Ocwen settles decade-long suit over BPO, hybrid valuation fees

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Loan servicing giant Ocwen has agreed to pay what could amount to tens of millions of dollars in refunds to settle allegations that it overcharged homeowners who got behind on their mortgage payments for “default-related services,” including broker price opinions (“BPOs”) performed by real estate brokers.

Ocwen continues to deny the claims leveled against it in a 2014 complaint, which alleged that Ocwen charged homeowners undisclosed mark-ups on BPOs and hybrid valuations to generate revenue for its loan servicing business.

“When home mortgage borrowers get behind on their payments and go into ‘default,’ Ocwen obtains a number of default-related services which purportedly are designed to protect the lender’s interest in the property,” the 2014 complaint alleged, such as property valuations. “To obtain these services, Ocwen funnels the work through its affiliated company, Altisource, who then orders these services using a network of third-party vendors.”

After marking up the fees charged by vendors — in some cases by 100 percent or more — Altisource would bill Ocwen, which would in turn bill homeowners, the complaint alleged.

While homeowners were informed in their mortgage disclosure that they’d be on the hook for default-related services if they fell behind on their loans, “Nowhere is it disclosed to borrowers that the servicer may engage in self-dealing to mark up the actual cost of those services to make a profit.”

A spokesman for Ocwen did not respond to Inman’s request for comment on the allegations, which it continues to deny, or the terms of the settlement.

If the settlement is approved by the court overseeing the case, as many as 330,377 homeowners who made their mortgage payments to Ocwen between 2010 and 2017 will have until Sept. 29, 2025 — more than a year and a half from now — to submit a claim entitling them to refunds estimated at $60 per BPO and $70 per hybrid valuation.

The deadline to request exclusion from the case comes up much sooner: July 12, 2024.

Details of the settlement, and instructions for filing a claim in the case, Weiner v. Ocwen Financial Corp., are available on a dedicated website, OcwenFeeSettlment.com.

While a refund of $60 or $70 may not sound like much, attorneys for Ocwen noted in a March 8 court brief that the company could, in theory, be on the hook to pay out as much as $53.83 million in refunds and “fee reversals,” plus as much as $8.95 million in attorneys fees’ and costs.

But Ocwen says many of the 330,377 homeowners it has identified as potentially eligible to file a claim didn’t actually pay for BPOs or hybrid valuations that were assessed to their accounts, “and therefore never suffered any losses.”

In their own court brief on the settlement, attorneys representing plaintiff David Weiner and others in the class-action lawsuit noted that the settlement doesn’t limit how many people can apply for refunds, and there is no cap on the total amount that can be paid to each borrower.

The amount actually paid out will ultimately depend on how many claims are submitted, and how many are deemed valid. But many of those who allegedly overpaid for BPOs and hybrid valuations are no longer Ocwen customers, and it could be difficult to track them down.

“During the lengthy period while this case was being litigated, a large percentage of class members severed their relationships with Ocwen due to foreclosures and other loan default-related events, as well as loan refinancings due to periods of lower interest rates,” attorneys for the plaintiffs said. “Because Ocwen no longer has the ability to send settlement checks directly to these class members, plaintiff’s counsel negotiated a settlement structure that allows class members a lengthy opportunity — a full 18 months from preliminary approval — to come forward and make claims for reimbursement of the fees at issue here.”

A court-appointed settlement administrator “will take active steps to locate and provide notice to class members, including via direct mail, email, and publication notice, with repeated outreach efforts being conducted by the settlement administrator during the claims period,” attorneys for the plaintiffs promised.

Going forward, the settlement would also require Ocwen to disclose to borrowers the markups charged by vendors providing BPO and hybrid valuations.

The Great Recession of 2007-09 and the resulting housing downturn created a number of legal issues for loan servicers, who in addition to collecting monthly payments for mortgage borrowers are also obligated to help distressed borrowers explore alternatives to foreclosure.

In 2013, Ocwen agreed to provide $2 billion in principal reductions to underwater borrowers and refund $125 million to nearly 185,000 foreclosed borrowers to settle allegations that it violated consumer protection laws and put thousands of homeowners at risk of foreclosure.

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Email Matt Carter