It’s been a year of settlements for Ocwen Financial.
For example, earlier this year, Ocwen reached a $223 million settlement with the California Department of Business Oversight, ridding itself of the restrictions that hampered its mortgage business in California for more than two years.
Separate of that, over the last few months, Ocwen began settling with some of the 31 states that took regulatory actions against the nonbank earlier this year over alleged escrow issues, restricting the company’s ability to acquire new mortgage servicing rights and originate new loans.
Back in July, Ocwen agreed to pay at least $49 million to settle a class action lawsuit over the nonbank restating its 2013 and 2014 earnings after its auditor found a potential “material weakness” in the way it valued and recorded a financial transaction.
Monday saw more of the same.
On Monday, Ocwen disclosed that it reached more settlements in various matters, including an additional settlement with investors related to the company’s previously restated earnings, and a settlement with CIT Bank over a 2013 MSR deal.
And while Ocwen’s previous settlements this year have all included the company paying out money or agreeing to various operational changes, the settlement with CIT Bank will see Ocwen on the receiving end of a settlement payout.
According to a filing with the Securities and Exchange Commission, the settlement with CIT Bank will see the company pay Ocwen $29.9 million for “certain claims arising from indemnification obligations under a 2013 transaction pursuant to which Ocwen acquired certain mortgage servicing rights and related servicing advance receivables from OneWest.”
OneWest Bank has ties to the current administration.
Department of the Treasury Secretary Steven Mnuchin and his partners at Dune Capital Management formed OneWest in 2009 after buying the remains of IndyMac Federal Bank from the Federal Deposit Insurance Corp.
Dune Capital Management then sold OneWest and Financial Freedom, a reverse mortgage servicer owned by OneWest, to CIT Group in 2015 for a profit.
Ocwen’s SEC filing does not provide additional details on the settlement with CIT, but CIT’s most recent 10-Q filing provides much more background on what led to this settlement.
From CIT’s filing:
In connection with the OneWest acquisition, CIT assumed the obligation to indemnify Ocwen Loan Servicing, LLC against certain claims that may arise from servicing errors, which are deemed attributable to the period prior to June 2013, when OneWest sold its servicing business to Ocwen, such as repurchase demands, non-recoverable servicing advances and compensatory fees imposed by the GSEs for servicer delays in completing the foreclosure process within the prescribed timeframe established by the servicer guides or agreements, exclusive of losses or repurchase obligations and certain agency fees, and which are limited to an aggregate amount of $150 million for claims noticed by February 28, 2017 to CIT.
As of September 30, 2017, the cumulative indemnification payments totaled approximately $56 million, which reduced the Company’s $150 million maximum potential indemnity obligation to Ocwen.
On August 12, 2016, Ocwen filed a Demand for Arbitration against CIT alleging that CIT failed to meet its contractual obligations to indemnify Ocwen for losses allegedly suffered in connection with the sale. Among other things, Ocwen alleges that CIT failed to perform its obligations under the sale agreement and breached its representations and warranties in the agreement.
In a separate SEC filing from Monday, CIT confirmed the $29.9 million settlement and said that it is paying the settlement out of its legal reserves.
While Ocwen will see a windfall of nearly $30 million in this settlement, Ocwen’s new settlement related to its restated earnings will wipe out that money entirely, plus a little more.
Ocwen also said Monday that it reached an agreement in principle to settle an “opt-out” securities fraud action brought on behalf of certain company shareholders who sued after Ocwen admitted to misstating its net income for the last three quarters of 2013 and the first quarter of 2014 due to a flaw in the company’s system.
Although the settlement is not finalized, if the settlement is approved as it is currently drawn up, this new agreement will include an aggregate cash payment of $36 million.
“While the company believes that it has sound legal and factual defenses, Ocwen agreed to this settlement in order to avoid the uncertain outcome of trial and the additional expense and demands on the time of its senior management that a trial would involve,” the company said in its SEC filing. “In the event the settlement is not finalized, the litigation would continue and we would vigorously defend the allegations made against Ocwen.”
Ocwen restating its financials also led to a $49 million class action settlement, which the company announced earlier this year.
