Eight Out of Nine Ain’t Bad

[dropcap]A[/dropcap]s a result of the robo-signing signing scandal and other foreclosure abuses, many servicers, including Ocwen, were sued by the Federal government.  A settlement was reached and as part of that settlement, the servicers are being monitored on 33 different metrics to see if they are complying with the agreement.  As it turns out, Ocwen Financial failed a test to determine whether it had notified borrowers of missing or incomplete documents for loan modifications in a timely manner, according to the national mortgage settlement monitor.

Joseph A. Smith Jr., the settlement monitor, plans to file a report Thursday with the U.S. District Court for the District of Columbia outlining corrective actions taken by Ocwen, which passed eight other tests. In December, Smith launched an investigation of Ocwen saying he could not rely on the Atlanta servicer’s internal review process.

The retesting of metrics began last year after a whistle-blower contacted Smith claiming that Ocwen was selecting its own samples of loan files instead of taking a statistical sample. Smith then created a hotline to allow any concerned employees to contact him. The results of the current review by the independent accounting firm McGladrey show that Ocwen failed just one metric, on loan mod documentation, that it had previously claimed to have passed. The company passed eight other tests including one that its internal review group claimed to have failed on terminating force placed insurance agreements.

To put Ocwen’s results in perspective, last year, Green Tree Servicing failed eight tests during one testing period, prompting further scrutiny of nonbank servicers’ processes.

The settlement allows banks and servicers to correct all violations, and it only subjects them to financial penalties if their mistakes reach a specific “error threshold” after corrective actions have been taken. No bank or servicer has yet paid financial penalties for failing any of the 33 metrics being tested by independent reviewers working for Smith. This should come as no surprise.

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