In addition to the lawsuit filed in U.S. District Court in Florida, more than 20 state regulators took action against the company, limiting its operations in their states.
The dual actions caused the company's stock to plunge nearly 54% on Thursday. Shares edged up 0.8% to $2.52 on Friday morning.
The federal consumer agency alleged that Ocwen conducted an error-plagued operation that failed to credit borrower payments, sent inaccurate statements and didn't make insurance payments on time, leading to a lapse of coverage.
The West Palm Beach, Fla., company also was accused of illegally starting foreclosure on at least 1,000 consumers and relying on a system to service loans that even an Ocwen executive called "ridiculous" and a "train wreck," the bureau said in a news release.
“Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” bureau Director
Ocwen, in a statement, called the consumer agency's allegations "inaccurate and unfounded" and promised to "vigorously defend" against the lawsuit.
"The CFPB suit is primarily based on the CFPB's flawed review of data and its self-serving conclusion about isolated instances where Ocwen self-identified ways we can do better," the company said.
The North Carolina Office of the Commissioner of Banks said the majority of the state actions stop the firm from acquiring additional mortgage-servicing rights or originating loans until Ocwen can properly manage its existing escrow accounts.
In a cease-and-desist order, the North Carolina commissioner said that according to a business plan Ocwen submitted to the state regulators, the company might not be able to remain afloat if it fixed its problems, given the considerable costs to upgrade its systems and anticipated regulatory penalties.
Ocwen said it received the orders from state regulators and is "in the process of reviewing them in detail."
The consumer bureau alleged problems at the company are wide ranging and include ignoring consumer complaints, deceptively signing people up for add-on products and bungling the foreclosure process.
For example, Ocwen foreclosed on borrowers before reviewing their loss-mitigation applications and even foreclosed on people who were accepted and fulfilling obligations under the program, the bureau alleged. In some cases, Ocwen asked borrowers for more information and gave them 30 days to submit it but foreclosed before that deadline.
In its lawsuit, the CFPB said Ocwen's use of an internal system, known as REALServicing, exacerbated problems. The system frequently failed and generated errors, requiring workers to employ manual workarounds that simply produced further inaccuracies, the agency said.
As of Dec. 31, Ocwen serviced nearly 1.4 million loans with an unpaid principal balance of $209 billion, according to the consumer bureau.
In February, Ocwen reached a separate agreement with California regulators and agreed to pay $225 million in refunds and loan forgiveness to Californians to settle allegations that sloppy practices led to violations of state and federal mortgage rules over the last several years.
The deal allowed the company to add new California mortgages to its books, which it had been barred from doing since January 2015.
The actions by the federal and state governments are the latest black eye for Ocwen, which grew to become one of the nation's largest nonbank mortgage-servicing firms after the housing crash but has been swamped by regulatory problems and consumer complaints.
In 2013, it reached a $2.1-billion national settlement with 49 states and the federal consumer bureau for the kinds of issues outlined in Thursday's lawsuit.
Times staff writer James Rufus Koren contributed to this report.
Follow me @khouriandrew on Twitter
April 21, 9:15 a.m.: This article was updated with Ocwen's stock price and additional details from the CFPB lawsuit.