WASHINGTON -- Ocwen Financial Corp. will reduce struggling borrowers' loan balances by $2 billion in an agreement with federal regulators and 49 states over foreclosure abuses. The Consumer Financial Protection Bureau and state attorneys general announced the deal Thursday with the Atlanta-based company, one of the largest U.S. mortgage servicers. The regulators said Ocwen pushed borrowers into foreclosure through illegal actions, such as failing to promptly and accurately credit mortgage payments.
The company also miscalculated interest rates and charged borrowers improper fees, the regulators said. "We believe that Ocwen violated federal consumer financial laws at every stage of the mortgage servicing process," CFPB Director Richard Cordray (pictured above) said in a conference call with reporters. "We have concluded that Ocwen made troubled borrowers even more vulnerable to foreclosure."
Under the agreement, Ocwen also will refund a combined $125 million to about 185,000 borrowers who had been foreclosed upon from 2009 through 2012. It also agreed to change the way it manages mortgages. The company must stop "robo-signing" of documents, the practice of automatically signing off on foreclosures without a proper review. The agreement must be approved by a federal court in Washington.
Ocwen said in a statement it was pleased to have reached the settlement. The agreement "is in alignment with the same ultimate goals that we share with the regulators -- to prevent foreclosures and help struggling families keep their homes," the company said.
Ocwen is the fourth-largest mortgage servicer in the country and the biggest that isn't a bank. It specializes in servicing high-risk mortgages. Servicing companies collect payments from borrowers and handle customer services, loan modifications and foreclosures. Federal and state regulators have signed agreements with a number of large banks and mortgage processing companies over foreclosure abuses.
Ocwen's compliance with the settlement will be overseen by Joseph A. Smith Jr., the monitor for the $25 billion settlement reached in February 2012 between the federal government and the states and five major banks -- Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.
The housing crisis struck starting in 2007, as home values sank and millions of borrowers defaulted on their mortgages. The crisis brought more than 4 million foreclosures. Some mortgage-servicing companies had processed foreclosures without verifying documents. The CFPB, 49 states and the District of Columbia signed the agreement with Ocwen. Oklahoma is the only state that isn't participating.
The largest share of the mortgage relief, an estimated $342 million, is expected to go to Florida. The state's attorney general, Pam Bondi, said during the conference call that Florida has the highest foreclosure rate in the U.S.
See more about foreclosure settlements:
What the Chase Settlement Could Mean to Consumers
Robo-Signing Scandal: Hundreds More Military Members Were Victims
Foreclosure Settlement Money: Are States Using It the Right Way?
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