Ocwen
Financial Corporation (Ocwen or the Company) provides the following updates.
State
Regulatory Matters
As previously
disclosed, Ocwen is seeking timely resolutions to the regulatory actions taken against us on April 20, 2017 or shortly thereafter
by mortgage and banking regulatory agencies from 30 states and the District of Columbia and two state attorneys general that alleged
deficiencies in our compliance with laws and regulations relating to our servicing and lending activities. In the Company’s
Current Reports on Form 8-K filed with the Securities and Exchange Commission (SEC) on September 29, 2017 and October 4, 2017,
Ocwen made disclosures relating to resolutions with 15 of these states.
Ocwen
has now entered into additional agreements with Minnesota and Alabama to resolve the regulatory actions brought by these states.
These agreements generally contain key terms that are similar to the agreements Ocwen previously disclosed and which are summarized
below (the Multi-State Common Settlement Terms):
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Ocwen
will not acquire any new residential mortgage servicing rights until April 30, 2018.
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Ocwen
will develop a plan of action and milestones regarding its transition from the servicing system it currently uses, REALServicing®,
to an alternate servicing system and will not board any new loans onto the REALServicing system. This restriction on boarding
new loans does not apply to loans that are already serviced on the REALServicing system, including those that are subsequently
modified or those that are subsequently converted to an arrangement whereby Ocwen acts as sub-servicer.
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In
the event that Ocwen chooses to merge with or acquire an unaffiliated company or its assets in order to effectuate a transfer
of loans from the REALServicing system, Ocwen must give the applicable regulatory agency prior notice to the signing of any
final agreement and the opportunity to object. If no objection is received, the provisions of the first bullet point above
shall not prohibit the transaction, or limit the transfer of loans from the REALServicing system onto the merged or acquired
company’s alternate servicing system. In the event that an unaffiliated company merges with or acquires Ocwen or Ocwen’s
assets, the provisions of the first bullet point above shall not prohibit the transaction, or limit the transfer of loans
from the REALServicing system onto the merging or acquiring company’s alternate servicing system.
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Ocwen
will engage a third party auditor to perform an analysis with respect to its compliance with certain federal and state laws
relating to escrow by testing approximately 9,000 loan files relating to loans secured by residential real property in various
states and the District of Columbia.
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Ocwen
will develop and submit for review corrective action plans for any errors that are identified by the third party auditor and
will remediate any individual accounts impacted by such errors.
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Ocwen
will develop and submit for review a plan to enhance its consumer complaint handling processes.
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Ocwen
will provide financial condition reporting on a confidential basis as part of each state’s supervisory framework for
the next three years.
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In all
of the above-described agreements, Ocwen neither admitted nor denied liability.
None
of the agreements contain any monetary fines or penalties, although Ocwen will incur costs complying with the terms of these settlements,
including in connection with the escrow analysis and transition to a new servicing system. These agreements are generally documented
as consent orders or consent agreements that resolve the specific cease and desist or other order brought by the applicable regulatory
agency. Each agreement applies to the same Ocwen entities as were named in the initiating cease and desist or other order.
As of
October 11, 2017, the total number of states where we have reached a resolution is 17.
Ocwen
continues to seek timely resolutions with the remaining 14 regulatory agencies and two state attorneys general. If Ocwen is successful
in reaching such resolutions, they may contain some or all of the terms outlined above and may also contain additional terms.
There can be no assurance that Ocwen will be able to reach resolutions with the remaining regulatory agencies and state attorneys
general.
In the
event that Ocwen does not comply with the terms of these agreements or if Ocwen is otherwise found to have breached applicable
laws and regulations, this could lead to (i) administrative fines and penalties and litigation, (ii) loss of our licenses and
approvals to engage in our servicing and lending businesses, (iii) governmental investigations and enforcement actions, (iv) civil
and criminal liability, including class action lawsuits and actions to recover incentive and other payments made by governmental
entities, (v) breaches of covenants and representations under our servicing, debt or other agreements, (vi) damage to our reputation,
(vii) inability to raise capital or otherwise fund our operations and (viii) inability to execute on our business strategy. Any
of these occurrences could increase our operating expenses and reduce our revenues, hamper our ability to grow or otherwise materially
and adversely affect our business, reputation, financial condition, liquidity and results of operations.
Wholesale Forward Lending
The Company
has decided to exit the wholesale forward lending business, and has agreed to sell certain assets related to the business
to an undisclosed buyer. The buyer is expected to assume a facilities lease and to offer positions to certain Ocwen employees
in the business. Ocwen estimates that it will recognize a loss of approximately $7 million related to the divestiture in
its third quarter 2017 results. This loss is primarily related to the Company writing off the capitalized balance of internally
developed software for the wholesale forward lending business. Additionally, the Company estimates that it will incur an additional
$1 million to $2 million of severance expense following the closing of the transaction, which is expected to occur in the fourth
quarter, subject to customary closing conditions.
Ocwen remains
in retail forward lending and all existing channels of reverse mortgage lending.
Special Note Regarding
Forward-Looking Statements
This Current
Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by a reference
to a future period or by the use of forward-looking terminology. Forward-looking statements by their nature address matters that
are, to different degrees, uncertain. Our business has been undergoing substantial change which has magnified such uncertainties.
Readers should bear these factors in mind when considering such statements and should not place undue reliance on such statements.
Forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results to differ
materially. In the past, actual results have differed from those suggested by forward looking statements and this may happen again.
Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements
include those described in Ocwen’s reports and filings with the SEC, including its amended 2016 Annual Report on Form 10-K/A
and its current and quarterly reports since such date. Anyone wishing to understand Ocwen’s business should review our SEC
filings. Ocwen’s forward-looking statements speak only as of the date they are made and we disclaim any obligation to update
or revise forward-looking statements whether as a result of new information, future events or otherwise. Ocwen may post information
that is important to investors on our website.