Ocwen Financial Corp. will pay $2.5 million and hire outside accountants to settle a dispute with California, which had threatened to suspend the license of the mortgage payment collector and foreclosure specialist.
State financial regulators said Friday that they would select a third-party auditor to ensure that Ocwen provides the loan file information needed for the state to ensure the company is complying with state mortgage lending laws.
As first reported by the Los Angeles Times last week, the California Department of Business Oversight had moved in October to pull Ocwen's license after spending more than a year in what it said was an unsuccessful effort to obtain the information.
"The Department is committed to supporting a fair and secure financial services marketplace for all California consumers," Jan Lynn Owen, the commissioner for business oversight, said in a statement. "This settlement allows us to move forward and ensure that Ocwen is meeting its obligations under the law."
Run-ins with state and federal regulators over botched handling of troubled borrowers and foreclosures have sent Ocwen's stock reeling. And its many woes are being compounded by angry and bloodthirsty investors.
Its shares fell by $1.30 Friday to $6.35, down 17% on news that a hedge fund had accused an affiliate of default and had shorted Ocwen stock, betting it would decline further.
Then, after the close of trading, came news that a group of large investors had taken the first step toward suing Ocwen, accusing it of having failed to properly collect payments on $82 billion of home loans.
David Millar, an outside spokesman for the company, did not immediately reply to phoned and emailed requests for comment.
The Department of Business Oversight said it retains the ability to pursue enforcement action against Ocwen should the examination of the loan files uncover substantive violations of laws designed to protect mortgage loan consumers.
"This allows us to get down to the business of doing our job for consumers and determining if Ocwen has followed the law," said Owen's spokesman, Tom Dresslar. "We're pleased this frustrating skirmish over what should have been a routine matter is finally resolved."
In additional to the $2.5-million penalty and paying for the audit, Ocwen has to cover the state agency's administrative costs for the case.
Ocwen, based in Atlanta, is the largest of a group of specialty mortgage servicers that have taken over responsibilities for collecting on billions of dollars in home loans, many of them troubled, from major banks.
The settlement prohibits Ocwen from taking on any new California customers until the business oversight agency determines the firm can respond quickly and fully to requests for information.
What's more, Ocwen will have to adopt an action plan to correct any deficiencies identified by the auditor. The state agency must approve the plan, and the auditor will oversee its implementation.
In return, California will withdraw its effort to suspend Ocwen's state license.