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California appoints auditor to examine Ocwen treatment of borrowers

California says it can seek repayment and penalties if auditor finds Ocwen violated mortgage servicing laws

California, as part of a consent order earlier this year, has named an auditor to assess whether Ocwen Financial Corp.’s mortgage servicing complies with state and federal laws.

If the review finds violations, the state Department of Business Oversight can seek repayment of funds for injured consumers as well as penalties against the Atlanta bill-collecting and foreclosure specialist, officials said Tuesday.

In a national settlement with the Consumer Financial Protection Bureau last year, Ocwen agreed to provide $268 million in relief to California homeowners over alleged foreclosure abuses.

Jan Lynn Owen, the state department’s commissioner, said Fidelity Information Services was chosen from an initial field of 31 candidates to fill the auditor position, created under a Jan. 23 consent order between Ocwen and the department.

The consent order resolved an enforcement action over Ocwen’s failure for more than a year to provide the department with loan file information needed for a routine regulatory examination. The order also required Ocwen to pay $2.5 million in penalties.

Fidelity will examine a sample of loan files and report on Ocwen’s compliance with the 2012 Homeowner Bill of Rights, the California Residential Mortgage Lending Act and other state and federal laws and regulations, the department said.

Fidelity also will review Ocwen’s practices, procedures and staffing levels to identify weaknesses that could undermine the firm’s ability to treat mortgage borrowers as required by law. Ocwen will have to adopt an action plan to correct any deficiencies identified by the auditor.

Ocwen, one of several major mortgage-service providers not affiliated with banks, has acquired rights to collect payments on hundreds of billions of dollars in home loans.

A specialist in handling troubled subprime borrowers, it was thought to have considerable expertise, but complaints mounted as the company mushroomed over the last five years.

As of March 31, Ocwen serviced 366,955 California mortgages with a total unpaid principal balance of $92.4 billion — 24% of the company’s U.S. portfolio.

In a separate settlement in New York, the company agreed to pay $150 million for relief of homeowners in that state, where it services $27 billion in home loans, 7% of the portfolio.

The Department of Business Oversight information and complaint number is (866) 275-2677.

Follow @ScottReckard for news of banks and home loans

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