Supt. Lawsky Announces Agreement with Goldman, Ocwan, Litton on
Groundbreaking New Mortgage Practices
Sale of Goldman's Subsidiary, Litton, Conditioned on New
Servicing Practices
NEW YORK, NY (09/01/2011)(readMedia)-- Superintendent of
Financial Services Benjamin M. Lawsky today announced that New
York's Department of Financial Services and Banking Department have
entered into an agreement with Goldman Sachs Bank, Ocwen Financial
Corp. and Litton Loan Servicing LP to adhere to landmark new
Mortgage Servicing Practices. The agreement was required by the
Superintendent as a condition to allowing Ocwen's acquisition today
of Goldman Sachs' mortgage servicing subsidiary, Litton. With the
Litton acquisition, Ocwen's mortgage servicing entity, Ocwen Loan
Servicing, LLC, will become the 12th largest servicer in the
nation, handling a very large number of customers in foreclosure or
facing possible foreclosure.
"This agreement provides important
consumer protections for homeowners who have found themselves in
dire straits due to the financial crisis," Superintendent Lawsky
said. "Our agreement sets a new higher standard for the residential
mortgage servicing industry, whose troubling foreclosure and
servicing practices we have been investigating along with other
regulators across the country. Goldman Sachs, Ocwen and Litton have
now all agreed to put the rights of homeowners ahead of their
profit margins by implementing these changes."
As a further condition to his issuance of
a "No Objection" letter on the Litton acquisition, Lawsky obtained
a commitment from Goldman Sachs to assist affected homeowners by
writing down approximately $53 million in unpaid principal.
Goldman's commitment will forgive 25 percent of the principal
balance all 60-day delinquent home loans in New York serviced by
Litton and owned by Goldman Sachs as of August 1.
Importantly, the agreement today is a
condition of the acquisition and does not preclude any future
investigations of past practices or release any future claims or
actions whatsoever.
The new Agreement on Mortgage Servicing
Practices that Goldman, Ocwen and Litton have signed makes
important changes in the mortgage servicing industry which, as a
whole, has been plagued by troublesome and unlawful practices.
Those practices include: "Robo-signing," referring to affidavits in
foreclosure proceedings that were falsely executed by servicer
staff without personal review of the borrower's loan documents and
were not notarized in accordance with state law; weak internal
controls and oversight that compromised the accuracy of foreclosure
documents; unfair and improper practices in connection with
eligible borrowers' attempts to obtain modifications of their
mortgages or other loss mitigation, including improper denials of
loan modifications; and imposition of improper fees by
servicers.
The Agreement makes the following
changes:
1. Ends Robo-signing and imposes staffing
and training requirements that will prevent Robo-signing.
2. Requires servicers to withdraw any
pending foreclosure actions in which filed affidavits were
Robo-signed or otherwise not accurate.
3. Requires servicers to provide a
dedicated Single Point of Contact representative for all borrowers
seeking loss mitigation or in foreclosure, preventing borrowers
from getting the runaround by being passed from one person to
another. It also restricts referral of borrowers to foreclosure
when they are engaged in pursuing loan modifications or loss
mitigation.
4. Requires servicers to ensure that any
force-placed insurance be reasonably priced in relation to claims
incurred, and prohibits force-placing insurance with an affiliated
insurer.
5. Imposes more rigorous pleading
requirements in foreclosure actions to ensure that only parties and
entities possessing the legal right to foreclose can sue
borrowers.
6. For borrowers found to have been
wrongfully foreclosed, requires servicers to ensure that their
equity in the property is returned, or, if the property was sold,
compensate the borrower.
7. Imposes new standards on servicers for
application of borrowers' mortgage payments to prevent layering of
late fees and other servicer fees and use of suspense accounts in
ways that compounded borrower delinquencies and defaults.
8. Requires servicers to strengthen
oversight of foreclosure counsel and other third party vendors, and
imposes new obligations on servicers to conduct regular reviews of
foreclosure documents prepared by counsel and to terminate
foreclosure attorneys whose document practices are problematic or
who are sanctioned by a court.
Ocwen and Litton are immediately
taking steps to implement these servicing practices. Goldman, which
is exiting the mortgage servicing business with the sale of Litton,
has agreed to adopt these servicing practices if it should ever
reenter the servicing industry.
