Business

Servicer Ocwen grows as borrowers groan

Mortgage servicer Ocwen is growing into a $500 billion behemoth — on the backs of bondholders and troubled borrowers.

Just last month, Ocwen, which processes residential mortgage payments, capped off a roughly three-year acquisition binge by acquiring $39 billion in servicing rights from Wells Fargo.

Banks have been dumping their servicing rights, and Ocwen has been snatching them up. This deal and others, with Goldman Sachs and JPMorgan Chase, will add up to a $500 billion servicing portfolio, according to a research note from Moody’s Investors Service.

But the nation’s fourth-largest mortgage servicer has ridden roughshod over homeowners, who cannot switch servicers if they don’t like working with Ocwen.

“We believe Ocwen violated federal consumer financial laws at every stage of the mortgage servicing process,” said Richard Cordray, director of the Consumer Financial Protection Bureau.

”After examining the potential violations, we have concluded that Ocwen made troubled borrowers more vulnerable to foreclosure,” Cordray added in December when announcing a $2.2 billion settlement of accusations against the company.

The deal sounds big, with $2 billion in principal reductions for struggling homeowners, including nearly $300 million for New York. But those costs will be borne by others, such as pension funds holding the mortgage-backed securities.

Ocwen will pay just $67 million in cash to victims of wrongful foreclosure. The company got off without admitting wrongdoing, and no executives were slapped with criminal charges.

It’s a raw deal, experts said.

“Bondholders are essentially taking a more direct hit as a result of those principal reductions,” said Roelof Slump, managing director at Fitch Ratingse.

Ocwen said the deal provides “clarity” and releases it from liability for servicing, modification and foreclosure practices.