortages that borrowers had already paid. For instance, as Ocwen’s auditors found in a March 30, 2016 audit, Ocwen did not have adequate controls over the entry of the comment code and therefore Ocwen did not catch when its personnel failed to manually enter the appropriate escrow shortage receipt comment code. This resulted in “the continued collection of escrow shortage amounts” that borrowers already paid. Specifically, Ocwen failed to timely process escrow shortage payments for thousands of borrowers, resulting in Ocwen’s collecting or attempting to collect inaccurate escrow shortage amounts that borrowers did not, in fact, owe because they already paid them.

108.

Fourth, when servicing borrowers’ loans and collecting upon their debts, Ocwen also used inaccurate information as to whether borrowers had an escrow account; whether borrowers’ escrow amounts were properly accounted for in borrowers’ loan modification payment amounts (e.g., borrowers’ modified monthly mortgage payments) before borrowers accepted the newly modified mortgage payments; and whether borrowers who filed for bankruptcy protection were being charged accurate amounts. Ultimately, this led to Ocwen’s using inaccurate escrow-related information to calculate amounts that borrowers owed, such as monthly payments. 109.

In the bankruptcy context, for example, Ocwen failed to generate accurate escrow amounts. In late 2014, the Head of Ocwen’s Escrow Department wrote in an email, which was forwarded to Ocwen’s Chief Executive Officer: Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 34 of 84

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I've stressed importance of getting the BK escrow balance issues fixed, but no confirmation of root cause or target correction date . . . . It's a system issue because a bucket that determines the amount of money that a customer sends for their monthly payment can change with no record of why on the system . . . . Please help get the importance across on this issue. If this is not fixed, I cannot recommend that we move to analyze BK for the portfolio. Even with a control report to catch them, there is still risk the balance will be wrong when you actually analyze the account. (Emphases added.) 110.

Fifth, Ocwen communicated inaccurate escrow-related information, including amounts that borrowers owed, as described in Paragraphs 98–110. Ocwen communicated such information orally and in writing, including in monthly periodic, billing, and escrow statements, and quotes, to borrowers. These representations were material to borrowers managing their mortgages and were likely to mislead borrowers acting reasonably under the circumstances.

Ocwen’s escrow failures caused significant borrower harm. 112.

Ocwen’s escrow errors caused significant harm to borrowers, including the costs and emotional distress that borrowers suffered when attempting to get Ocwen to correct its mistakes.

113.

This type of harm can disproportionately affect borrowers in bankruptcy. As Ocwen’s former Head of Servicing Compliance testified: Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 35 of 84

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If you have a borrower who is sixty days down or in BK [bankruptcy], if an analysis is done and they find that the escrow account is short and the payment has to go up by fifty bucks . . . . If you've got somebody that's sixty days down or in BK [bankruptcy] and all of a sudden, because of a shortage in the escrow account, their payment goes up by fifty bucks, that can make a big difference. So it can have a disproportionate impact because they're already on the ropes financially. 114.

115.

One borrower contacted Ocwen multiple times to complain about an incorrect, inflated escrow deficiency. The borrower had previously filed for bankruptcy, and by a bankruptcy court order on June 1, 2015, his account was deemed current with an escrow deficiency of $530.67. Despite the court order, Ocwen continued to report an escrow deficiency of $8,468.03. The borrower complained repeatedly to Ocwen, but to no avail. In March 2016, the borrower filed a complaint against Ocwen with the Bureau and the Texas Attorney General. In a response letter dated June 3, 2016, Ocwen acknowledged that, per the June 1, 2015 court order, the borrower’s account should have been deemed current with an escrow shortage of only $530.67. Ocwen also admitted that it had sent the borrower two escrow statements that reflected an “incorrect escrow account balance deficiency” and apologized for any “frustrations [the Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 36 of 84

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borrower had] incurred as a result of the error.” Ocwen agreed to make corrections to the borrower’s account, run a new escrow analysis, waive all fees and expenses that Ocwen charged to the account, and amend any negatively reported credit information. 116.

The complaint submitted by another borrower typifies the myriad payment processing, escrow, and insurance errors Ocwen made, and how they can drive borrowers into foreclosure. The borrower complained about the following series of errors:

• When the borrower entered into a loan modification in April of 2016, his principal balance increased by more than $161,000, but Ocwen was unable to explain why his balance increased by this amount; • Even though the borrower made his required monthly modification payments on time, Ocwen repeatedly failed to post his payments on time or at all; • Ocwen charged the borrower for flood insurance that the borrower did not need because his property was not in a flood zone; and • Ocwen then erroneously attempted to foreclose on the borrower. 117.

In a letter dated February 10, 2017, Ocwen admitted to multiple errors in the process:

• Ocwen explained that the increase in the borrower’s principal balance when his loan was modified was because the borrower had a negative escrow balance of $88,124.55 and $124,912.71 had been capitalized during modification. But Ocwen did not explain why the borrower’s principal balance had increased to $161,000. • Ocwen admitted, though, that the negative escrow balance was wrong and based on erroneous charges it imposed on the borrower for lender-placed flood and hazard insurance: “When the modification was completed the calculations used Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 37 of 84

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Lenders Placed Flood Insurance and Lenders Placed Hazard Insurance for multiple years that were not necessarily due.” • As a result of these erroneous charges, Ocwen determined that the borrower actually had a positive escrow balance or surplus of $36,788.16 in his escrow account, not a negative escrow balance or deficiency of more than $88,000. 118.

In light of these errors, Ocwen stated that it would be “re-modifying the loans current terms accordingly” and would attempt to waive the foreclosure fees it had imposed on the borrower’s account. On March 24, 2017, the foreclosure proceedings against the borrower were voluntarily dismissed. 119.

Ocwen mishandled borrowers’ hazard insurance. 120.

During the Relevant Time Period, Ocwen failed to make timely payments of borrowers’ hazard insurance premiums and serviced loans based on inaccurate insurance data that led to wrongful insurance premium charges.

Ocwen’s obligations under RESPA, the CFPA, and the FDCPA. 121.

Under RESPA and Regulation X, if a borrower’s monthly payment includes a payment for hazard insurance, such as homeowner’s insurance, wind insurance, or other types of property-related insurance, then the servicer must generally Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 38 of 84

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make disbursements in a timely manner, on or before the deadline to avoid a penalty, as long as the borrower’s payment is not more than 30 days overdue. 122.

In addition, the CFPA and FDCPA prohibit servicers from engaging in unfair, deceptive, and abusive acts and practices related to debt collection activities and in connection with mortgage servicing, including in the context of charges they impose relating to borrowers’ insurance policies, such as flood insurance policies.

Ocwen failed to comply with its RESPA, CFPA, and FDCPA obligations with respect to hazard insurance.

123.

Ocwen failed to comply with RESPA, the CFPA, and FDCPA during the Relevant Time Period in at least four ways related to hazard insurance, including when servicing federally related mortgage loans.

124.

First, in numerous instances, Ocwen failed to timely disburse payments to hazard insurance companies on behalf of escrowed borrowers whose payments were not more than 30 days overdue. For example, due to syncing and updating failures between REALServicing and Ocwen’s insurance vendor’s system, Ocwen’s insurance vendor did not recognize that numerous Ocwen borrowers had escrow accounts and therefore failed to make disbursements to these borrowers’ insurance companies before the deadline for a penalty.

125.

In other instances, incorrect account data in REALServicing, such as whether an account was escrowed for insurance and insurance payee information, resulted in Ocwen’s making untimely and incorrect disbursements for borrowers’ insurance policies. Ocwen, for example, made double payments (out of borrowers’ accounts) for the same insurance policy on thousands of accounts, disbursed premiums to wrong payees, and failed to timely disburse funds to pay thousands of insurance Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 39 of 84

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premiums. Ocwen also made untimely and duplicate tax disbursements from escrow accounts, as well. These failures, as well as those detailed in Paragraph 124, led Ocwen to service loans and collect debt with additional inaccurate information, such as monthly amounts that borrowers owed.

126.

• 3,000 of these borrowers received letters from Ocwen indicating that it was going to impose force-placed insurance on their loans because they lacked hazard insurance;

• 500 of these borrowers had force-placed insurance imposed on their loans by Ocwen; and • 100 of these borrowers were foreclosed upon by Ocwen. 127.

128.

Third, Ocwen used inaccurate data about whether borrowers were in flood zones to charge borrowers for flood insurance premiums for insurance policies that borrowers were not required to maintain.

129.

In early 2014, a large bank servicer that transferred the subservicing rights of its loans to Ocwen audited a sample of loans where Ocwen had force-placed flood Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 40 of 84

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insurance policies on borrowers’ properties. For approximately half of the loans it tested, the large bank servicer found that Ocwen imposed force-placed flood insurance on borrowers’ homes, despite the fact that the large bank’s records indicated that the borrowers already had their own flood insurance policies in place. 130.

131.

In early 2015, when Ocwen audited flood zone data among its various service providers, it found more than 3,000 loans for which the flood-zone-related data in REALServicing were inaccurate. In July of 2015, Ocwen’s auditors also concluded that Ocwen “lacks sufficient controls to ensure lender-placed flood insurance policies do not exceed regulatory required coverage amounts.” Ocwen’s auditors also reviewed a sample of 40 loans where the property was located in a flood zone and noted: “there were several loans where the lender-placed flood insurance policy amounts exceeded the required statutory or investor minimum coverage. Further, there were instances where gap insurance policies were created, even though the customer independently purchased sufficient flood coverage.” Ocwen’s use of inaccurate flood insurance data led to Ocwen’s servicing loans and collecting upon debts using inaccurate escrow-related information to calculate amounts that borrowers owed, such as monthly payments. 132.

Fourth, Ocwen communicated inaccurate information about amounts that borrowers owed, based on Ocwen’s use of inaccurate hazard and flood insurance information, as set forth in Paragraphs 124–131. Ocwen communicated such information orally and in writing, including in monthly periodic, billing, and escrow Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 41 of 84

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statements. These representations were material to borrowers managing their mortgages and were likely to mislead borrowers acting reasonably under the circumstances.

Ocwen’s insurance failures caused significant borrower harm. 133.

Ocwen’s insurance failures caused substantial financial and emotional harm to borrowers. From April 2015 to April 2016, Ocwen received complaints from more than 19,000 borrowers related to its management of borrowers’ insurance policies. Ocwen found that it made numerous errors relating to force-placed insurance imposed on borrowers’ accounts, borrowers’ hazard insurance not being paid, and insurance refunds not being timely refunded or paid to borrowers. 134.

135.

Another borrower’s experience highlights the difficulty borrowers had in getting Ocwen to correct its insurance errors, as well as the downstream effects these errors had on borrowers’ escrow accounts and payments amounts. This borrower complained to Ocwen multiple times about her escrow payments, but was not able to resolve her complaints until she submitted a complaint through her state regulator. In a May 8, 2015 letter responding to the borrower and the state regulator, Ocwen admitted that it had made a “duplicative disbursement for windstorm hazard insurance,” resulting in the borrower being overcharged for insurance. In addition, Ocwen conceded Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 42 of 84

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that the duplicate wind insurance payment had caused her escrow balance to appear artificially low, which resulted in Ocwen incorrectly increasing the borrower’s monthly payment to account for the purported shortage.

Ocwen failed to protect borrowers when it made servicing errors.

136.

Ocwen’s errors at every loan servicing stage made it even more important that the company adequately investigate and respond to borrower complaints. These functions can act as a “safety net” to catch borrowers before they are further harmed by a servicer’s unlawful conduct. Here, too, Ocwen failed borrowers during the Relevant Time Period. From April 2015 through April 2016, Ocwen received more than 580,000 complaints from more than 300,000 different borrowers. 137.

During the Relevant Time Period, Ocwen routinely failed to reasonably investigate, and, when appropriate, make corrections in response to borrower complaints. These failures caused serious harm to consumers.

Ocwen’s obligations under RESPA.

138.

Under RESPA and Regulation X, servicers are required to have policies and procedures that are reasonably designed to ensure that they investigate, respond to, and, as appropriate, make corrections in response to complaints by borrowers.

Ocwen failed to comply with its obligations under RESPA with respect to consumer complaint handling.

139.

Ocwen failed to implement policies and procedures during the Relevant Time Period that were reasonably designed to meet the consumer complaint handling objectives to respond, investigate, and, where appropriate, correct errors in three ways. 140.

First, Ocwen’s policies and procedures were not reasonably designed to identify and respond to consumer complaints. Per Ocwen’s policy, Ocwen call center Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 43 of 84

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personnel were supposed to escalate repeat complaints regarding the same issue to a supervisor or a designated call center employee, known as the borrower’s “Escalation Relationship Manager.” But, due to insufficient policies and procedures and an overreliance on rigid scripting, Ocwen call center personnel failed to adequately resolve the complaint or escalate the call for investigation and correction of the error. As a result, borrowers were forced to call Ocwen multiple times about the same complaint before the call center personnel escalated the matter for investigation and error correction.

141.

In April 2015, Ocwen implemented new policies and procedures to address the difficulty its call center personnel had in identifying and escalating borrower complaints. These policies and procedures, however, were not reasonably designed to handle consumer complaints. For example, instead of requiring Ocwen to identify a complaint the first time a borrower called in, the new policies and procedures placed the burden on the borrower to complain multiple times–at least five times in nine days– before Ocwen would automatically escalate the borrower’s complaint for resolution to an Escalation Relationship Manager.

142.

As a result, many borrowers were forced to call Ocwen multiple times before Ocwen investigated and corrected their errors. For example, of the more than 450,000 complaints that Ocwen processed from April 2015 through April 2016, approximately 68 percent involved borrowers who contacted Ocwen multiple times within a 15–day period; approximately 40 percent involved borrowers who contacted Ocwen three or more times within a 15-day period; and approximately 17 percent involved borrowers who contacted Ocwen five or more times within a 15-day period. Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 44 of 84

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143.

Second, Ocwen’s policies and procedures were not reasonably designed to ensure that its personnel conducted reasonable investigations of the alleged error in complaints. Ocwen’s policies and procedures, for instance, directed Ocwen personnel to rely on the information in REALServicing to investigate complaints. Thus, Ocwen’s ability to appropriately investigate complaints was largely dependent on the accuracy of the information contained within REALServicing and Ocwen relied upon inaccurate data in REALServicing in investigating consumer complaints. 144.

Further, Ocwen’s policies and procedures did not require Ocwen personnel who investigated borrowers’ complaints to cross-reference the errors raised in those complaints to Ocwen’s known and documented systemic errors, such as the payment processing and application, escrow, and insurance errors. Thus, such personnel did not consider that information in their investigations. In responding to certain borrower complaints, Ocwen simply parroted back the information in REALServicing, including details set forth in payment and escrow histories, without addressing the errors presented by borrowers’ complaints.

145.

Third, Ocwen’s policies and procedures were not reasonably designed to ensure its personnel corrected the errors they identified. Ocwen’s policies and procedures provided personnel little or no guidance on how to correct identified errors. For example, Ocwen’s policies and procedures did not detail what factors personnel should consider when recommending remediation, including what types of harms and downstream impacts to borrowers they should consider. At best, Ocwen’s policies and procedures identified certain forms of remediation such as fee waivers and credit reporting corrections, but did not inform personnel when these or other forms of remediation were appropriate. Without any such guidance, Ocwen personnel were left Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 45 of 84

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to their own discretion to determine whether an error had occurred, and, if so, how to correct the error.

Ocwen’s consumer complaint handling failures caused significant borrower harm.

146.

Ocwen’s failure to properly investigate consumer complaints and correct errors caused significant consumer harm.

147.

Ocwen’s consumer complaint failures are illustrated by the experience of several borrowers, including those described in Paragraphs 90–92, 115–119, 134–135, 148, and 183–184, who complained to Ocwen multiple times in order to try to get Ocwen to correct errors.

148.

One borrower repeatedly contacted Ocwen throughout 2014 to have Ocwen correct an error with her escrow account. When the borrower’s loan was transferred to Ocwen in August 2013, Ocwen set up an escrow account and incorrectly began making disbursements for property taxes and property insurance, even though the borrower had a tax deferment as part of a program for low income-seniors and paid her own property insurance. In July 2014, Ocwen sent the borrower a notice of default, which included an escrow balance of $3,841.92, late fees, and other fees and charges. After the borrower was unable to get Ocwen to resolve her dispute, she submitted, through AARP’s Legal Counsel for the Elderly, a Qualified Written Request and notice of error regarding the escrow mistakes and the related errors. Ocwen’s response only contained generic account information and did not correct the errors. It was only after the borrower’s counsel sent Ocwen another complaint to the Bureau in October 2014 that Ocwen responded, in a letter dated December 17, 2014, in which it stated it would remove the borrower’s escrow balance, waive late fees, and reduce the borrower’s Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 46 of 84

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payment amount to $302.43, which was the original and correct amount of the borrower’s payment.

Ocwen engaged in unlawful foreclosure practices.

149.

Ocwen long touted its ability to service and modify distressed loans, claiming, “helping homeowners is what we do.” In fact, during the Relevant Time Period, Ocwen failed to accurately maintain foreclosure-related information necessary to ensure that it provided borrowers with required foreclosure protections. As a result of these and other failures, Ocwen wrongfully initiated foreclosure proceedings and wrongfully conducted foreclosure sales during the Relevant Time Period.

Ocwen’s obligations under RESPA and the CFPA.

150.

RESPA and Regulation X provide borrowers with a variety of protections when they apply for a loan modification or other loss mitigation options, such as short sales, in connection with mortgages secured by their principal residences. Several of these protections are triggered once the borrower submits an oral or written application for a loss mitigation option.

151.

First, under Regulation X, servicers are required to have policies and procedures that are reasonably designed to ensure that they receive accurate and current information reflecting actions performed by their foreclosure attorneys. This is to ensure, among other things, that servicers can comply with applicable protections for borrowers.

152.

Second, under Regulation X, if a servicer receives a loss mitigation application 45 days or more before a foreclosure sale or before a sale is scheduled, it must provide the borrower an acknowledgement letter within five days that states whether the application is “complete,” and, if it is not, what additional documents and Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 47 of 84

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information the borrower must submit to complete the application (“Acknowledgment Letter”).

153.

155.

Regulation X also generally prohibits servicers from, among other things, commencing a first notice or filing of a foreclosure (“First Filing”), obtaining a foreclosure judgment, or conducting a foreclosure sale if, among other things: the servicer has received a Complete Application but has not yet provided the borrower with an Evaluation Notice.

156.

From January 10, 2014 through February 26, 2017, the above Regulation X protections did not apply if Ocwen had already complied with the requirements of 12 C.F.R. § 1024.41 for a Complete Application. In other words, if Ocwen received a Complete Application and complied with all requirements set forth in 12 C.F.R. § 1024.41, then a subsequent loss mitigation application would not be subject to Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 48 of 84

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Regulation X’s requirements. Thus, the term “First Complete Application” refers to Complete Applications that Ocwen received on or after January 10, 2014, more than 37 days before a foreclosure sale was scheduled or before any sale was scheduled, and for which Ocwen had not previously complied with the requirements of 12 C.F.R. § 1024.41 for a Complete Application.

157.

In addition, a servicer is prohibited from engaging in unfair, deceptive, and abusive acts and practices, including in the context of foreclosure activity, under the CFPA.

Ocwen failed to obtain accurate and current foreclosure information from its foreclosure attorneys.

158.

Ocwen used foreclosure attorneys to provide it with various foreclosure services, including commencing and completing foreclosures upon borrowers’ loans, and placing “foreclosure holds” on borrowers’ accounts to prevent the initiation of a foreclosure or obtain a stay or postponement of a foreclosure. However, during the Relevant Time Period, Ocwen’s policies and procedures relating to its foreclosure attorneys were deficient as they failed to ensure that Ocwen obtained accurate and current information reflecting its foreclosure attorneys’ actions. 159.

During the Relevant Time Period, Ocwen was aware that it had not received timely or accurate information from its foreclosure attorneys. For example, in 2014, Ocwen’s auditors found that one of Ocwen’s largest foreclosure law firms in Florida had failed to timely update Ocwen’s system with current foreclosure sale dates for 100 percent of the loan files tested. In response to this finding, the firm explained that it “continues to have periodic, on-going access issues within [Ocwen’s systems], which at times hinders our ability to comply with the several issues noted during the Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 49 of 84

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audit.” In another 2014 audit, Ocwen found that another of Ocwen’s Florida foreclosure law firms had failed to upload documents to Ocwen’s system for 100 percent of the loan files tested.

160.

The deficiency of Ocwen’s policies and procedures was highlighted again in 2015 when Ocwen’s auditors found that its foreclosure law firms had failed to provide Ocwen with timely and accurate information. For example: • In a 2015 audit of one of Ocwen’s foreclosure law firms in Florida referenced in Paragraph 159, Ocwen found that the firm was still not accurately updating Ocwen’s system with the correct foreclosure milestone dates. Ocwen described the impact as follows: “When incorrect data is inputted into the system, Ocwen staff is unaware of the current status of the foreclosure proceedings” and presented “data integrity issues.” In response to the 2015 audit, the firm pointed out that transferred loans may contain incorrect dates, but stated that it could not update those loan files because there was a “hold” placed on transferred loans. • In another 2015 audit, Ocwen found that one of its Oregon foreclosure law firms had failed to timely upload documentation to Ocwen’s system for 80 percent of the loan files tested. The audit report listed the cause as “Some of the Firm personnel are not familiar with [Ocwen’s system] document upload.” • In another 2015 audit of one of its foreclosure law firms in New Jersey, Ocwen found that the firm had failed to upload all documents to Ocwen’s systems for 60 percent of the loan files tested “result[ing] in missing documentation [in Ocwen’s system] for SCRA [Servicemembers Civil Relief Act] and PACER checks.” The audit identified the reason for the failure as: “The Firm was unaware of the requirement for filed and or recorded documentation to be uploaded [to Ocwen’s Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 50 of 84

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system].” Ocwen’s auditors also described the impact of the failure: “Failure to upload documents to [Ocwen’s system] affects the [ability of the] servicer to view and ensure all documents completed by the attorney were accurate.” 161.

The 2015 audit findings for these law firms were not outliers. In March 2016, Ocwen conducted an internal audit of its foreclosure operations and found, for foreclosures initiated between July and December 2015, that: • “Foreclosure documents are not consistently uploaded on [Ocwen’s system] by attorney firms. In 15 (13%) of 120 foreclosure initiation events reviewed, documents were not uploaded to [Ocwen’s system] by external counsel.” • “Delays occur in uploading foreclosure related documents on [Ocwen’s system]. In 12 (30%) of 40 foreclosure initiation events reviewed, documents were uploaded to [Ocwen’s system] by external counsel between 3 and 11 days after event completion.”

162.

Key Ocwen personnel were aware that Ocwen’s foreclosure attorneys’ failure to provide accurate and current information had negatively impacted Ocwen’s ability to service loans. In December 2015, Ocwen’s Head of Loss Mitigation testified that he became aware earlier in 2015 that Ocwen’s systems had missing or inaccurate foreclosure sale dates. He explained that Ocwen Loss Mitigation employees relied on the foreclosure sale date to, among other things, determine how many days to grant Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 51 of 84

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borrowers to return missing documents in connection with their loss mitigation applications. He further testified that he reached out to Ocwen’s Head of Foreclosure to inform him that the Loss Mitigation department needed foreclosure sale dates in the system and asked him to work with Ocwen’s foreclosure attorneys to ensure that they input these dates into Ocwen’s system, but he was unaware of what actions, if any, Ocwen took to ensure that this actually occurred. 163.

In May 2016, Ocwen’s Head of Foreclosure also testified that he was aware that Ocwen’s foreclosure attorneys had not always provided Ocwen with timely and accurate foreclosure information. He further testified that: • Some of Ocwen’s attorney managers tested the accuracy of the data Ocwen’s foreclosure law firms entered into Ocwen’s systems, but acknowledged that not all of Ocwen’s attorney managers followed this practice and that the practice was not required by Ocwen’s policies and procedures.

• Ocwen’s system prevented foreclosure attorneys from making any changes to the foreclosure sale date when there was a foreclosure hold on an account, and that Ocwen did not have a policy that required its foreclosure attorneys to contact Ocwen with any updated foreclosure sale date information (since they could not make changes in the system) when a foreclosure hold was in place. 164.

As a result of Ocwen’s policies and procedures deficiencies, Ocwen initiated foreclosures, obtained foreclosure judgments, and conducted foreclosure sales on borrowers’ accounts on which Ocwen placed foreclosure holds. As of May 2016, Ocwen maintained a daily report, which it called the “Dual Tracking Report,” that tracked the date, identity of the borrower, and reasons why Ocwen initiated a Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 52 of 84

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foreclosure, obtained a foreclosure judgment, or conducted a foreclosure sale even though a borrower’s account had a foreclosure hold. 165.

Below are two charts from one of Ocwen’s Dual Tracking Reports. The first chart catalogues instances where Ocwen initiated a foreclosure proceeding even though Ocwen placed a foreclosure “hold” on the loan, a process known as “dual tracking.” The chart identifies the reason or root cause for each “[d]ual [t]rack violation,” such as “attorney proceeded while the file was on hold.” The chart shows that, by Ocwen’s own analysis, between November 2015 and April 2016, Ocwen attorneys initiated one hundred and twenty foreclosure proceedings when the subject loan was subject to a foreclosure hold.

166.

The second chart below indicates the reasons that borrowers’ accounts were subject to foreclosure holds. It shows that the vast majority of the foreclosure holds that Ocwen violated were in place because borrowers had submitted a completed loan Attorney proceeded while the file was on hold Hold not placed within timelines Milestone completed prior to FC initiation RC Pending Timing issue, loss mitigation trigger within 1 business day of milestone Rootcause for Dual Track violation Post Nov 2015 FC Sale First Legal Judgement Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 53 of 84

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modification package, and thus were potentially subject to Regulation X foreclosure protections.

Ocwen failed to comply with its Regulation X and CFPA obligations with respect to its foreclosure practices, policies, and procedures.

167.

Ocwen violated Regulation X and/or the CFPA during the Relevant Time Period in at least three ways, including when servicing federally related mortgage loans. 168.

First, in violation of Regulation X, Ocwen failed to maintain policies and procedures that were reasonably designed to ensure that Ocwen provided its personnel with accurate and current documents, and information reflecting actions performed by its foreclosure attorneys. Ocwen repeatedly failed to obtain current and accurate information from its foreclosure attorneys, such as foreclosure sale and publication dates, among other information and documentation. Ocwen knew that such failures were impacting its ability to place or timely place foreclosure holds on borrower accounts, resulting in harm or potential harm to borrowers. Hold Reason in Pre FC —Post Oct 2015 Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 54 of 84

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169.

Second, in violation of Regulation X, Ocwen received First Complete Applications from borrowers on or after January 10, 2014 and before any foreclosure sale was scheduled, and, even though Ocwen was still evaluating First Complete Applications and had yet to send borrowers Evaluation Notices, Ocwen commenced First Filings against these borrowers.

170.

Third, in violation of the CFPA, Ocwen inappropriately conducted numerous foreclosure sales on the homes of borrowers before the deadline it provided these borrowers to submit missing documents. These borrowers had submitted incomplete applications for loss mitigation assistance. Ocwen sent the borrowers letters requesting that they submit the missing documents or information and gave the borrowers a deadline, but then foreclosed before that deadline. 171.

Ocwen’s head of Loss Mitigation conceded that foreclosing on borrowers before the deadlines it communicated to borrowers to submit additional or missing information was deceptive and confused borrowers. These representations were material to borrowers and were likely to mislead borrowers acting reasonably under the circumstances. These borrowers reasonably interpreted Ocwen’s request for additional or missing information to evaluate the borrowers’ loss mitigation applications to mean that Ocwen would not foreclose on them before the expiration of the deadline Ocwen provided for submitting the additional or missing information. 172.

In an email with the subject “Sale Date before Missing Doc Expiration,” an official in Ocwen’s Loss Mitigation department wrote: Please confirm if our missing letter states that if they don’t send a complete package we will go ahead with sale irrespective of the missing doc due date. To me that does not sound right, where we inform the borrower to send Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 55 of 84

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in documents by a date but go ahead with sale prior to expiration of that date. (Emphasis added.) The Head of Ocwen’s Loss Mitigation Department agreed, responding: If there is no denial on the current instance you should not be going to sale, period. Even though we have disclosure language around 37 days before FC and 7th day at midnight you will get hit with UDAP every single time you do not follow the rules above. You need to think like the customer which is without a denial you will still think you have time. (Emphases added)

Ocwen’s foreclosure failures caused significant borrower harm. 173.

Aside from the obvious harm to any borrower whose home was wrongfully foreclosed upon, Ocwen’s illegal foreclosure practices also caused significant financial harm, emotional distress, negative credit reporting, and other harm to borrowers.

OCWEN FAILED TO PROVIDE COMPLETE AND ACCURATE LOAN INFORMATION TO NEW SERVICERS 174.

During the Relevant Time Period, Ocwen sold hundreds of thousands of its rights to service borrowers’ loans, also referred to as mortgage servicing rights (“MSRs”), to new mortgage servicers. Ocwen failed during the Relevant Time Period, however, to provide complete and accurate borrower loan information to the new servicers or to notify new servicers of errors that were likely to impact the accuracy and completeness of the transferred borrower records.

Ocwen’s obligations under RESPA.

175.

As of January 10, 2014, RESPA and Regulation X require a transferor servicer to maintain policies and procedures reasonably designed to ensure that it can timely transfer all information and documents in its possession or control relating to the transferred loan to the new servicer in a form and manner that ensures the accuracy of the transferred information and documents and that enables the new servicer to comply Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 56 of 84

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with applicable laws and the terms of the new servicer’s obligations to the owner or assignee of the mortgage loan (“investor guidelines”).

Ocwen failed to comply with RESPA with respect to MSR transfers.

176.

During the Relevant Time Period, Ocwen failed to comply with RESPA and Regulation X’s policy and procedure requirements relating to transfers in at least three ways when servicing federally related mortgage loans. 177.

178.

Second, Ocwen failed to transfer complete and accurate borrower loss mitigation and foreclosure information that new servicers needed to provide borrowers with protections to which they are entitled. For example, prior to November 2015, Ocwen failed to provide information for the loans being transferred in a form that new servicers could understand whether borrowers had:

• A foreclosure sale date close to the transfer date, which new servicers needed in order to avoid erroneously foreclosing on the borrower, who may have been entitled to protections under Regulation X or other applicable laws; and • Previously filed for bankruptcy and had obtained a discharge in that proceeding, which the new servicer needed to know in order to comply with applicable federal law and bankruptcy court orders.

Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 57 of 84

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179.

Third, Ocwen failed to disclose known inaccuracies and errors that may have impacted the accuracy or completeness of the transferred borrower loan records and the new servicer’s ability to comply with applicable law and investor guidelines. Ocwen did not disclose, for example, errors it tracked in its Risk Convergence Reports or audit findings that Ocwen knew or should have known impacted the accuracy or completeness of the loan information and the new servicer’s ability to comply with applicable law and investor guidelines.

180.

Ocwen’s Head of Servicing Transfers testified in June of 2016, for example, that he was not aware if Ocwen disclosed to new servicers that Ocwen had: • Incorrectly calculated certain borrowers’ reinstatement quotes, including those in demand letters and foreclosure affidavits;

• Failed to credit payments made by up to 10,000 borrowers to satisfy their escrow shortages;

Ocwen’s failure to transfer complete and accurate borrower records caused significant borrower harm.

181.

Ocwen’s failure to transfer complete and accurate borrower records and disclose known errors to new servicers impacted borrowers after their loans were transferred to a new servicer.

Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 58 of 84

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182.

According to Ocwen’s records, from April 2015 to April 2016, Ocwen received more than 6,800 complaints from borrowers related to the transfer of their loans by Ocwen to a new servicer.

183.

For example, one borrower complained that his monthly payment amount increased by 47 percent when Ocwen failed to correct its escrow errors before transferring the borrower’s loan to a new servicer. In June 2014, Ocwen approved the borrower for a loan modification agreement that reduced his monthly payment to $1,639.07. Around November 2015, Ocwen transferred the borrower’s loan to a new servicer. In March 2016, the new servicer conducted an escrow analysis and determined that the borrower had an escrow shortage of $9,164.13, and that, as a result, the borrower’s payment would increase by $777.49, from $1,639.07 to $2,398.54. The borrower contacted Ocwen when the new servicer was unable to explain why the borrower had such a large escrow shortage. In a June 1, 2016 letter, Ocwen admitted that it had made an “error in its escrow application at the time of modification.” As a result, Ocwen only capitalized a portion of the borrower’s total escrow balance when it modified the borrower’s loan. To correct its error and unbeknownst to the borrower, Ocwen reduced the balance in the borrower’s escrow account two days before transferring the loan that left the borrower’s escrow account with a negative balance of $4,440.91. The borrower reported that he was eventually forced to retain an attorney, pay more than $5,000 in legal fees to ensure that Ocwen corrected its error, and obtain a new repayment plan with the new servicer to cover the escrow shortage. 184.

Another borrower complained that Ocwen did not transfer complete information about his payments and loan modification to the new servicer. As a result, the new servicer refused to recognize the borrower’s loan modification and stated that Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 59 of 84

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the borrower owed more than $10,000 in past due payments. When the borrower complained to Ocwen, it admitted in a letter that the borrower had made his required modification payments but that Ocwen failed to properly apply the funds. Ocwen also admitted that it had been attempting to correct its payment application error through a reversal request on the borrower’s account so it could reapply the borrowers’ payments, but had incorrectly processed the reversal request. And then before Ocwen could complete its second attempt at a reversal request to fix its error, Ocwen transferred the loan to the new servicer. Instead of alerting the new servicer to its mistakes, Ocwen simply transferred the borrower’s loan, leaving the $19,182.69 in payments that the borrower had made pursuant to his loan modification agreement in a suspense account.

OCWEN FAILED TO SUFFICIENTLY REMEDIATE HARM TO BORROWERS 185.

Ocwen was aware that its servicing failures caused significant harm to borrowers and that these failures could have devastating consequences. 186.

Despite its awareness of the harm it caused, Ocwen had no consistent policy, procedure, or practice for providing borrower remediation during the Relevant Time Period, even when it identified a systemic failure that could harm numerous borrowers.

187.

During the Relevant Time Period, Ocwen also lacked a systematic process to track and analyze errors it learned of through borrower complaints or notices of error to determine whether other borrowers may have been harmed by the same errors. As a result, Ocwen typically only corrected errors or provided remediation to those borrowers who complained (assuming Ocwen recognized the call as an actual complaint, Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 60 of 84

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investigated, and/or made a correction) or submitted a notice of error, but generally did not correct the same or similar errors for other borrowers who did not complain. 188.

During the Relevant Time Period, Ocwen also did not have policies or procedures requiring it to determine whether a risk item on its Risk Convergence Reports impacted or harmed borrowers, or whether borrower remediation was required, before it “close[d]” that risk item.

189.

Instead, Ocwen focused on operational remediation to correct the error and prevent any future impact on borrowers. As a result, in many instances, Ocwen failed to identify the borrower population that was impacted by a given risk item or to provide full remediation to that population. Instead, Ocwen generally provided borrower remediation only when a borrower complained to Ocwen or when a court or regulator required Ocwen to provide a borrower with relief. 190.

During the Relevant Time Period, Ocwen’s “appetite” for borrower remediation appears to have been further diminished when the remediation could have a significant financial impact on Ocwen. For example, in one email, Ocwen personnel discussed Ocwen’s auditors’ findings that Ocwen lacked “processes to review and ensure compliance with state laws for negative amortization” relating to adjustable rate mortgages, and whether to review impacted loans and provide borrowers with remediation. After analyzing the potential $21 million in costs for Ocwen to remediate, Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 61 of 84

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Ocwen declined to do so due to the “substantial, negative financial impact and Legal confirmation that [Privileged material redacted] is sufficient justification to forego the lookback.”

192.

Ultimately, Ocwen’s former Head of Compliance conceded in 2016 testimony that Ocwen should have remediated borrowers who were harmed by Ocwen’s errors and suffered potential harm. When asked if Ocwen did so, she conceded: “Could the company have done more? Absolutely.”

VIOLATIONS OF THE CONSUMER FINANCIAL PROTECTION ACT 193.

Sections 1031 and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531 and 5536(a)(1)(B), prohibit covered persons from engaging “in any unfair, deceptive, or abusive act or practice.”

194.

195.

An act or practice is deceptive if it misleads or is likely to mislead the consumer; the consumer’s interpretation is reasonable under the circumstances; and the misleading act or practice is material.

196.

Section 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(B), prohibits covered persons from committing any act or omission in violation of a Federal consumer financial law.

197.

Section 1002(14) of the CFPA, 12 U.S.C. § 5481(14), defines the FDCPA, RESPA, and TILA as Federal consumer financial laws. Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 62 of 84

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COUNT I Ocwen’s Use of Inaccurate and Incomplete Information to Service Loans Was Unfair

198.

The Bureau incorporates by reference the allegations of Paragraphs 10– 148, and 183–192.

199.

In numerous instances during the Relevant Time Period, Ocwen serviced loans and collected debts from borrowers, as alleged in Paragraphs 24–26. 200. In numerous instances during the Relevant Time Period, Ocwen used inaccurate and incomplete information to service borrowers’ loans and collect upon borrowers’ debts because:

a. It input inaccurate and incomplete information about borrowers into its REALServicing system of record, as set forth in Paragraphs 34–47, 68–70, 81, 125, 128–131, and 134–135;

This inaccurate and incomplete information related to borrowers’: a. Loan terms, including interest rate(s), balloon payments, and maturity dates, as set forth in Paragraphs 34–47, 62, 69, 70, and 81; b. Amounts received from and owed by borrowers, including monthly payments, payoff amounts, and reinstatement amounts, as set forth in Paragraphs 69–70, 72, 78–83, 85–94, 98–103, 105–110, 114–119, 124– 125, 128–131, 133–135, 148, and 183–184;

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c. Escrow amounts, including borrowers’ monthly escrow amounts and escrow shortages, as set forth in Paragraphs 69–70, 82, 93–94, 98– 103, 105–110, 114–119, 131, 135, 148, and 183; d. Insurance coverage, disbursements, and amounts due, including premiums Ocwen charged to borrowers for hazard insurance, flood insurance, and purchase mortgage insurance, as set forth in Paragraphs 69–70, 94, 116–120, 124–125, 128–131, 133–135, and 148; and/or e. Loss mitigation information, including terms of loan modification agreements, as set forth in Paragraphs 62, 69–70, 108, 116–119, and 183–184.

202. Ocwen’s use of inaccurate or incomplete information to service loans and collect upon borrowers’ debts caused or was likely to cause substantial injury to consumers, such as the unlawful commencement of foreclosures, unlawful foreclosure sales, improper handling of loss mitigation applications, misapplication of borrowers’ payments, collection and billing of inaccurate and incorrect amounts, imposition of inappropriate fees and charges, inaccurate delinquency statuses, inaccurate negative credit reporting, and/or emotional distress, as set forth in Paragraphs 35, 68–70, 79, 85–92, 112–119, 133–135, 148, 183–184, and 201. 203. These injuries could not have been reasonably avoided by consumers, who do not choose their mortgage servicer, as set forth in Paragraphs 27, 70, 86–92, 114– 119, 133–135, 139–148, and 183–192.

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204. These injuries were not outweighed by countervailing benefits to consumers or competition, as set forth in Paragraphs 35, 68–71, 79, 85–92, 112–119, 133–135, 148, 183–192, and 201.

205. Ocwen’s acts and practices as described in Paragraphs 198–204 constitute unfair acts and practices in violation of Sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531(a) and (c) and 5536(a)(1)(B). COUNT II Ocwen’s Deceptive Acts and Practices Regarding Loan Terms and Status

206. The Bureau incorporates by reference the allegations of Paragraphs 10– 148, and 183–192.

207. In numerous instances during the Relevant Time Period, Ocwen serviced loans and collected upon debts from borrowers, as alleged in Paragraphs 24–26. 208. In numerous instances during the Relevant Time Period, Ocwen represented to borrowers, directly or indirectly, expressly or by implication, that their loans had:

a. Certain monthly amounts due, as alleged in Paragraphs 70, 72, 80–94, 98–103, 105–111, 114–119, 124–125, 128–132, 134–135, 148, and 183– 184;

b. Certain reinstatement amounts due, as alleged in Paragraphs 70, 83– 84, and 100;

c. Certain payoff amounts due, as alleged in Paragraphs 70, 83–84, 89, 92, and 100;

d. Certain escrow amounts due, as alleged in Paragraphs 69, 70, 93–94, 98–103, 105–111, 114–119, 132, 135, 148, and 183; Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 65 of 84

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e. Certain insurance amounts due, as alleged in Paragraphs 70, 94, 116– 120, 124–125, 128–132, 134–135, and 148.

209. In truth and fact, in numerous instances the material representations set forth in the above-referenced Paragraph 208 were false, misleading, or were not substantiated at the time the representations were made, including but not limited to representations made where Ocwen had knowledge or reason to believe that: The prior servicer data and records upon which it relied were inaccurate or missing but it failed to obtain or review information substantiating the accuracy of the data prior to collecting or foreclosing on borrowers’ loans, as alleged in Paragraphs 34–47, 68–70, 81, and 84;

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210.

Ocwen’s acts and practices as described in Paragraphs 206–209 constitute deceptive acts and practices in violation of Sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531(a) and 5536(a)(1)(B).

COUNT III Ocwen’s Deceptive Foreclosure Communications

211.

The Bureau incorporates by reference the allegations of Paragraphs 10–22, 149, 162, and 170–173.

212.

In numerous instances during the Relevant Time Period, in connection with servicing mortgage loans, Ocwen misrepresented, directly or indirectly, expressly or by implication, that borrowers had a certain amount of time, typically 30 days, to submit additional information that Ocwen needed to complete and evaluate their loss mitigation applications and that borrowers would not be foreclosed on while that request was pending.

213.

214.

The representations set forth in Paragraphs 212–213 were false or misleading and were material to borrowers’ decisions relating to their mortgages. 215.

Ocwen’s acts and practices as described in Paragraphs 211–214 constitute deceptive acts and practices in violation of Sections 1031 and 1036 of the CFPA. 12 U.S.C. §§ 5531(a) and 5536(a)(1)(B).

VIOLATIONS OF THE TRUTH-IN-LENDING ACT 216.

TILA and its implementing regulation, Regulation Z, at 12 C.F.R. § 1026.36(c)(1), prohibit certain acts and practices and contain certain Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 67 of 84

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requirements relating to payment processing in connection “with a consumer credit transaction secured by a consumer’s principal dwelling.” 217.

“Consumer credit” as defined by Regulation Z, 12 C.F.R. § 1026.2(a)(12) means, “credit offered or extended to a consumer primarily for personal, family, or household purposes.”

218.

“Credit” as defined by Regulation Z, 12 C.F.R. § 1026.2(a)(14) means “the right to defer payment of debt or to incur debt and defer its payment.” 219.

A “dwelling” as defined by Regulation Z, 12 C.F.R. § 1026.2(a)(19), means a “residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.” 220. From January 10, 2014 through February 26, 2017, Ocwen was a servicer of consumer credit secured by consumers’ principal dwellings where it serviced mortgages that were extended to consumers primarily for personal, family, or household purposes and secured consumers’ principal residential structures that contained one to four units.

COUNT IV Ocwen’s Periodic Statement Failures

221.

The Bureau incorporates by reference the allegations of Paragraphs 10–22 68, 70, 72, 80–94, 98–103, 114–119, 124–125, 128–132, 134–135, 148, 183–184, and 220.

222. Since January 10, 2014, Regulation Z generally has required that Ocwen must, subject to certain exceptions, provide borrowers with a monthly periodic statement or billing statement detailing information such as the amount due, how Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 68 of 84

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Ocwen will break down and apply monthly payments, all payments received since the last statement, the total of all payments received since the beginning of the current calendar year, all transaction activity since the last statement, and the amount of payments in a suspense or unapplied funds account. 12 C.F.R. § 1026.41(d). 223. In numerous instances from January 10, 2014 through February 26, 2017, Ocwen failed to send borrowers periodic statements accurately detailing required information such as the monthly payment amount due, as described in Paragraphs 68, 70, 72, 80–94, 98–103, 106–108, 111, 114–119, 124–125, 128–132, 134–135, 148, and 183–184.

224. The acts and practices described in Paragraphs 221–223 constitute violations of 12 C.F.R. § 1026.41(d), and 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(A).

VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 225.

Section 808 of the FDCPA, 15 U.S.C. § 1692f, prohibits debt collectors, such as Ocwen, from engaging in unfair or unconscionable means to collect or attempt to collect any debt.

226. Section 807 of the FDCPA, 15 U.S.C. § 1692e, prohibits debt collectors, such as Ocwen, from using any false, deceptive, or misleading representation or means in connection with the collection of any debt. Section 807(2) prohibits the false representation of the character, amount, or legal status of the debt. Section 807(10) prohibits debt collectors from using any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer. Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 69 of 84

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227.

The term “consumer” as defined in Section 803(3) of the FDCPA, 15 U.S.C. § 1692a(3), means “any natural person obligated or allegedly obligated to pay any debt.”

228. The term “debt” as defined in Section 803(5) of the FDCPA, 15 U.S.C. § 1692a(5), means “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.” 229. The term “debt collector” as defined by Section 803(6) of the FDCPA, 15 U.S.C. § 1692a(6) means, in relevant part, any person who “uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts” or who “regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” It does not include a person collecting debts owed to another to the extent the debts were not in default at the time that the person obtained them. 15 U.S.C. § 1692a(6)(F)(iii). 230. During the Relevant Time Period, Ocwen acquired servicing rights to some mortgages that were in default at the time of transfer and proceeded to collect on those mortgages. With respect to those debts, Ocwen was a debt collector as defined by the FDCPA because it regularly collected or attempted to collect, directly or indirectly, debts owed or due or asserted to be owed or due another and its collection activities are covered by the FDCPA.

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COUNT V Ocwen’s Use of Inaccurate and Incomplete Information to Service Loans Was Unfair

231.

The Bureau incorporates by reference the allegations of Paragraphs 10– 148, 183–192, and 230.

232. During the Relevant Time Period, Ocwen routinely acquired the servicing rights to mortgages that were in default at the time of transfer and, in connection with those mortgages, it regularly collected or attempted to collect, directly or indirectly, debts owed or due or asserted to be owed or due another, as alleged in Paragraphs 24– 26.

233. With respect to the loans described in Paragraph 232, in numerous instances during the Relevant Time Period, Ocwen used inaccurate and incomplete information, including incorrect data and incomplete or missing documentation, to collect upon borrowers’ debts because:

a. It input inaccurate and incomplete information about borrowers into its REALServicing system of record, as set forth in Paragraphs 34–47, 68–70, 81, 125, 128–131, and 134–135;

b. REALServicing generated inaccurate information about borrowers’ loans due to system deficiencies and errors, as set forth in Paragraphs 34–35, 48–62, 68–70, 78–79, 82–83, 93, 100, 109, and 124; c. Ocwen’s manual processes themselves resulted in errors, as set forth in Paragraphs 34–35, 63–70, 73–74, 78–79, 82, 93, 107, and 110; 234. This inaccurate and incomplete information related to: a. Loan terms, including interest rate(s), balloon payments, and maturity dates, as set forth in Paragraphs 34–47, 62, 69, 70, and 81; Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 71 of 84

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b. Amounts received from and owed by borrowers, including monthly payments, payoff amounts, and reinstatement amounts, as set forth in Paragraphs 69–70, 72, 78–83, 85–94, 98–103, 105–110, 114–119, 124– 125, 128–131, 133–135, 148, and 183–184;

235.

Ocwen’s use of this inaccurate or incomplete information to collect upon debts caused or was likely to cause substantial injury to consumers, such as the unlawful commencement of foreclosures, unlawful foreclosure sales, improper handling of loss mitigation applications, misapplication of borrowers’ payments, collection and billing of inaccurate and incorrect amounts, imposition of inappropriate fees and charges, inaccurate delinquency statuses, inaccurate negative credit reporting, and/or emotional distress, as set forth in Paragraphs 35, 68–70, 79, 85–92, 112–119, 133–135, 148, 183– 184, and 234.

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236. These injuries could not be reasonably avoided by consumers, who do not choose their mortgage servicer, as set forth in Paragraphs 27, 70, 86–92, 114–119, 133– 135, 139–148, and 183–192.

237.

These injuries were not outweighed by countervailing benefits to consumers or competition, as set forth in Paragraphs 35, 68–71, 79, 85–92, 112–119, 133–135, 148, 183–192, and 234.

238. Ocwen’s acts and practices as described in Paragraphs 231–237 constitute unfair or unconscionable means to collect or attempt to collect a debt in violation of Section 808 of the FDCPA. 15 U.S.C. § 1692f, and § 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(A).

COUNT VI Ocwen’s Deceptive Debt Collection Practices

239. The Bureau incorporates by reference the allegations of Paragraphs 10– 148, 183–192, and 230.

240. During the Relevant Time Period, Ocwen routinely acquired the servicing rights to some mortgages that were in default at the time of transfer and, in connection with those mortgages, it regularly collected or attempted to collect, directly or indirectly, debts owed or due or asserted to be owed or due another, as alleged in Paragraphs 24– 26.

241.

During the Relevant Time Period, Ocwen represented to borrowers, directly or indirectly, expressly or by implication, that their debts referenced in Paragraph 240 had:

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a. Certain monthly amounts due, as alleged in Paragraphs 70, 72, 80–94, 98–103, 105–111, 114–119, 124–125, 128–132, 134–135, 148, and 183– 184;

b. Certain reinstatement amounts due, as alleged in Paragraphs 70, 83– 84, and 100;

c. Certain payoff amounts due, as alleged in Paragraphs 70, 83–84, 89, 92, and 100;

d. Certain escrow amounts due, as alleged in Paragraphs 69, 70, 93–94, 98–103, 105–111, 114–119, 132, 135, 148, and 183; e. Certain insurance amounts due, as alleged in Paragraphs 70, 94, 116– 120, 124–125, 128–132, 134–135, and 148.

242. In truth and fact, in numerous instances the material representations set forth in the above-referenced Paragraph 241 were false, misleading, or were not substantiated at the time the representations were made, including but not limited to representations made where Ocwen had knowledge or reason to believe that: The prior servicer data and records upon which it relied were inaccurate or missing but it failed to obtain or review information substantiating the accuracy of the data prior to collecting on borrowers’ debt or foreclosing on borrowers’ loans, as alleged in Paragraphs 34– 47, 68–70, 81, and 84;

Its system of record contained inaccurate information due to system errors and limitations, manual entry errors, and incorrect information provided by service providers but it failed to obtain or review information substantiating the accuracy of the data prior to collecting Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 74 of 84

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on borrowers’ debt or foreclosing on borrowers’ loans, as alleged in Paragraphs 34–35, 48–70, 72–74, 78–79, 82–84, 93–94, 99–101, 103–105; 107–111, 124–125, 128–132, 134–135, and 148; and/or Consumers disputed, challenged, or questioned the validity or accuracy of Ocwen’s information but it failed to obtain or review information substantiating the accuracy of the information, or failed to consider the consumers’ disputes, prior to collecting on borrowers’ debt or foreclosing on borrowers’ loans, as alleged in Paragraphs 70, 88–92, 114–119, 133–137, 139–148, and 183–184.

243. The acts and practices described in Paragraphs 239–242 constitute violations of Sections 807(2) and (10) of the FDCPA, 15 U.S.C. §§ 1692e(2)(A) and 1692e(10), and § 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(A). VIOLATIONS OF THE REAL ESTATE SETTLEMENT PROCEDURES ACT 244. RESPA and its implementing regulation, Regulation X, apply to “federally related mortgage loans,” including the servicing of those loans, the administration of their escrow accounts, error resolution procedures, force-placed insurance, general servicing policies and procedures, and loss mitigation procedures. 245.

RESPA and Regulation X apply to the conduct of “servicers.” Regulation X defines a servicer as a person “responsible for servicing of a federally related mortgage loan.” Under Regulation X, “servicing” means “receiving any scheduled periodic payments from a borrower pursuant to the terms of any federally related mortgage loan . . . and making the payments to the owner of the loan or other third parties of principal and interest and such other payments with respect to the amounts received from the Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 75 of 84

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borrower as may be required pursuant to the terms of the mortgage servicing loan documents or servicing contract.”

246. From January 10, 2014 through February 26, 2017, Ocwen was a servicer under RESPA and Regulation X because it received payments from borrowers pursuant to the terms of federally related mortgage loans and was responsible for, among other things, distributing the payments of principal and interest to investors who own the borrowers’ loans and, when borrowers’ loans included escrow accounts, to the borrowers’ taxing authorities or insurance companies. COUNT VII Ocwen’s Escrow Violations

247.

The Bureau incorporates by reference the allegations of Paragraphs 10–22, 93–94, 97–107, 112–114, 120, 123–127, and 246.

248. As of January 10, 2014, Section 6(g) of RESPA, 12 U.S.C. § 2605(g) states that “[i]f the terms of any federally related mortgage loan require the borrower to make payments to the servicer of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the property, the servicer shall make payments from the escrow account for such taxes, insurance premiums, and other charges in a timely manner as such payments become due.”

249. The requirements of Section 6(g) are further explained in Regulation X, 12 C.F.R. § 1024.17(k) and 34(a), which states “[i]f the terms of any federally related mortgage loan require the consumer to make payments to an escrow account, the servicer must pay the disbursements in a timely manner, that is, on or before the Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 76 of 84

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deadline to avoid a penalty, as long as the borrower’s payment is not more than 30 days overdue.”

250. In numerous instances from January 10, 2014 through February 26, 2017, Ocwen failed to pay hazard insurance premiums in a timely manner on behalf of escrowed borrowers whose payments were no more than 30 days overdue, as alleged in Paragraphs 120 and 123–127.

251.

Section 1024.17 of Regulation X requires servicers to: Conduct annual escrow analyses for borrowers, 12 C.F.R. § 1024.17(c)(3) and (f)(1);

Provide borrowers with annual escrow statements within 30 days of the completion of the escrow account computation year, 12 C.F.R. § 1024.17(i); and Only collect escrow shortages when a shortage, in fact, exists, 12 C.F.R. § 1024.17(f)(3).

252.

In numerous instances from January 10, 2014 through February 26, 2017, Ocwen:

Failed to timely conduct annual escrow analyses for borrowers and, in some instances, failed to conduct the escrow analyses altogether, as set forth in Paragraphs 93–94, 97–102, and 112–114; Failed to provide borrowers who were not delinquent, in foreclosure, or in bankruptcy with escrow statements within 30 days of the completion of the escrow account computation year and, in some instances, failed to provide the escrow statements at all, as alleged in Paragraphs 93– 94, 97, and 103–105; and Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 77 of 84

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Collected escrow shortages that did not exist because it failed to timely process borrowers’ escrow shortage payments, as alleged in Paragraphs 93, 97, and 106–107.

253.

The acts and practices described in Paragraphs 247, 250, and 252 constitute violations of Section 6(g) of RESPA and Regulation X, 12 C.F.R. §§ 1024.17(k), 1024.17(c)(3), 1024.17(i), 1024.17(f)(1) and (3), and 1024.34(a), and § 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(A). COUNT VIII Ocwen’s Servicing Policies and Procedures Violations

254.

The Bureau incorporates by reference the allegations of Paragraphs 10–22, 136–137, 139–149, 158–168, 173–174, 176–184, and 246. 255.

As of January 10, 2014, pursuant to Regulation X, which was promulgated under Section 19(a) of RESPA, 12 U.S.C. § 2617(a), Ocwen must maintain policies and procedures reasonably designed to ensure that it achieves the objectives set forth in 12 C.F.R. § 1024.38(b). 12 C.F.R. § 1024.38(a). These objectives include: a. Investigating, responding to, and, as appropriate, making “corrections in response to complaints asserted by a borrower,” 12 C.F.R. § 1024.38(b)(1)(ii);

b. Providing Ocwen’s personnel with access to “accurate and current documents and information reflecting actions performed by service providers,” 12 C.F.R. § 1024.38(b)(3)(i); and c. Timely transferring all information and documents in Ocwen’s possession or control relating to the transferred mortgage loans to a transferee or new servicer “in a form and manner that ensures the Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 78 of 84

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accuracy of the information and documents transferred” and enables the new servicer to comply with the new servicer’s obligations to the owner or assignee of the mortgage loan and applicable law, 12 C.F.R. § 1024.38(b)(4)(i).

256.

From January 10, 2014 through February 26, 2017, Ocwen failed to maintain policies and procedures reasonably designed to ensure that it investigated, responded to, and, as appropriate, made corrections in response to complaints asserted by a borrower, as alleged in Paragraphs 136–137 and 139–148. 257.

From January 10, 2014 through February 26, 2017, Ocwen failed to maintain policies and procedures reasonably designed to ensure its personnel had access to accurate and current documents and information reflecting actions performed by service providers, namely Ocwen’s foreclosure attorneys, as alleged in Paragraphs 149, 158–168, and 173, because Ocwen repeatedly failed to obtain from its foreclosure attorneys accurate and current information, such as scheduled foreclosure sale and publication dates. Ocwen also knew that such failures impacted its ability to place or timely place foreclosure holds on borrower accounts, resulting in harm or potential harm to borrowers.

258. From January 10, 2014 through February 26, 2017, Ocwen failed to maintain policies and procedures reasonably designed to ensure that it could transfer all information and documents in a form and manner that ensured new servicers had complete and accurate information and were able to comply with applicable laws by, as alleged in Paragraphs 174, and 176–184, failing to: a. Maintain any such policies and procedures relating to mortgage servicing rights it transferred;

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b. Transfer complete and accurate borrower loss mitigation and foreclosure information that new servicers needed to provide borrowers with protections to which they are entitled; and c. Disclose known inaccuracies and errors that may have impacted the accuracy or completeness of the transferred borrower loan records and the new servicer’s ability to comply with applicable law and investor guidelines.

259.

The acts and practices described in Paragraphs 254, and 256–258 constitute violations of Sections 19(a) of RESPA, 12 U.S.C. § 2617(a) and Regulation X, §§ 12 C.F.R. 1024.38(a), 12 C.F.R. 1024.38(b)(1)(ii), and 1024.38(b)(4)(i), and § 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(A). COUNT IX Ocwen’s Foreclosure Violations

260. The Bureau incorporates by reference the allegations of Paragraphs 10–22, 149, 167, 169, 173, and 246.

261.

As of January 10, 2014, Regulation X, which the Bureau promulgated pursuant to Sections 6(j)(3), 6(k)(1)(C), 6(k)(1)(E) and 19(a) of RESPA, 12 U.S.C. §§ 2605(j)(3), (k)(1)(C), and (k)(1)(E), and 12 U.S.C. § 2617(a), provides borrowers with a variety of protections during their loss mitigation application and foreclosure processes.

262. Under Regulation X, if a servicer receives a loss mitigation application, which is an oral or written request for a loss mitigation option that is accompanied by any information required by a servicer for evaluation for a loss mitigation option (“Loss Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 80 of 84

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Mitigation Application”), from borrowers whose mortgage is secured by their principal residence, certain protections are triggered.

263. Under Regulation X, if a servicer receives a Loss Mitigation Application 45 days or more before a foreclosure sale or before a sale is scheduled, it must send the borrower an acknowledgement letter within five days that indicates if the application is complete and, if it is not, states the additional documents and information that the borrower must submit to complete the application (“Acknowledgment Letter”). A Loss Mitigation Application is complete under Regulation X when the servicer has received all of the information it requires from a borrower to evaluate the borrower’s application for all available loss mitigation options (“Complete Application”). 264. Regulation X also requires that, if a servicer receives a Complete Application more than 37 days before a foreclosure sale is scheduled or before any sale is scheduled, it must evaluate the borrower for all available loss mitigation options and provide the borrower with a written notice within 30 days indicating, among other things, whether it will offer the borrower any loss mitigation options (“Evaluation Notice”). After a borrower receives the Evaluation Notice, she may have further protections if she accepts a loss mitigation offer or appeals a denial of a loss mitigation offer set forth in the Evaluation Notice.

265.

266. From January 10, 2014 through February 26, 2017, the above Regulation X protections described in Paragraphs 262–265 did not apply if a servicer already Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 81 of 84

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complied with the requirements of 12 C.F.R. § 1024.41 for a Complete Application. In other words, if a servicer received a Complete Application and complied with all requirements set forth in 12 C.F.R. § 1024.41, then a subsequent loss mitigation application would not be subject to Regulation X’s requirements. Thus, the term “First Complete Application” refers to Complete Applications that Ocwen received on or after January 10, 2014 and for which Ocwen had not previously complied with the requirements of 12 C.F.R. § 1024.41 for a Complete Application. 267.

From January 10, 2014 through February 26, 2017, and before any foreclosure sale dates were scheduled, Ocwen received Loss Mitigation Applications from borrowers whose mortgages were secured by their principal residences. 268. From January 10, 2014 through February 26, 2017, and before any foreclosure sale dates were scheduled, Ocwen received First Complete Applications from borrowers whose mortgages were secured by their principal residences. 269. As set forth in Paragraphs 149, 167, 169, and 173, in numerous instances from January 10, 2014 through February 26, 2017, and before any foreclosure sale dates were scheduled, Ocwen received borrowers’ First Complete Applications. Ocwen commenced First Filings on these First Complete Applications even though Ocwen was still evaluating the Applications, namely, Ocwen had not yet sent the borrower an Evaluation Notice.

270. The acts and practices described in Paragraphs 260, and 267–269 constitute violations of Sections 6(j)(3), 6(k)(1)(C), 6(k)(1)(E) and 19(a) of RESPA, 12 U.S.C. §§ 2605(j)(3), (k)(1)(C), and (k)(1)(E), and 12 U.S.C. § 2617(a), and Regulation X, 12 C.F.R. §§ 1024.41(b)(2)(i)(B), 1024.41(c)(1)(i) and (ii), 1024.41(f)(2), and 1024.41(g), and § 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(A). Case 9:17-cv-80495-KAM Document 775 Entered on FLSD Docket 04/19/2021 Page 82 of 84

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Prayer for Relief Wherefore, the Bureau, pursuant to Sections 1054 and 1055 of the CFPA, 12 U.S.C. §§ 5564 and 5565, and the Court’s own equitable powers, requests that the Court:

1. Permanently enjoin Defendants from committing future violations of the CFPA, FDCPA, RESPA, and TILA, and enter such other injunctive relief as appropriate, including ordering that, if any Defendant is found to be in material noncompliance with any injunction entered by the Court, the Defendant must claw back any non-salary bonuses or other compensation it has paid, or stock option it has granted, to any officer or director of the Defendant in connection with the time period during which the Defendant was not in compliance; 2. Award such relief as the Court finds necessary to redress injury to consumers, including, but not limited to, rescission or reform of contracts; refund of moneys; restitution; and payment of damages or other monetary relief; 3. Award such relief as the Court finds necessary to disgorge the Defendants of unlawful gains;

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Dated: April 19, 2021

Respectfully submitted,

Attorneys for Plaintiff Consumer Financial Protection Bureau

CARA PETERSEN Acting Enforcement Director

JOHN WELLS Deputy Enforcement Director For Litigation

JAMES T. SUGARMAN Assistant Litigation Deputy

/s/ Jean M. Healey_______ Jean M. Healey Email: [email protected] Phone: 202-435-7514 Facsimile: (202) 435-7722 1700 G Street NW Washington, DC 20552

Atur Desai

1700 G Street NW Washington, DC 20552 Facsimile: (202) 435-7722

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Opinion (Aug. 2022)

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[PUBLISH] In the United States Court of Appeals For the Eleventh Circuit

____________________ No. 21-11314 ____________________

CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff-Appellant, versus OCWEN FINANCIAL CORPORATION, a Florida corporation, OCWEN LOAN SERVICING LLC, a Delaware limited liability company, OCWEN MORTGAGE SERVICING INC., a U.S. Virgin Islands corporation, PHH MORTGAGE CORPORATION,

Defendants-Appellees.

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Opinion of the Court 21-11314 ____________________ Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 9:17-cv-80495-KAM ____________________

Before NEWSOM, MARCUS, Circuit Judges, and STORY, District Judge.* NEWSOM, Circuit Judge:

In 2013, the Consumer Financial Protection Bureau sued Ocwen Financial Corporation and several of its affiliates on the ground that a number of their mortgage-servicing practices violated federal law. The CFPB’s suit was resolved by a settlement agreement that was memorialized in a formal consent judgment. In short, the consent judgment released Ocwen from liability for the conduct alleged in the CFPB’s complaint and established a three-year period during which Ocwen had to comply with detailed servicing standards enforced through a specific monitoring and compliance regime. Shortly after the consent judgment’s term expired in 2017, the CFPB sued Ocwen a second time, alleging that it had violated various consumer-protection laws between January 2014 and February 2017. The district court granted summary

* Honorable Richard W. Story, United States District Judge for the Northern District of Georgia, sitting by designation. USCA11 Case: 21-11314 Date Filed: 04/06/2022 Page: 2 of 14

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21-11314 Opinion of the Court judgment to Ocwen on res judicata grounds, reasoning that the 2013 action barred the CFPB’s follow-on suit. On appeal, the CFPB contends that the 2013 action’s res judicata effect should be controlled by that case’s consent judgment—not its complaint—and that the underlying settlement agreement shows that the parties didn’t intend to preclude a challenge to any conduct occurring from 2014 onwards. We agree that the 2013 action’s preclusive effect should be determined by the terms of the parties’ settlement agreement, as memorialized in the consent judgment. Based on our review of the entire settlement agreement, however, we hold that the parties intended to preclude new challenges to conduct covered by the settlement agreement’s three-year servicing-standard, monitoring, and enforcement regime. Accordingly, we vacate the district court’s decision and remand for further proceedings.

I In December 2013, the CFPB, 49 states, and the District of Columbia filed suit in the United States District Court for the District of Columbia against Ocwen, challenging a number of its mortgage-servicing practices. That matter was resolved in February 2014 when the district court entered a consent judgment pursuant to a settlement agreement between the parties. For present purposes, three of the consent judgment’s provisions are important. First, the consent judgment remained operative for a three-year period, until February 26, 2017, and required USCA11 Case: 21-11314 Date Filed: 04/06/2022 Page: 3 of 14

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Opinion of the Court 21-11314 Ocwen to abide by specific servicing standards during that timeframe. Those provisions covered a wide range of mortgageservicing activity, prescribing standards for, among other things, verifying borrowers’ account information, documenting notes, notifying borrowers about loan-modification options, participating in bankruptcy proceedings, charging servicing fees, and obtaining force-placed insurance.

Second, the consent judgment created a monitoring and enforcement regime to police Ocwen’s compliance with the servicing standards. In particular, the consent judgment appointed an individual to oversee Ocwen’s implementation of the standards and to report Ocwen’s progress and any potential violations to a monitoring committee, which included the CFPB. The consent judgment specified that if Ocwen violated a servicing standard by exceeding the threshold error rate for the applicable compliance metric, it would have the right to cure the violation pursuant to a correctiveaction plan. If Ocwen cured, no party to the consent judgment could seek relief with respect to that violation. But if Ocwen either failed to cure or committed the same violation again within a specified time, a party could bring an enforcement action to obtain any of a limited number of remedies.

Third, the consent judgment contained a release, which, in relevant part, provided as follows:

[T]he CFPB fully and finally releases [Ocwen] from all potential liability that has been or might have been asserted by the CFPB relating to mortgage servicing USCA11 Case: 21-11314 Date Filed: 04/06/2022 Page: 4 of 14

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21-11314 Opinion of the Court practices described in the complaint . . . that have taken place as of 11:59 p.m., Eastern Standard Time, on December 18, 2013. . . .

[T]he CFPB specifically reserves and does not release any liability for conduct other than conduct related to the Mortgage Servicing Practices asserted or that might have been asserted in the complaint. . . . Nothing in this Release shall limit the CFPB’s authority with respect to [Ocwen], except to the extent the CFPB has herein expressly released claims. During the consent judgment’s three-year term, Ocwen abided by the servicing standards and the monitoring regime. It failed to cure a potential violation only once, and, in that instance, the monitoring committee filed an unopposed motion to obtain the consent judgment’s prescribed relief.

Shortly after the consent judgment’s term ended on February 26, 2017, the CFPB sued Ocwen again—this time in the United States District Court for the Southern District of Florida. The CFPB alleged, in ten counts, that Ocwen had violated various federal consumer-protection laws since January 2014. The district court granted summary judgment to Ocwen on nine counts, reasoning that the 2013 D.C. action’s res judicata effect barred them to the extent that they challenged conduct occurring before February 26, 2017. After that ruling, the CFPB voluntarily dismissed the tenth count of its complaint and confirmed that the other nine challenged only Ocwen’s conduct between January 2014 and February USCA11 Case: 21-11314 Date Filed: 04/06/2022 Page: 5 of 14

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Opinion of the Court 21-11314 26, 2017. The district court entered final judgment in Ocwen’s favor, and the CFPB appealed.1 II Because the CFPB has narrowed the frame of its complaint, this dispute comprises three distinct time periods. The parties agree that the CFPB has released all claims against Ocwen pertaining to conduct that occurred before January 2014. Likewise, they agree that the CFPB can pursue enforcement actions for all legal violations that occurred (or may yet occur) after February 26, 2017. But the parties dispute the CFPB’s authority with respect to Ocwen’s conduct that occurred between January 2014 and February 26, 2017, when the consent judgment that resolved the 2013 action was in effect. Our task is to determine whether the 2013 action—and in particular the resulting forward-looking 2014 consent judgment—has any res judicata effect barring claims in the current case.

A A claim is barred by res judicata, i.e., claim preclusion, when “(1) there is a final judgment on the merits; (2) the decision was rendered by a court of competent jurisdiction; (3) the parties, or those in privity with them, are identical in both suits; and (4) the same cause of action is involved in both cases.” Ragsdale v.

1 Because “[b]arring a claim on the basis of res judicata is a determination of law,” our review is de novo. Ragsdale v. Rubbermaid, Inc., 193 F.3d 1235, 1238 (11th Cir. 1999).

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21-11314 Opinion of the Court Rubbermaid, Inc., 193 F.3d 1235, 1238 (11th Cir. 1999). There is no dispute that the first three of these conditions are satisfied here: The consent judgment constituted a final judgment on the merits of the 2013 action, the D.C. district court had proper jurisdiction to enter it, and both Ocwen and the CFPB were parties to it. The debate centers on the fourth condition—whether the same causes of action are involved in both cases. In answering that question, we must also decide whether we should look to the complaint that initiated the 2013 D.C. action or the settlement agreement that resolved it.

The answer to the latter question is straightforward: In Norfolk Southern Corp. v. Chevron, U.S.A., Inc., we held that when two parties settle a lawsuit, that suit’s res judicata effect is “controlled by the Settlement Agreement into which the parties entered,” not by “the original complaint.” 371 F.3d 1285, 1288 (11th Cir. 2004). In that case, a prior action between the same parties had concluded with a settlement agreement and a dismissal with prejudice under Federal Rule of Civil Procedure 41. Id. at 1287. The settlement agreement specified that Norfolk Southern released Chevron from all future claims “arising out of any contamination by oil” of a leased property that was the subject of the first suit. Id. Norfolk Southern later sued Chevron for cleanup costs of an adjacent area harmed by non-oil contaminants. Id. at 1287–88. The district court granted Chevron summary judgment based on the res judicata effect of the earlier dismissal. Id. at 1288. Reversing, we held that although traditional principles of res judicata might USCA11 Case: 21-11314 Date Filed: 04/06/2022 Page: 7 of 14

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Opinion of the Court 21-11314 have precluded the later suit because the oil and non-oil contaminants came from the same source, the settlement agreement released claims only arising from “contamination by oil” of the leased property. Id. at 1290. Thus, the agreement implicitly permitted claims arising from non-oil contamination and from any contamination of areas other than the leased property. Id. We allowed Norfolk Southern’s claim to proceed based on the parties’ intent as encapsulated in the settlement agreement because a judgment based on a settlement “receives its legitimating force from the fact that the parties consented to it.” Id. at 1288. Following Norfolk Southern, we have reiterated that “[w]here a case has been settled, the principles of res judicata apply to the matters specified in the settlement agreement.” Original Brooklyn Water Bagel Co. v. Bersin Bagel Grp., 817 F.3d 719, 725 (11th Cir. 2016) (involving a consent judgment entered on a settlement agreement). That rule makes sense. When a judge enters a consent judgment based on the parties’ settlement agreement, the agreement becomes the court’s judgment and binds the parties like any other judgment. See Judgment, Black’s Law Dictionary (11th ed. 2019) (defining “consent judgment” as a “settlement that becomes a court judgment when the judge sanctions it”); Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 4443 (3d ed. 2021) (noting that a private settlement agreement can give rise to res judicata if it is memorialized in a judgment). And because a consent judgment is legitimized by the parties’ agreement, the judgment’s preclusive scope extends only as far as that USCA11 Case: 21-11314 Date Filed: 04/06/2022 Page: 8 of 14

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21-11314 Opinion of the Court agreement. See Norfolk S., 371 F.3d at 1288–89; Goldman v. Northrop Corp., 603 F.2d 106, 109 (9th Cir. 1979) (concluding that although the parties’ settlement agreement covered more ground than the original complaint, the settlement agreement controlled); Int’l Techs. Consultants, Inc. v. Pilkington PLC, 137 F.3d 1382, 1387 (9th Cir. 1998) (“A consent decree in a private action imposes no more on the party to be bound than that party agreed to.”). Here, the 2014 consent judgment between the CFPB and Ocwen controls the res judicata effect of the 2013 D.C. action. To the extent that the district court held otherwise and applied traditional principles of res judicata, it erred. B Having concluded that the focus of our res judicata inquiry is the parties’ settlement agreement and ensuing consent judgment, it remains for us to conduct that inquiry. To determine the preclusive effect of a consent judgment, we must apply traditional principles of contract law to ascertain the parties’ intent. Norfolk S., 371 F.3d at 1289; see also United States v. S. Ute Tribe or Band of Indians, 402 U.S. 159, 161 (1971) (noting that the case’s decision turned on interpretation of the settlement agreement that was reduced to judgment); Keith v. Aldridge, 900 F.2d 736, 740 (4th Cir. 1990) (“When a consent judgment entered upon settlement by the parties of an earlier suit is invoked by a defendant as preclusive of a later action, the preclusive effect of the earlier judgment is determined by the intent of the parties.”); Wright & Miller, supra, at USCA11 Case: 21-11314 Date Filed: 04/06/2022 Page: 9 of 14

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Opinion of the Court 21-11314 § 4443 (noting that a consent judgment must be enforced “in accord with the intent of the parties”).

Here, there are three ways in which the parties’ “intent” might be understood: Either (1) the CFPB can sue Ocwen for all alleged legal violations occurring between January 2014 and February 26, 2017; (2) the CFPB can’t sue Ocwen for any alleged violations occurring during that period; or (3) the CFPB can sue Ocwen only for legal violations not covered by the settlement’s terms. We assess each interpretation in turn.

The CFPB urges us to adopt the first interpretation by narrowly focusing on the settlement agreement’s release provision— which, again, stated that the CFPB “does not release any liability for conduct other than conduct related to the Mortgage Servicing Practices asserted or that might have been asserted in the complaint.” The CFPB reasons that this provision explicitly encapsulates the parties’ intent that their settlement agreement released Ocwen from liability only for conduct that occurred prior to the filing of the D.C. action, i.e., before December 18, 2013. Because its current lawsuit covers only conduct that occurred from January 2014 onwards, the CFPB contends that the consent judgment presents no res judicata bar.

The CFPB never really explains why we should read the settlement agreement so narrowly, other than to emphasize Norfolk Southern’s focus on the release provision of the settlement USCA11 Case: 21-11314 Date Filed: 04/06/2022 Page: 10 of 14

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21-11314 Opinion of the Court agreement at issue there. In that case, though, there weren’t any injunction-like forward-facing standards or enforcement provisions like those prescribed by the agreement that we confront. So, contrary to the CFPB’s assertion, Norfolk Southern’s reliance on the release provision of the agreement at issue there isn’t dispositive— or even very probative—here. Moreover, and in any event, fundamental principles of contract interpretation counsel against reading one provision of a contract in isolation. See Hegel v. First Liberty Ins. Corp., 778 F.3d 1214, 1221 (11th Cir. 2015) (“Terms and phrases cannot be viewed in isolation . . . .”); Feaz v. Wells Fargo Bank, N.A., 745 F.3d 1098, 1104 (11th Cir. 2014) (“Traditional contractinterpretation principles make contract interpretation a question of law, decided by reading the words of a contract in the context of the entire contract and construing the contract to effectuate the parties’ intent.”).

Ocwen persuasively argues that the settlement agreement’s extensive three-year servicing-standard, monitoring, and enforcement regime indicates that if it committed a legal violation covered by the standards, the parties intended for the CFPB to remedy that violation through the agreed-upon processes—not through a separate court proceeding. If the CFPB could freely elect when to proceed through the strictures of the settlement agreement and when to go straight to court, Ocwen surely wouldn’t have agreed to the (costly) three-year compliance-and-enforcement regime. As a formal matter, we agree that complying with the settlement agreement’s servicing standards didn’t eliminate Ocwen’s responsibility USCA11 Case: 21-11314 Date Filed: 04/06/2022 Page: 11 of 14

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Opinion of the Court 21-11314 to abide by the law more generally. But as a practical matter, the settlement agreement would be impossible to enforce if the CFPB could unilaterally decide when to invoke it and when to ignore it. Ocwen couldn’t possibly have intended to get so little security from the parties’ bargain.

For its part, Ocwen seems (perhaps not surprisingly) to urge a diametrically opposite interpretation of the parties’ agreement. On its reading, the parties agreed to an exclusive enforcement regime during the agreement’s three-year term, meaning that the CFPB can’t now initiate a new lawsuit for any legal violation that Ocwen committed in that period. See Br. of Appellee at 23–24 (describing the settlement agreement as an “exclusive enforcement regime” and stating that the parties agreed to a “comprehensive framework [that] would govern any challenge to Ocwen’s activities”); Oral Arg. at 23:21 (advocating that the CFPB can’t sue to remedy legal violations during the three-year period even if no servicing standard is on point).

We see two problems with Ocwen’s interpretation. First, the settlement agreement contains no provision stating that the agreement’s enforcement mechanisms are exclusive or that the CFPB can’t sue Ocwen at all during the consent judgment’s life. Second, the settlement’s release provision states, in part, that nothing in the release “shall limit the CFPB’s authority with respect to [Ocwen], except to the extent the CFPB has herein expressly released claims.” Reading the agreement to preclude the CFPB from USCA11 Case: 21-11314 Date Filed: 04/06/2022 Page: 12 of 14

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21-11314 Opinion of the Court suing Ocwen for any alleged misconduct during the consent judgment’s term would require us to conclude that the CFPB silently relinquished its authority to enforce the law. It can’t be that the CFPB agreed to let Ocwen violate the law so long as it didn’t violate a servicing standard. We must therefore also reject Ocwen’s construction of the parties’ agreement.

We think that the best interpretation of the agreement is this: On the one hand, for conduct that occurred between January 2014 and February 26, 2017 and is covered by the consent judgment’s servicing-standards-and-monitoring regime, the parties established a particular enforcement mechanism that the CFPB must follow. On the other hand, the CFPB may sue Ocwen to enforce legal violations that occurred during that period and are not covered by that regime. This middle-course reading avoids the problem of rendering the settlement agreement’s enforcement mechanism meaningless, while preserving the CFPB’s authority to enforce the law.

In its brief to us, Ocwen carefully explained its appraisal of the overlap between the servicing standards and each of the counts in the CFPB’s current complaint. See Br. of Appellee at 13–14. But the district court never undertook such a claim-by-claim analysis when it dismissed all nine of the CFPB’s counts, and the CFPB contends that at least one claim—about escrow accounts—isn’t covered by an on-point servicing standard. See Br. of Appellant at 22– 24. Because “[w]e are . . . a court of review, not a court of first USCA11 Case: 21-11314 Date Filed: 04/06/2022 Page: 13 of 14

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Opinion of the Court 21-11314 view,” Callahan v. U.S. Dep’t of Health & Hum. Servs., 939 F.3d 1251, 1266 (11th Cir. 2019), we decline to conduct a claim-by-claim assessment ourselves; rather, we remand to the district court to do so in the first instance.

* * *

For these reasons, we hold (1) that the res judicata effects of an earlier lawsuit resolved by a consent judgment are measured by reference to the terms of the consent judgment, rather than the complaint, and (2) that in this case, the CFPB may, consistent with the consent judgment that resolved the 2013 D.C. action, sue Ocwen for alleged violations that occurred between January 2014 and February 26, 2017 only if they aren’t covered by the consent judgment’s servicing-standard, monitoring, and enforcement regime.

Accordingly, we VACATE the district court's decision and REMAND so that, in accordance with Norfolk Southern, the court can determine in the first instance which counts of the CFPB’s current complaint are barred by the 2014 consent judgment between the parties.

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Judgment (May 2023)

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UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA

Case No. 9:17-CV-80495-MARRA

CONSUMER FINANCIAL PROTECTION BUREAU,

Plaintiff,

OCWEN FINANCIAL CORPORATION, et al.,

Defendants.

______________________________________________/

SUMMARY JUDGMENT ORDER (SECOND) ON REMAND FROM THE ELEVENTH CIRCUIT COURT OF APPEALS

INTRODUCTION This case is back before the Court on remand from the Eleventh Circuit Court of Appeals. After a review of the Court of Appeals’ Mandate, a review of the record evidence, and consideration of the arguments of the parties, the Court rules as follows: II.

BACKGROUND On April 6, 2022, the Eleventh Circuit Court of Appeals vacated the Court’s final judgment in favor of Defendants Ocwen Financial Corporation, et al. (“Ocwen”), remanding the matter for further proceedings. More specifically, the appellate court directed this Court to conduct “a claimby-claim assessment” to determine whether any of the nine counts of Plaintiff Consumer Financial Protection Bureau (“Bureau”)’s complaint survive because they “[are not] covered by the consent judgment’s servicing-standard, monitoring, and enforcement regime.” Consumer Financial Protection Bureau v. Ocwen Financial Corporation, 30 F.4th 1079, 1086 (11th Cir. 2022) (emphasis added). The mandate recognizes that res judicata may preclude the Bureau’s claims; its Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 1 of 25

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“course correction” requires the Court to perform a more particularized assessment of the current claims as compared to the consent judgment’s regime.

The consent judgment1 stems from litigation in a District of Columbia action between and among the same parties herein. See Consumer Financial Protection Bureau v. Ocwen Financial Corporation, Case No. 13-cv-02025 (D. D.C. February 26, 2014) at DE 12, 12-1, 12-2, 12-3, 12- 4, 12-52 (“the 2013 action”). The current operative complaint (the Bureau’s Second Amended) identifies January 1, 2014 through February 26, 2017 as the “Relevant Time Period” (DE 775 at 1), the same time period the NMS was prospectively enforceable and Ocwen’s conduct was under agreed upon scrutiny for allegedly harming borrowers. Through the consent judgment, the parties “agreed to resolve their claims without the need for litigation” (DE 12 at 7) and created a roadmap of oversight through its servicing-standard, monitoring, and enforcement regime, including but not limited to options to petition the D. C. court if necessary (DE 12-4, e.g., at 14 (G): “Subject to Section I [Enforcement], below, in the event that a dispute cannot be resolved, Servicer, the Monitor, or the Monitoring Committee may petition the Court for resolution of the dispute”). As noted by the Eleventh Circuit, the monitoring committee successfully petitioned the D.C. court to obtain the consent judgment’s prescribed relief for an uncured potential violation on at least one occasion. CFPB v. Ocwen Financial Corp., 30 F.4th at 1082. In brief sum, the Bureau’s current complaint frames allegations that Ocwen, during the Relevant Time Period, violated the Consumer Financial Protection Act of 2010 (“CFPA”) and

1 The consent judgment is alternately referred to as “National Mortgage Settlement [NMS] C.J.,” or “NMS.”

2 References to “DE 12” and its exhibits (DE 12-1, 12-2, 12-3, 12-4 and 12-5) all refer to docket entries from the 2013 action.

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laws and regulations enumerated thereunder3 through the conduct of its mortgage servicing business (DE 775).4 This Court’s final judgment in favor of Ocwen was based on res judicata as set forth in the judgment and related summary judgment order (DE 777; DE 764 at 29-31). The Bureau’s successful appeal of the Court’s final judgment brings us to this moment. Having reviewed the pertinent portions of the record, with the benefit of oral argument on March 14, 2023 and the parties’ post-remand briefing on the merits, and being otherwise duly advised in the premises, the Court rules that the terms of the parties’ bargain -- i.e., the consent judgment -- bar the Bureau’s current claims in toto, based upon the reasoning and claim-by-claim analysis set forth below.

III.

DISCUSSION A. The Complaint The Bureau’s allegations are summarized for ease of reference as follows: COUNT ALLEGATION LAW CITED I Use of Inaccurate and Incomplete Information to Service Loans Was Unfair Section 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531(a) and (c) and 5536(a)(1)(B)

II Deceptive Acts and Practices Regarding Loan Terms and Status Same as above

III Deceptive Foreclosure Communications Same as above; and Truth in Lending Act (“TILA”), and Regulation Z5

3 “Enumerated consumer laws” under the CFPA means, at 12 U.S.C.A. § 5481(12)(H) (Fair Debt Collection Practices Act (“FDCPA”)); 12 U.S.C.A. § 5481(12)(M) (Real Estate Settlement Procedures Act (“RESPA”) of 1974); 12 U.S.C.A. § 5481(12)(O) (Truth in Lending Act (“TILA”)); and related regulations found at 12 C.F.R. §1024 (Regulation X, RESPA); and 12 C.F.R. §1026 (Regulation Z, TILA).

4 Familiarity with the record (exceeding 800 docket entries) is presumed for purposes of this Order; salient portions are restated here to refresh memories only. 5 Paragraphs 216-220 of Second Amended Complaint (“SAC”) Count III set forth prohibitions and definitions under TILA and Regulation Z without specifying how Ocwen allegedly violated those Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 3 of 25

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IV Periodic Statement Failures 12 C.F.R. § 1026.41(d) [TILA], and 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(A); Fair Debt Collections Act (FDCPA)6

V Use of Inaccurate and Incomplete Information to Service Loans Was Unfair FDCPA and CFPA

VI Deceptive Debt Collection Practices FDCPA, CFPA;

RESPA, Regulation X

VII Escrow Violations RESPA, Regulation X; CFPA

VIII Servicing Policies and Procedures Violations RESPA, Regulation X; CFPA

IX Foreclosure Violations RESPA, Regulation X; CFPA

(DE 775).

B. The Bargain As the Bureau concedes, the consent judgment terms constitute “the deal that was struck” (Transcript of Mar. 14, 2023 Oral Argument (“Tr”) at 13) and the lens through which the Court must perform its analysis to more specifically articulate how, if at all, those terms do not cover the claims before the Court. CFPB v. Ocwen Financial Corp., 30 F.4th at 1084. The Court’s previous res judicata analysis will not be revisited herein except as may be necessary to fulfill the appellate court’s mandate (DE 764 at 13-26).

The Bureau’s express intention “in effecting [the] settlement [was] to remediate harms allegedly resulting from the alleged unlawful conduct of the Defendant” (DE 12 at 8). Pertinent

laws and regulations (DE 775 at 67-68). (In remand briefing, the Bureau cites only to the CFPA for Count III (DE 807 at 8), not the enumerated laws thereunder, such as TILA or Regulation Z.) 6 Paragraphs 225-230 of SAC Count IV set forth prohibitions and definitions under FDCPA without specifying how Ocwen allegedly violated that law (DE 775 at 69-70). Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 4 of 25

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exhibits to the consent judgment include a “Settlement Term Sheet” /Servicing Standards (DE 12- 1 (Exhibit A)); “Enforcement Terms” /Servicing Standards, including Metrics (DE 12-4 (Exhibit D)); and the “CFPB Release” (DE 12-5 (Exhibit E)).

C. The Metrics The Bureau, post-remand, reasserts as one of its two central arguments that if there is no Metric to cover an allegation in its complaint, then there is, in substance, daylight through which one or more of its claims may gain traction to avoid the effects of res judicata (DE 807 at 1)7 (“you have to look at the metrics in order to determine whether in fact there was a violation at the end of the day”) (Tr at 7). It claims that there is “no place that this is clearer than Count VII,” where it alleges that Ocwen “failed to timely conduct the required annual analyses of borrowers’ escrow accounts. Not a single NMS Servicing Standard or Metric applies to Ocwen’s timely performance of annual escrow analyses and Ocwen’s own expert could not identify one”8 (DE 807 at 1); “there is no coverage as it relates to escrow, specifically escrow analysis, on the face of the National Mortgage Settlement . . . ” (Tr at 5).

7 The Bureau’s second central argument -- the “System of Record” deficiency theory -- as with the “absence of Metric” theory was considered and rejected by the Court in its pre-remand order on summary judgment (DE 764 at 17 -21).

8 The Bureau appears to be referring to the following specific testimony of Ocwen’s expert, which the Court quotes here for completion: “Q: . . . Let me be more precise. Is there an NMS standard that is informing your opinion as to what the generally accepted servicing standards are? A: For what purposes? Q: For escrow analyses. A: Oh. Not that I can think of” (DE 742-12 at 190). Subsequently, the following exchange transpires: “Q: . . . So here, you title this section Three, ‘Ocwen Collected Escrow Shortages In Accordance With Servicing Standards.’ Again, what do you mean by ‘servicing standards’ here? A. Generally accepted servicing standards. Q: Is there an NMS standard that informs your opinion here? A: I don’t believe -- I can’t recall whether the servicing standards in the NMS cover escrow. I don’t think there’s a metric related to escrow in the NMS. Q: Because, presumably, you would have listed it, had one existed? A: I’m just telling you, I don’t recall” (Id. at 210-11).

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The Bureau’s attempts to distinguish the NMS from the Metrics, as if the latter are a standalone scheme and prerequisite to a potential violation, are eclipsed by the plain terms of the consent judgment, the penumbra under which they both travel. The Eleventh Circuit repeatedly refers to Ocwen’s need to comply with the Servicing Standards as the umbrella precept, with just one specific reference to a servicing standard’s “applicable compliance metric.” CFPB v. Ocwen Financial Corp., 30 F.4th at 1082. Cf., id. at 1081 (“consent judgment released Ocwen from liability for the conduct alleged in the CFPB’s complaint and established a three-year period during which Ocwen had to comply with detailed servicing standards enforced through a specific monitoring and compliance regime” and “[b]ased on our review of the entire settlement agreement, however, we hold that the parties intended to preclude new challenges to conduct covered by the settlement agreement’s three-year servicing-standard, monitoring, and enforcement regime”); at 1082 (“First, the consent judgment remained operative for a three-year period, until February 26, 2017, and required Ocwen to abide by specific servicing standards during that timeframe. Those provisions covered a wide range of mortgage-servicing activity, prescribing standards for, among other things, verifying borrowers’ account information, documenting notes, notifying borrowers about loan-modification options, participating in bankruptcy proceedings, charging servicing fees, and obtaining force-placed insurance. Second, the consent judgment created a monitoring and enforcement regime to police Ocwen’s compliance with the servicing standards”); and at 1085 (“Ocwen persuasively argues that the settlement agreement’s extensive three-year servicingstandard, monitoring, and enforcement regime indicates that if it committed a legal violation covered by the standards, the parties intended for the CFPB to remedy that violation through the agreed-upon processes—not through a separate court proceeding”) (emphasis added). Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 6 of 25

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Ocwen characterizes the Metrics as part of the overall consent judgment, operating both as a means to test certain aspects of the Servicing Standards and a vehicle to obtain a “liquidated damages” award (Tr at 43-44). It argues, and the Court agrees, that to the extent the Metrics may have proven insufficient to test compliance with the Servicing Standards, this only demonstrates the consent judgment’s limitation, not a basis to file putatively new claims for the same timeframe in this Court for alleged misconduct covered by the consent judgment. (DE 810 at 8-9; DE 764 at 20-21).

Contrary to the Bureau’s arguments in post-remand briefing and at the post-remand Oral Argument, the Court finds that the Servicing Standards and Metrics, while interdependent, are not so inextricably intertwined that there can be no violation of the consent judgment without a violation of a particular Metric. This is illustrated not just by reference to the Eleventh Circuit decision as shown above, but also by the following terms of the consent judgment: “Defendant shall comply with the Servicing Standards, attached hereto as Exhibit A, in accordance with their terms and Section A of Exhibit D [Metrics] attached hereto.” (DE 12 at 9 (III.3.)) (emphasis added)

Implementation Timeline for Servicing Standards overall, referring only five (5) Metrics to specific deliverable dates (DE 12-4 at 2 (A).)

Monitoring Committee “shall monitor [Ocwen’s] compliance with this Consent Judgment,” i.e., which includes both the Servicing Standards and Metrics (DE 12- 4 at 2 (B.))

The Monitor’s Responsibilities are “to determine whether [Defendant] is in compliance with the Servicing Standards,” i.e., not just the Metrics (Id. at 4 (C.5.))

“The Internal Review Group shall have personnel skilled at evaluating and validating process, decisions and documentation utilized through the implementation of the Servicing Standards,” i.e., not just the Metrics (Id. at 5 (C.9.))

As Ocwen correctly points out, “[t]here are some standards that have no accompanying [M]etric at all” (Tr at 44), and the Eleventh Circuit did not remand the matter for the Court to Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 7 of 25

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articulate whether there was a Metric to cover an allegation, it was to determine whether any “alleged violations that occurred between January 2014 and February 26, 2017 . . . aren’t covered by the consent judgment’s servicing-standard, monitoring, and enforcement regime.” CFPB v. Ocwen Financial Corp., 30 F.4th at 1086 (emphasis added). Even if the Bureau’s position as to the need for a specific Metric to cure an alleged violation were true, as to the foreclosure Counts III and IX, the NMS’ servicing-standard, monitoring, and enforcement regime expressly provides a mechanism to add Metrics at least as to borrowers or tenants in foreclosed properties (DE 12-4 at 8-9 (C. 22-23)). Hence, these counts clearly could have been covered by the NMS. More importantly, if the “Servicer, the Monitor, and the Monitoring Committee” were unable to resolve “any dispute concerning any issue arising under the Consent Judgment,” the parties could have petitioned the D.C. court for resolution of “a dispute,” or “the dispute” -- not any narrow category of disputes (DE 12-4 at 14) (emphasis added). There is simply no term stating that there must be a specific Metric in dispute to petition the D.C. court for relief. The consent judgment provided a plethora of means for the Bureau to petition the D.C. court for relief consistent with the consent judgment terms, during and after the Relevant Time Period, e.g.: 12. This Court retains jurisdiction for the duration of this Consent Judgment to enforce its terms. The parties may jointly seek to modify the terms of this Consent Judgment, subject to the approval of this Court. This Consent Judgment may be modified only by order of this Court. (DE 12 at 11)

15. . . . .Defendant shall have no f urther obligations under this Consent Judgment six months after the expiration of the Term, but the Court shall retain jurisdiction for purposes of enforcing or remedying any outstanding violations that are identified in the final Monitor Report and that have occurred but not been cured during the Term.9 (Id. at 12)

9 To the extent the Court’s previous Order on summary judgment suggested that the current action was filed just two months after the expiration of the Consent Judgement (DE 764 at 11), this Order supersedes the previous inadvertent misstatement. Based on this provision (DE 12 at 11), Ocwen was still answerable to the NMS (and, by extension, the presiding D.C. court) until August 26, 2017, six months after the February 26, 2017 expiration of the consent judgment, making the Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 8 of 25

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G. . . . Subject to Section I, below, in the event that a dispute cannot be resolved, Servicer, the Monitor, or the Monitoring Committee may petition the Court for resolution of the dispute. (DE 12-4 at 14)

I. 1. Consent Judgment. This Consent Judgment shall be filed in the U.S. District Court for the District of Columbia and shall be enforceable therein. (Id.)

Ergo, where Servicing Standards at I. B.1. also require that “Servicer shall maintain procedures to ensure accuracy and timely updating of borrower’s account information, including posting of payments and imposition of fees,” these requirements as to accuracy and timeliness cover the Bureau’s related allegations and were available for the Bureau to act upon during the Relevant Time Period or, if deficient from the Bureau’s point of view, may have been grounds to petition the D.C. court for relief (DE 12-1 at 5) (emphasis added). Finally, while the Eleventh Circuit agreed with the Bureau that the res judicata preclusive effect on its current, 2017, action should be analyzed based upon the consent judgment which grew out of the 2013 complaint, not the complaint itself, it held that the “parties intended to preclude new challenges to conduct covered by the settlement agreement’s three-year servicing-standard, monitoring, and enforcement regime.” CFPB v. Ocwen Financial Corp., 30 F.4th at 1081. The parties simply, and still, dispute “the CFPB’s authority with respect to Ocwen’s conduct that occurred [during the Relevant Time Period], when the consent judgment that resolved the 2013 action was in effect.” Id. at 1083.

Based on the foregoing, and the mandate that this Court conduct a “claim-by-claim” analysis of how, if at all, the consent judgment precludes the extant claims, Id. at 1086, the Court provides as follows.

Bureau’s April 20, 2017 filing in the Southern District of Florida (the instant matter) even more inappropriate than previously suggested by the Court.

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D. Claim-by-Claim Analysis 1. Count VII (“Escrow Violations”) Following the Bureau’s lead, we begin with Count VII, through which it claims Ocwen failed to pay hazard insurance premiums in a timely manner on behalf of escrowed borrowers, failed to timely conduct escrow analyses, or conduct them at all, and committed other escrow-related misconduct in violation of the Real Estate Settlement Procedures Act (“RESPA”) and Regulation X (DE 775 at 76- 78).

As previously stated, the Bureau asserts that “[n]ot a single NMS Servicing Standard or Metric applies to Ocwen’s timely performance of annual escrow analyses.” (DE 807 at 1). Ocwen asserts that Servicing Standards I.B.1, I.B.5, and VII.A.1, and Metrics 4.B and 33 overlap Count VII claims (DE 808-1 at 2). The Bureau further argues that “[e]scrow was simply not at issue in [the] underlying [2013] action, which is why it is also not at issue in the NMS” (Tr at 34). The Court’s review of the NMS suggests otherwise. Specifically, the Settlement Term Sheet at I.B.5 requires Ocwen to provide to borrowers (other than borrowers in bankruptcy or borrowers who have been referred to or are going through foreclosure) adequate information on monthly billing or other account statements to show in clear and conspicuous language:

a. total amount due;

b. allocation of payments, including a notation if any payment has been posted to a “suspense or unapplied funds account”;

c. unpaid principal;

d. fees and charges for the relevant time period;

e. current escrow balance; and

f. reasons for any payment changes, including an interest rate or escrow account adjustment, no later than 21 days before the new amount is due Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 10 of 25

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(except in the case of loans as to which interest accrues daily or the rate changes more frequently than once every 30 days)

(DE 12-1 at 6-7) (emphasis added). An indispensable prerequisite to determining whether an “escrow account adjustment” is necessary is the performance of the annual escrow analysis by the Servicer, squarely refuting the Bureau’s arguments. Similarly, Settlement Term Sheet at VI.B.4.b., provides that “Servicer shall not collect late fees (i) based on an amount greater than the past due amount; (ii) collected from the escrow account or from escrow surplus without the approval of the borrower; or (iii) deducted from any regular payment” (Id. at 40-41) (emphasis added), which also necessarily requires Ocwen to perform an escrow analysis. Ocwen’s need to maintain accurate escrow account data, and its escrow-related conduct more generally, was plainly at issue and covered by the Standards.

Finally, Metric 2 (“Integrity of Critical Sworn Documents”), at B and C, also includes related Test Questions referencing “escrow shortages and deficiencies,” which necessarily requires the performance of an escrow analysis (DE 12-4 at 19-20) or at least inquiry as to whether an escrow analysis has been done. If the Bureau believed these or any other Metrics were deficient it was incumbent upon them to have petitioned the D.C. court to address such perceived shortcomings.

The Court also agrees with Ocwen that Servicing Standards VII.A.1 (“Forced-Placed Insurance), and Metrics 4.B (measuring whether payment postings are timely and accurate) and 33 (measuring billing statement accuracy) overlap with Count VII.

Based on the foregoing, and the entire record, the Court finds that Count VII was covered by the consent judgment’s servicing-standard, monitoring, and enforcement regime.

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2. Count I (“Use of Inaccurate and Incomplete Information to Service Loans Was Unfair”)

In Count I, the Bureau claims Ocwen used inaccurate and incomplete loan data in servicing borrowers’ loans, the product of its inputting inaccurate and incomplete account information obtained from other servicers without review and substantiation, along with other operational deficiencies in its proprietary “system of record” (“SOR”) (DE 775 at 63-65). Ocwen’s alleged actions caused or were likely to cause substantial injury including but not limited to unlawful commencement of foreclosures and improper handling of loss mitigation applications, all constituting “unfair acts and practices” in violation of the CFPA (Id. at 64-65).

In support that Count I is not covered by the NMS, the Bureau proffers that “the fundamental difference” between the Servicing Standards and its current claims [specifically including Counts I, II, V and VI] is that the “Bureau is concerned with the accuracy of the information in Ocwen’s system of record while the NMS focused on discrepancies between Ocwen’s system of record and statements it made to consumers” (DE 807 at 7) (emphasis added). The Bureau further posits that the “NMS definition of accuracy [ ] only requires that the statements mimic the system of record” (Id. at 10). In other words, the Bureau asserts that the NMS was not concerned with whether Ocwen was providing factually accurate information to its borrowers. Rather, the NMS was only concerned with whether the information provided by Ocwen to its borrowers, even if factually incorrect, was consistent with its allegedly inaccurate system of record. Not only is this an astounding proposition, but the Bureau’s interpretation overlooks, among other things, that under the NMS, Ocwen’s “systems to record account information shall be periodically independently reviewed for accuracy and completeness by an independent reviewer” (DE 12-1 at 8, I.B.9). It also ignores the dictionary definitions of “discrepancy” -- “a difference between two things that should be the same” -- and “accuracy” – “the fact of being exact Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 12 of 25

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or correct.”10 The Bureau’s argument simply constitutes a distinction without a difference: a discrepancy necessarily means one data set is accurate and one is inaccurate. Moreover, even if Ocwen’s system of record was itself an issue, as the Bureau claims, that would have been something the Internal Review Group and/or the Monitor was expressly empowered to address, e.g.: “The Internal Review Group shall have personnel skilled at evaluating and validating processes, decisions, and documentation utilized through the implementation of the Servicing Standards, and “The qualifications and performance of the Internal Review Group will be subject to ongoing review by the Monitor” (DE 12-4 at 4-5, C. 7-10 (emphasis added)). The Bureau’s position that the Standards are not concerned with accuracy is also contraindicated by the NMS. For example, Metric 4 (“Accuracy and Timeliness of Payment Application and Appropriateness of Fees”), at “B,” requires “Payment posted timely (within 2 business days of receipt) and accurately,” and a related test question asks, “Were payments posted in the right amount?” (DE 12-4 at 23); Metric 2 requires that “amounts agree to system of record within tolerance if overstated” (DE 12-4 at 19).

Finally, Servicing Standards at I (“Foreclosure and Bankruptcy Information and Documentation”) and IV (“Loss Mitigation”) and accompanying Metrics, e.g., Metrics 1, 3 address foreclosure issues and loss mitigation issues (DE 12-1 at 2-13, 18-37; DE 12-4 at 18, 21-22). Ocwen also persuasively argues that Standard I.B.1 -- Servicer shall maintain procedures to ensure accuracy and timely updating of borrower’s account information, including posting of payments and imposition of fees. Servicer shall also maintain adequate documentation of borrower account information, which may be in either electronic or paper format (DE 12-1 at 5),

Standard I.B.8 --

10 https://dictionary.cambridge.org/us/dictionary/english/discrepancy; https://dictionary.cambridge.org/us/dictionary/english/accuracy. Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 13 of 25

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Servicer shall take appropriate action to promptly remediate any inaccuracies in borrowers’ account information, including: a. Correcting the account information; b. Providing cash refunds or account credits; and c. Correcting inaccurate reports to consumer credit reporting agencies (DE 12-1 at 8),

and Metric 33 (measuring billing statement accuracy, with test questions asking, relative to balances, payments, fees, and charges) -- Does the monthly billing statement accurately show, as compared to the system of record at the time of the billing statement the allocation of payments, including a notation if any payment has been posted to a ‘suspense or unapplied funds account’? (DE 12-4 at 37) (emphasis added)

in particular cover the claims asserted in Count I (DE 808 at 9-10, DE 808-1 at 1). Based on the foregoing, and the entire record, the Court finds that Count I was covered by the consent judgment’s servicing-standard, monitoring, and enforcement regime. 3. Count II (“Deceptive Acts and Practices Regarding Loan Terms and Status”)

In Count II, the Bureau claims Ocwen made material misrepresentations to borrowers regarding loan terms and status (again allegedly due to its reliance on inaccurate loan data placed into its system of record without substantiation), constituting “deceptive acts and practices” in violation of the CFPA (DE 775 at 65-67).

In its remand briefing, the Bureau again (as with Count I) refers to the SOR as itself being inaccurate and incomplete and argues NMS’ focus on discrepancies and the Bureau’s focus on accuracies leads to the conclusion that “[t]he NMS terms thus do not cover the Bureau’s allegations” (DE 807 at 7- 8). As was the case with Count I, the Court finds this position unavailing. Moreover, the Court rejects the Bureau’s assertion that “Metric 4.B also makes clear that the Servicing Standards are unconcerned with whether the balances or information in the [SOR] were, in fact, accurate” (DE 807 at 7-8) (emphasis added). According to Metric 4.B, payments must be posted timely and accurately, to the “right account number,” “in the right amount,” and refer to “properly identified conforming payments” (DE 12-4 at 23). Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 14 of 25

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Furthermore, Servicing Standards at I.A.1. require Ocwen to ensure that factual assertions made in documentation supporting foreclosure and bankruptcy proceedings (e.g., pleadings, proofs of claim, affidavits) are “accurate and complete,” “supported by competent and reliable evidence,” and “that [Ocwen] has reviewed competent and reliable evidence to substantiate the borrower’s default and the right foreclose, including the borrower’s loan status and loan information” (DE 12-1 at 2) (emphasis added). Although seemingly redundant, Ocwen’s affiants were also required to confirm in filings related to such proceedings “that they have reviewed competent and reliable evidence to substantiate the borrower’s default and the right to foreclose, including the borrower’s loan status and required loan ownership information” (Id. at 2-3) (emphasis added). Servicing Standards at IV.B.14 requires that Ocwen “shall ensure timely and accurate communication of or access to relevant loss mitigation status and changes in status to its foreclosure attorneys, bankruptcy attorneys and foreclosure trustees and, where applicable, to court-mandated mediators” (Id. at 23) (emphasis added). Servicing Standards IV.C.3., 4 and 8 are replete with requirements that Ocwen establish a single point of contact (“SPOC”) primarily responsible for communicating with borrowers about the status of their loan accounts and being knowledgeable about the loan status throughout loss mitigation, loan modification and foreclosures processes (Id. at 23-25). Servicing Standards at IV.E. further requires that Ocwen “shall develop or contract with a third-party vendor to develop an online portal linked to Servicer’s primary servicing system where borrowers can check, at no cost, the status of their first lien loan modifications.” (Id. at 28). Finally, Metric 5.B., requires that these borrower portals -- which are subject to quarterly review -- “provide loss mitigation status updates” (DE 12-4 at 25); and Metric 5.F., “Account Status Activity,” requires “System of record electronically documents key activity of a foreclosure, loan modification, or bankruptcy” (Id. at 28).

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Based on the foregoing, and the entire record, the Court finds that Count II was covered by the consent judgment’s servicing-standard, monitoring, and enforcement regime. 4. Count III (“Deceptive Foreclosure Communications”) In Count III, the Bureau alleges Ocwen made material misrepresentations to borrowers regarding foreclosures and committed other foreclosure-related misconduct, constituting deceptive acts and practices in violation of the CFPA (DE 775 at 67). More specifically, the Bureau claims that Ocwen, during the Relevant Time Period, misrepresented timeframes within which borrowers who were engaged in loss mitigation efforts would not be foreclosed upon. In post remand briefing, the Bureau contends that this count is not covered by the NMS simply because Ocwen “failed to demonstrate that the NMS Servicing Standards and Metrics cover” this claim (DE 807 at 8). Ocwen’s post remand brief, on the other hand, accurately identifies a litany of NMS Servicing Standards and Metrics that apply to this Count (DE 808 at 9-10).

Servicing Standards at I.A-C (“Foreclosure and Bankruptcy Information and Documentation”), including their enumerated subparagraphs, of which there are many, amply cover Count III and will not be restated here (DE 12-1 at 2-10). In addition, to the extent that the Bureau asserts Ocwen “benefited from [ ] limited Metric testing that was funneled through [the Servicing] standards” (Tr at 13) to show Count III is not covered by the NMS, the Servicing Standards provided the Bureau with express terms for the number of Metrics to grow in the context of borrowers or tenants in foreclosed properties, terms which the Bureau appears to have overlooked to remediate complaint allegations found in Count III (DE 12-4 at 8-9 (C. 22, 23)). More specifically, the Standards’ “Work Plan’” provides that Ocwen’s “compliance with the Servicing Standards shall be assessed via metrics identified and defined in Schedule D-1 hereto, as supplemented by and consistent with the metrics provided in the [NMS] 2012 Consent Judgment and any additional metrics that may Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 16 of 25

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be developed in accordance with Section C.22 below (‘the Metrics’). The threshold error rates for the Metrics are set forth in Schedule D-1 (as supplemented from time to time in accordance with Section C.22, below, the ‘Threshold Error Rates’)” (Id. at 5 (C.11) (emphasis added)). Based on the foregoing, and the entire record, the Court finds that Count III was covered by the consent judgment’s servicing-standard, monitoring, and enforcement regime. 5. Count IV (“Periodic Statement Failures”) In Count IV, the Bureau alleges that Ocwen failed to provide accurately detailed periodic billing statements to borrowers, in violation of the CFPA and Regulation Z (DE 775 at 68-69). In post remand briefing, the Bureau contends that this count, like Count III, is also not covered by the NMS simply because Ocwen “failed to demonstrate that the NMS Servicing Standards and Metrics cover” this claim, renewing its attempts to pierce the plain meaning of “accurate” by asserting an illusory distinction between “(accurate in reality, as opposed to the NMS definition of accuracy which only requires that the statements mimic the system of record)” (DE 807 at 8). Ocwen counters that Count IV is precluded by the NMS “because they are covered by the NMS’s Servicing Standards, which imposed detailed requirements addressing the accuracy of borrower information held by Ocwen” (DE 808 at 9). Ocwen specifically cites Servicing Standards I.B.1, 5, and 10 and Metrics 4.B. and 33 in support of its position (DE 808-1 at 1). The Court’s analysis of Count IV as compared to the NMS finds that Servicing Standards I.B.1., 5, 9 and 10 (DE 12-1 at 5-9) cover this claim by their detailed itemization of account information that must be sent to borrowers -- “systems to record account information [which] shall be periodically independently reviewed for accuracy and completeness by an independent reviewer” (Id. at 8) (emphasis added). In addition, Metric 33 (citing Standards I.B.5) measures “Billing Statement Accuracy” and lists as “Test Questions” the following: Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 17 of 25

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1.Does the monthly billing statement accurately show, as compared to the system of record at the time of the billing statement, the unpaid principal balance?

2.Does the monthly billing statement accurately show as compared to the system of record at the time of the billing statement each of the following: a. total payment amount due; and, b. fees and charges assessed for the relevant time period? 3. Does the monthly billing statement accurately show as compared to the system of record at the time of the billing statement the allocation of payments, including a notation if any payment has been posted to a “suspense or unapplied funds account”?

(DE 12-4 at 37) (emphasis added). These questions, in addition to illustrating how Count IV is covered by the NMS Standards and Metrics, also undermine the Bureau’s insistence that the SOR itself was the issue because the billing statements were expected to mimic the SOR (see generally, supra at 12-14). These questions, which engender a comparison between the monthly billing statements and the SOR, suggest that the two data sets were not merely to be checked for mimicry, but to see if there was any discrepancy between them which would require appropriate further inquiry and/or corrective action. In any event, and as previously stated, if the Bureau had an issue with the SOR itself, it was incumbent upon it to use the existing tools it had under the “deal that was struck.”

Based on the foregoing, and the entire record, the Court finds that Count IV was covered by the consent judgment’s servicing-standard, monitoring, and enforcement regime. 6. Count V (“Inaccurate and Incomplete Information to Service Loans Was Unfair”)

In Count V, the Bureau alleges that Ocwen used inaccurate and incomplete information to service loans which were in default, and through acts and practices constituting unfair or unconscionable means to collect on these debts, violated both the CFPA and the Fair Debt Collection Practices Act (“FDCPA”). More specifically, the Bureau claims that Ocwen’s SOR and Ocwen’s manual processes both resulted Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 18 of 25

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in erroneous borrower account information as to loan terms, payments, payoff amounts, escrow amounts and loss mitigation information (DE 775 at 71-72). This misinformation allegedly caused unlawful foreclosure proceedings, mishandling of loss mitigation applications and misapplication of payments, collection, and billing, among other potential or actual injuries (Id.). The Bureau’s post remand brief states that its claims in Count V (like Count I, II and VI)11 are the result of the SOR itself being inaccurate and incomplete and the “NMS terms thus do not cover the Bureau’s allegations” (DE 807 at 8).

Ocwen’s Response to the Bureau’s post remand brief points to the Court’s Order on Summary Judgment in support of its position that even if the SOR was itself the issue, the Court already concluded that the NMS required an independent third party to review “‘those parts of the [SOR] that pertain to account information for accuracy and completeness’” (DE 810 at 4-5; DE 764 at 18 (Order on SJ)).

Whether the SOR itself or Ocwen’s manual processes were the source of alleged actual or potential injury during the Relevant Time Period, Servicing Standards and related Metrics were available to the Bureau to redress any issues. Servicing Standards I.B.1,12 I.B.9,13 for instance, cover Count V and afforded the Bureau an avenue of redress during the NMS enforcement period. Servicing Standard I.B.8 required Ocwen to “take appropriate action to promptly remediate any inaccuracies in borrowers’ account information” (DE 12-1 at 8). Servicing Standard I.C. contains

11 Both parties group Counts I, II, V and VI together for post-remand argument purposes (DE 807 at 7; DE 808 at 9).

12 “Servicer shall maintain procedures to ensure accuracy and timely updating of borrower’s account information, including posting of payments and imposition of fees. Servicer shall also maintain adequate documentation of borrower account information, which may be in either electronic or paper format” (DE 12-1 at 5).

13 “Servicer’s systems to record account information shall be periodically independently reviewed for accuracy and completeness by an independent reviewer” (DE 12-1 at 8). Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 19 of 25

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a litany of requirements to ensure, for instance, that a foreclosing entity “has a documented enforceable interest . . . under applicable state law, or is otherwise a proper party to the foreclosure action.” (DE 12-1 at 9). Metrics 1 through 3 expressly measure and test the propriety of a foreclosure action and the accuracy of account information leading to a foreclosure, to protect borrowers and tenants from injury (DE 12-4 at 18-22). Additional Metrics could have been proposed to the extent needed to address a suspected “pattern of noncompliance with a material term of the Servicing Standards that is reasonably likely to cause harm to borrowers or tenants residing in foreclosed properties” (DE 12-4 at 8-9). But the failure to include such additional Metrics does not mean that the Servicing Standards that were adopted did not address the issue. Based on the foregoing, and the entire record, the Court finds that Count V was covered by the consent judgment’s servicing-standard, monitoring, and enforcement regime. 7. Count VI (“Deceptive Debt Collection Practices”) In Count VI, the Bureau asserts that during the Relevant Time Period, Ocwen engaged in deceptive debt collection practices through material misrepresentations made to borrowers as to monthly, reinstatement, payoff and escrow amounts due, on loans for which it had acquired servicing rights, constituting violations of both the FDCPA and the CFPA (DE 775 at 73-75). Ocwen allegedly had “knowledge or reason to believe that” the prior servicer data and its own SOR had inaccurate information, yet it did not review the data for accuracy prior to engaging in collection activity, and it failed to review or consider consumers’ challenges to such inaccuracies (Id. at 74-75). The allegations of Count VI are nearly indistinguishable from Count V, save the distinct sections of the FDCPA which are claimed to have been violated -- Section 807 in Count VI versus Section 808 in Count V. Both Count VI and Count V allege violations of 15 U.S.C. §1692 and §1036 of the CFPA Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 20 of 25

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and 12 U.S.C. §5536 of the CFPA. Also, in Count VI, the gravamen of the alleged offenses is that Ocwen knew or should have known that the data it was using from prior servicers was inaccurate. The Servicing Standards and Metrics cited above as to Counts I, II, and V apply with equal or substantially equal force to Count VI.

Based on the foregoing, and the entire record, the Court finds that Count VI was covered by the consent judgment’s servicing-standard, monitoring, and enforcement regime. 8. Count VIII (“Servicing Policies and Procedures Violations”) In Count VIII, the Bureau alleges that Ocwen failed to maintain adequate servicing policies and procedures reasonably designed to ensure that it provided its personnel (and mortgage transferee personnel) with access to the accurate loan information needed to service borrower accounts, including but not limited to effectively respond to consumer complaints, implement foreclosure holds on accounts, and disclose known inaccuracies that may impact transferee servicers’ ability to comply with applicable laws and investor guidelines (DE 775 at 78-80). These alleged offenses violate the RESPA and Regulation X as well as the CFPA (Id. at 80).

On remand, the Bureau again argues that Ocwen “failed to demonstrate that the NMS Servicing Standards and Metrics cover the Bureau’s remaining claims” (including Count VIII) and in support cites “hundreds of facts, supporting exhibits and extensive loan level evidence showing that Ocwen,” e.g., boarded 1.38 million “critical data fields containing discrepancies requiring corrections for 628,166 borrowers” (DE 807 at 8). This suggests to the Court that that the NMS’ enforcement mechanisms were working, and to the extent discrepancies were uncovered, they should have been addressed through the available enforcement mechanisms.

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The Court finds that the alleged offenses proffered under Count VIII are covered by Servicing Standards including but not limited to I.B.1.,14 I.B.7.,15 I.E. (“Quality Assurance Systems Review”) (DE 12-1 at 12-13), II.A.,16 II B. (“Additional Oversight of Activities by Third-Party Providers) (DE 12-1 at 15-16), IV.C. (“Single Point of Contact”) (DE 12-1 at 23-26) and IV.M. (“Transfer of Servicing of Loans”) (DE 12-1 at 35-37). Additionally, Metric 5 “Policy/Process Implementation” (including, at 5.C., the “Single Point of Contact” (SPOC) program) (DE 12-4 at 25-26), Metric 6 (“Customer Experience”), Metrics 30, 31 and 32 (measuring loan modification process, testing SPOC interactions with borrowers and SPOC implementation and effectiveness) (DE 12-4 at 29-36) all measure the means by which policies, process, and borrower experiences could be measured and provided a basis for the Bureau to have found relief for the alleged offenses. Based on the foregoing, and the entire record, the Court finds that Count VIII was covered by the consent judgment’s servicing-standard, monitoring, and enforcement regime. 9. Count IX (“Foreclosure Violations”) Finally, in Count IX, the Bureau alleges Ocwen improperly initiated foreclosures when the borrower was on track towards a loan modification and other foreclosure-related misconduct in violation

14 “Servicer shall maintain procedures to ensure accuracy and timely updating of borrower’s account information, including posting of payments and imposition of fees. Servicer shall also maintain adequate documentation of borrower account information, which may be in either electronic or paper format” (DE 12-1 at 5) (emphasis added). 15 “Servicer shall adopt enhanced billing dispute procedures, including for disputes regarding fees. These procedures will include: a. Establishing readily available methods for customers to lodge complaints and pose questions, such as by providing toll-free numbers and accepting disputes by email; b. Assessing and ensuring adequate and competent staff to answer and respond to consumer disputes promptly; c. Establishing a process for dispute escalation; d. Tracking the resolution of complaints; and e. Providing a toll-free number on monthly billing statements” (DE 12-1 at 7-8).

16 “Servicer shall adopt policies and processes to oversee and manage foreclosure firms, law firms, foreclosure trustees, subservicers and other agents, independent contractors, entities and third parties (including subsidiaries and affiliates) retained by or on behalf of Servicer that provide foreclosure, bankruptcy or mortgage servicing activities” (DE 12-1 at 13-15) (emphasis added). Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 22 of 25

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of the RESPA and Regulation X and the CFPA (DE 775 at 80-82). Grouping Count IX with Counts III, IV, VII and VIII in its post remand brief, the Bureau again argues that Ocwen “failed to demonstrate that the NMS Servicing Standards and Metrics cover the Bureau’s remaining claims” (DE 807 at 8-9). As to Count IX, the Bureau specifically asserts in support that Ocwen “commenced foreclosure proceedings on 1,118 borrowers’ loans while still evaluating their applications; and foreclosed on 45 borrowers while evaluating them for loss mitigation assistance, despite promising borrowers that Ocwen had stopped the foreclosure process” (Id. at 9) (citations to the record omitted). The Court finds unpersuasive the Bureau’s argument that Ocwen’s alleged failure to disclose alleged misconduct reveals that such alleged misconduct was not covered by the NMS (Id.). Ocwen more persuasively argues that, like Count III, Count IX is covered by the NMS as the conduct complained of was exhaustively covered by the Servicing Standards and Metrics (DE 808 at 11-12).

The Court’s analysis of Count IX finds that the conduct complained of is covered generally by Servicing Standards I. (“Foreclosure and Bankruptcy Information and Documentation”) and more specifically, in extensive detail, by Servicing Standards IV. (“Loss Mitigation”) (DE 12-1 at 2-10, 18-34). In addition, the following Metrics apply to the allegations in Count IX: Metric 1.A. (“Foreclosure sale in error”) (Test questions ask, e.g., “2. Was the borrower in an active trial period plan (unless the servicer took appropriate steps to postpone sale)? 3. Was the borrower offered a loan modification fewer than 14 days before the foreclosure sale date (unless the borrower declined the offer or the servicer took appropriate steps to postpone the sale)?”) (DE 12-4 at 18); Metric 3.A. (“Pre-Foreclosure Initiation”), measuring the accuracy of account information (DE 12-4 at 21); Metric 3.B. “(Pre-Foreclosure Initiation Notifications”) (measuring, inter alia, whether required notifications were sent to the borrower “before 14 days prior to referral Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 23 of 25

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to foreclosure”) (DE 12-4 at 22); Metric 6.B.viii.a. (“Referred to foreclosure in violation of Dual Track Provisions”) (measuring whether “[l]oan was referred to foreclosure in error”) (DE 12-4 at 32), Metric 6.B.viii.b.(“Failure to postpone foreclosure proceedings in violation of Dual Track Provisions”) (measuring whether “[f]oreclosure proceedings allowed to proceed in error.”) (Id.), and Metric 30 (measuring loan modification process) (test questions ask, inter alia, “did the Servicer afford the borrower at least 30 days to submit any additional required documents from the last ADRL [Additional Document Request Letter] before referring the loan to foreclosure or proceeding to foreclosure sale?”) (Id. at 34).

Based on the foregoing, and the entire record, the Court finds that Count IX was covered by the consent judgment’s servicing-standard, monitoring, and enforcement regime. IV.

CONCLUSION As the Court previously opined, “[t]hat the Bureau now better understands the cause and ramifications of the servicing misconduct alleged in the D. C. Action and wishes to cast a wider statutory net over it does not avoid a res judicata bar” (DE 764 at 27) (internal citation omitted). The NMS’ forward looking enforcement regime spans the same Relevant Time Period the Bureau identifies in its Second Amended Complaint. The Bureau’s Release reserved its right to assert claims “other than conduct related to the Mortgage Servicing Practices asserted or that might have been asserted” in the 2013 action (DE 12-5 at 4) (emphasis added). The NMS, the lodestar against which the Court has reviewed the Bureau’s SAC contained the prospective-looking enforcement regime which covers conduct related to the mortgage servicing practices asserted. The Court’s claim-by-claim analysis leads it to the conclusion that the NMS Servicing Standards and Metrics preclude, based on res judicata, all of the claims asserted in Counts I-IX of the SAC.

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Based upon the foregoing, it is ORDERED AND ADJUDGED: Counts I-IX of the Bureau’s Second Amended Complaint are, pursuant to Norfolk Southern Corp. v. Chevron, U.S.A., Inc., 371 F.3d 1285 (11th Cir. 2004). Final judgment for Ocwen shall be entered by separate order of the Court pursuant to Rule 58. DONE AND ORDERED in Chambers at West Palm Beach, Palm Beach County, Florida, this 2nd day of May, 2023.

KENNETH A. MARRA United States District Judge

cc: All counsel of record Case 9:17-cv-80495-KAM Document 813 Entered on FLSD Docket 05/02/2023 Page 25 of 25