Ocwen Financial (OCN) is almost in the clear with the National Mortgage Settlement after more than a year of scrutiny due to problems with the servicer’s Internal Review Group (IRG).
“After a review of the issues I found with Ocwen’s IRG’s integrity and subsequent review of its work to address these problems, I have reported to the Court that I now have a measure of assurance that the issues with Ocwen’s IRG’s independence, competency and capacity have been sufficiently addressed,” said Joseph Smith, Jr., Monitor of the National Mortgage Settlement.
Smith’s office announced in December of 2014 that it did not trust Ocwen’s own internal reviews and the documents they provide after a company employee contacted a member of the monitoring committee and alleged serious deficiencies in the IRG process.
In May, the office released an update on the findings, saying Ocwen properly addressed its noncompliance and independence issues to a satisfactory standard. The report also found that there were in fact errors in Ocwen’s internal review.
Smith brought on McGladrey, an accounting firm, to determine whether Ocwen had been meeting the settlement's conditions.
“We are pleased that after more than one year of intense scrutiny and investigation by the Monitor, our original testing was substantially validated. The Monitor appears to have regained confidence in our Internal Review Group and our overall compliance with the National Mortgage Settlement,” Ocwen said in a statement.
These two chartw for test periodw seven and eight show the comparisons between McGladrey’s results and the IRG’s answers.
Click to enlarge
(Source: National Mortgage Settlement)
Click to enlarge
(Source: National Mortgage Settlement)
“With the exception of Metric 19 in the first quarter of 2014, the IRG’s testing for both quarters of 2014 was not significantly different from McGladrey’s independent testing,” said Smith.
“These results, along with the changes Ocwen made to its IRG, have given me a measure of assurance regarding my confidence in the current independence, capacity and competency of the IRG. These results and changes have also allowed me to determine that the IRG has sufficient ability to effectively implement and execute its work under the Settlement,” Smith continued.
And as for Metric 19, it tests whether the servicer is complying with the requirement to notify borrowers of any missing or incomplete documents in a loan modification application in a timely manner.
Ocwen submitted a corrective action plan (CAP) that identified and addressed the root cause of its fail.
“My professionals and I reviewed the CAP and determined that it should sufficiently address the fail. Ocwen is currently implementing the CAP, and cure period testing will resume in the third quarter of 2015,” said Smith.
From here, Smith’s office will report on Ocwen’s performance for the third and fourth calendar quarters of 2014 in the coming months.
“In that report and subsequent reports, I will provide updates on the status of Ocwen’s corrective actions regarding its letter-dating issues. I anticipate that Ocwen will complete these corrective actions and the IRG will resume its testing of the impacted metrics in the third quarter of 2015,” said Smith.
However, this does not mean that Ocwen is fully out of the Smith’s watchful eye.
Smith concluded saying, “After reviewing McGladrey’s independent retesting of the at-risk metrics and the changes Ocwen made to its IRG, I have determined that Ocwen’s IRG is now sufficiently independent, competent and capable of effectively implementing and executing its work under the Settlement. My team and I will continue to monitor Ocwen’s IRG closely.”
