Carvelli v OCWEN Financial Who Regulates Whom? Who's Regulating the BANKS & SERVICER'S? FORECLOSURE COMPLAINTS UP STATES THE CFPB

Class Action Complaint

Plaintiff Karen A. Carvelli (“Plaintiff”), individually and on behalf of all other persons
similarly situated, by her undersigned attorneys, for her complaint against Defendants, alleges the
following based upon personal knowledge as to herself and her own acts, and information and
belief as to all other matters, based upon, inter alia, the investigation conducted by and through
her attorneys, which included, among other things, a review of the Defendants’ public documents,
conference calls and announcements made by Defendants, United States Securities and Exchange
Commission (“SEC”) filings, wire and press releases published by and regarding Ocwen Financial
Corporation (“Ocwen” or the “Company”), analysts’ reports and advisories about the Company,
and information readily obtainable on the Internet. Plaintiff believes that substantial evidentiary
support will exist for the allegations set forth herein after a reasonable opportunity for discovery.

NATURE OF THE ACTION
1. This is a federal securities class action on behalf of a class consisting of all persons
other than defendants who purchased or otherwise acquired Ocwen securities between May 11,
2015 and April 19, 2017, both dates inclusive (the “Class Period”), seeking to recover damages
caused by defendants’ violations of the federal securities laws and to pursue remedies under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule
10b-5 promulgated thereunder, against the Company and certain of its top officials.
2. Ocwen Financial Corporation is diversified financial services holding company.
The Company's primary businesses are the acquisition, servicing, and resolution of sub-performing
and nonperforming residential and commercial mortgage loans, as well as the related development
of loan servicing technology and business-to business e-commerce solutions for the mortgage and
real estate industries.
3. Founded in 1988, the Company is headquartered in West Palm Beach, Florida.
Ocwen’s stock trades on the New York Stock Exchange (“NYSE”) under the ticker symbol
“OCN.”
4. Throughout the Class Period, Defendants made materially false and misleading
statements regarding the Company’s business, operational and compliance policies. Specifically,
Defendants made false and/or misleading statements and/or failed to disclose that: (i) Ocwen
engaged in significant and systemic misconduct at nearly every stage of the mortgage servicing
process; (ii) the foregoing conduct, when it became known would subject the Company to
heightened regulatory scrutiny and potential criminal sanctions; (iii) as a result of the foregoing,
Ocwen’s public statements were materially false and misleading at all relevant times.
5. On April 20, 2017, the U.S. Consumer Financial Protection Bureau (“CFPB”)
issued a press release entitled “Consumer Financial Protection Bureau sues Ocwen for failing borrowers throughout mortgage servicing process,” reporting that the Company had generated
errors in borrowers’ accounts, failed to credit payments, illegally foreclosed on homeowners, and
charged borrowers for add-on products without their consent. The press release, in part:
WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB)
today sued one of the country’s largest nonbank mortgage loan servicers, Ocwen
Financial Corporation, and its subsidiaries for failing borrowers at every stage of
the mortgage servicing process. The Bureau alleges that Ocwen’s years of
widespread errors, shortcuts, and runarounds cost some borrowers money and
others their homes. Ocwen allegedly botched basic functions like sending
accurate monthly statements, properly crediting payments, and handling taxes
and insurance. Allegedly, Ocwen also illegally foreclosed on struggling
borrowers, ignored customer complaints, and sold off the servicing rights to loans
without fully disclosing the mistakes it made in borrowers’ records. The Florida
Attorney General took a similar action against Ocwen today in a separate lawsuit.
Many state financial regulators are also independently issuing cease-and-desist and
license revocation orders against Ocwen for escrow management and licensing
issues today.
“Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the
mortgage servicing process, costing some consumers money and others their
homes,” said CFPB Director Richard Cordray. “Borrowers have no say over who
services their mortgage, so the Bureau will remain vigilant to ensure they get fair
treatment.”
Ocwen, headquartered in West Palm Beach, Fla., is one of the nation’s largest
nonbank mortgage servicers. As of Dec. 31, 2016, Ocwen serviced almost 1.4
million loans with an aggregate unpaid principal balance of $209 billion. It services
loans for borrowers in all 50 states and the District of Columbia. A mortgage
servicer collects payments from the mortgage borrower and forwards those
payments to the owner of the loan. It handles customer service, collections, loan
modifications, and foreclosures. Ocwen specializes in servicing subprime or
delinquent loans.
The CFPB uncovered substantial evidence that Ocwen has engaged in significant
and systemic misconduct at nearly every stage of the mortgage servicing process.
The CFPB is charged with enforcing the Dodd-Frank Wall Street Reform and
Consumer Protection Act, which protects consumers from unfair, deceptive, or
abusive acts or practices, and other federal consumer financial laws. In addition,
the Bureau adopted common-sense rules for the mortgage servicing market that
first took effect in January 2014. The CFPB’s mortgage servicing rules require that
servicers promptly credit payments and correct errors on request. The rules also
include strong protections for struggling homeowners, including those facing
foreclosure. In its lawsuit, the CFPB alleges that Ocwen:

Serviced loans using error-riddled information: Ocwen uses a
proprietary system called REALServicing to process and apply borrower
payments, communicate payment information to borrowers, and maintain
loan balance information. Ocwen allegedly loaded inaccurate and
incomplete information into its REALServicing system. And even when
data was accurate, REALServicing generated errors because of system
failures and deficient programming. To manage this risk, Ocwen tried
manual workarounds, but they often failed to correct inaccuracies and
produced still more errors. Ocwen then used this faulty information to
service borrowers’ loans. In 2014, Ocwen’s head of servicing described
its system as “ridiculous” and a “train wreck.”
 Illegally foreclosed on homeowners: Ocwen has long touted its ability to
service and modify loans for troubled borrowers. But allegedly, Ocwen has
failed to deliver required foreclosure protections. As a result, the Bureau
alleges that Ocwen has wrongfully initiated foreclosure proceedings on at
least 1,000 people, and has wrongfully held foreclosure sales. Among
other illegal practices, Ocwen has initiated the foreclosure process before
completing a review of borrowers’ loss mitigation applications. In other
instances, Ocwen has asked borrowers to submit additional information
within 30 days, but foreclosed on the borrowers before the deadline. Ocwen
has also foreclosed on borrowers who were fulfilling their obligations under
a loss mitigation agreement.
 Failed to credit borrowers’ payments: Ocwen has allegedly failed to
appropriately credit payments made by numerous borrowers. Ocwen has
also failed to send borrowers accurate periodic statements detailing the
amount due, how payments were applied, total payments received, and
other information. Ocwen has also failed to correct billing and payment
errors.
 Botched escrow accounts: Ocwen manages escrow accounts for over 75
percent of the loans it services. Ocwen has allegedly botched basic tasks in
managing these borrower accounts. Because of system breakdowns and an
over-reliance on manually entering information, Ocwen has allegedly failed
to conduct escrow analyses and sent some borrowers’ escrow statements
late or not at all. Ocwen also allegedly failed to properly account for and
apply payments by borrowers to address escrow shortages, such as changes
in the account when property taxes go up. One result of this failure has been
that some borrowers have paid inaccurate amounts.
 Mishandled hazard insurance: If a servicer administers an escrow
account for a borrower, a servicer must make timely insurance and/or tax
payments on behalf of the borrower. Ocwen, however, has allegedly failed
to make timely insurance payments to pay for borrowers’ home insurance
premiums. Ocwen’s failures led to the lapse of homeowners’ insurance coverage for more than 10,000 borrowers. Some borrowers were pushed
into force-placed insurance.

Bungled borrowers’ private mortgage insurance: Ocwen allegedly
failed to cancel borrowers’ private mortgage insurance, or PMI, in a timely
way, causing consumers to overpay. Generally, borrowers must purchase
PMI when they obtain a mortgage with a down payment of less than 20
percent, or when they refinance their mortgage with less than 20 percent
equity in their property. Servicers must end a borrower’s requirement to pay
PMI when the principal balance of the mortgage reaches 78 percent of the
property’s original value. Since 2014, Ocwen has failed to end borrowers’
PMI on time after learning information in its REALServicing system was
unreliable or missing altogether. Ocwen ultimately overcharged borrowers
about $1.2 million for PMI premiums, and refunded this money only after
the fact.
 Deceptively signed up and charged borrowers for add-on products:
When servicing borrowers’ mortgage loans, Ocwen allegedly enrolled some
consumers in add-on products through deceptive solicitations and without
their consent. Ocwen then billed and collected payments from these
consumers.
 Failed to assist heirs seeking foreclosure alternatives: Ocwen allegedly
mishandled accounts for successors-in-interest, or heirs, to a deceased
borrower. These consumers included widows, children, and other relatives.
As a result, Ocwen failed to properly recognize individuals as heirs, and
thereby denied assistance to help avoid foreclosure. In some instances,
Ocwen foreclosed on individuals who may have been eligible to save these
homes through a loan modification or other loss mitigation option.
 Failed to adequately investigate and respond to borrower complaints:
If an error is made in the servicing of a mortgage loan, a servicer must
generally either correct the error identified by the borrower, called a notice
of error, or investigate the alleged error. Since 2014, Ocwen has allegedly
routinely failed to properly acknowledge and investigate complaints, or
make necessary corrections. Ocwen changed its policy in April 2015 to
address the difficulty its call center had in recognizing and escalating
complaints, but these changes fell short. Under its new policy, borrowers
still have to complain at least five times in nine days before Ocwen
automatically escalates their complaint to be resolved. Since April 2015,
Ocwen has received more than 580,000 notices of error and complaints
from more than 300,000 different borrowers.
 Failed to provide complete and accurate loan information to new
servicers: Ocwen has allegedly failed to include complete and accurate
borrower information when it sold its rights to service thousands of loans to
new mortgage servicers. This has hampered the new servicers’ efforts to
comply with laws and investor guidelines.
The Bureau also alleges that Ocwen has failed to remediate borrowers for the
harm it has caused, including the problems it has created for struggling
borrowers who were in default on their loans or who had filed for bankruptcy.
For these groups of borrowers, Ocwen’s servicing errors have been particularly
costly.
(Emphasis added.)
6. On that same day, it was further reported that the North Carolina Office of the
Commissioner of Banks and state regulators from more than twenty states issued a cease-anddesist order (the “Order”) to Ocwen’s subsidiaries as a result of the Company’s mishandling of
consumer escrow accounts and a deficient financial condition. The Order “specifically prohibits
the acquisition of new mortgage servicing rights and the origination of mortgage loans by Ocwen
Loan Servicing (NMLS number 1852), a subsidiary of Ocwen, until the company is able to prove
it can appropriately manage its consumer mortgage escrow accounts.”
7. On this news, Ocwen’s share price fell $2.91, or 53.89%, to close at $2.49 on April
20, 2017.
8. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline
in the market value of the Company’s securities, Plaintiff and other Class members have suffered
significant losses and damages.