Ocwen, one of the largest loan servicers in the United States, is getting plenty of big ink this week. One former mortgage company executive wrote, "Think of Ocwen as the SS Prison Guards carrying out the financial holocaust* for the large banks." The New York Post wrote, "The latest news about Ocwen is so damning the loan-servicing company has entered ex-Countrywide boss Angelo Mozillo territory." Those are some pretty harsh words. If the allegations by NY's Department of Financial Services are true, those words are well deserved. They also highlight new whistleblower opportunities.
We have long been involved with litigation against special servicers on the commercial side of the real estate industry. The Ocwen allegations, however, open the door for whistleblower opportunities under the federal False Claims Act. Why? Because shoddy servicing leads to increased foreclosures. Since most home mortgages are insured by the the FHA, Fannie Mae or Freddie Mac, those foreclosures mean increased burdens for taxpayers. Banks must also certify to the government that they are in compliance with FHA and HUD regulations. If the claims by New York State are true, they are certainly not in compliance.
So what exactly did Ocwen do wrong? According to NY's banking superintendent, Benjamin Lawsky, Ocwen backdated thousands of letters to homeowners that offered the opportunity to modify their loans. By depriving them of the window to seek modification, Ocwen may have caused thousands or tens of thousands of homeowners to lose their homes.
Worse, Lawsky claims that Ocwen did nothing after being alerted to the problem by an internal whistleblower. The servicing giant neither fixed the problem nor alerted affected homeowners and regulators. Says Lawsky, “Ocwen’s indifference to such a serious matter demonstrates a troubling corporate culture that disregards the needs of struggling borrowers... The existence and pervasiveness of these issues raise critical questions about Ocwen's ability to perform its core function of servicing loans."
The New York Post reports that Ocwen responded to the allegations by saying, "I don't want to give the impression this was backdating or purposeful backdating."
Ocwen has been in trouble before. Two years ago the company was accused of misstating mortgage values and trying to silence homeowners who complained.
We have long believed that the residential mortgage servicing industry is plagued with fraud and abuse. We also believe that lenders have their hand in the abuse. Banks have done a terrible job with HAMP loan modifications. In our opinion, both banks and servicers would rather not be bothered with modifications. And remember, since most mortgages are backed by Fannie and Freddie, banks have little financial incentive to keep folks in their homes. If the mortgage defaults, taxpayers are there for the bailout.
We believe there are many opportunities for whistleblowers here. Anyone in the residential mortgage servicing or lending industry with inside or original source information about abuse or fraud may be eligible for a whistleblower award. The federal False Claims Act pays whistleblowers up to 30% of whatever the government collects. The Financial Institutions Reform Recovery and Enforcement Act may pay a whistleblower award of up to $1.6 million if a federally insured bank is involved.
Need more information or think you have information? Give us a call today. Whistleblower awards are paid on a first come, first serve basis. To qualify under the False Claims Act, a lawsuit must first be filed under seal in federal court. Reporting the wrongful conduct to a hotline does not qualify you for an award.
*[Ed. Note: The title for this blog and the quote come from published sources. We are reporting on events and do not wish to offend anyone by use of the word "holocaust." We understand the Holocaust is a tragedy beyond description and almost beyond human comprehension.]
May 2017 - We are now seeking clients for an Ocwen class action. Please click on the link above for more details or go to our investigations page.