Updated April 25, 2012 by popular request
Texas Jury Rules Against Ocwen
Ocwen Financial Corporation ("Ocwen") is a vertically integrated multi-billion dollar, publicly traded (NYSE: OCN) financial services holding company, engaged in a variety of businesses related to mortgage servicing, real estate asset management, asset recovery and technology. Headquartered in
Within a 12 month period this company has lost two major lawsuits alleging fraud, malice, misrepresentation and manipulation totaling $14.5M. Other allegations have been made by former and current employees including the intentional destruction of information, and document forgery.
Why do so many people claim that Ocwen is ripping them off and wrongfully foreclosing on their homes?
Is Ocwen really the bad guy?
This is the first in a series of stories about this company, Ocwen services sub-prime mortgages. This means they service mortgages for people that have had trouble paying their bills in the past. And Ocwen services a lot of these, nearly 400,000 customers.
As part of this investigation we decided to review a typical Ocwen customer, and a not so typical Ocwen customer. We will call them Mr. Smith and Mr. Jones (these are real Ocwen customers) who have ask to not be identified because of pending legal action.
Mr. Smith just had the loan servicing rights acquired by Ocwen in August of 2005. Mr. Smith has homeowners insurance through Prudential, his premiums are paid and current. In September of 2005 Mr. Smith paid his regular monthly bill to Ocwen with his old account #.
Mr. Smith had not received his new payment information from Ocwen and did not want to be late on his payment. Ocwen cashed this payment and on Sept 22nd sent him a letter (to the wrong address), stating he was late on house payment this letter did not contain his new account and payment information.
Mr. Smith contacted Ocwen numerous times in writing and on the phone trying to resolve this matter. Many times Mr. Smith would be routed to customer representatives that spoke very poor or unintelligible English or would be disconnected.
In October Mr. Smith still had not received his new payment information and again sent another payment to Ocwen, which again they cashed and again sent a letter, this time threatening foreclosure.
In November of 2005 Mr. Smith finally received his payment information, the statement showed he was 4 months behind (yes 4 months when he had only been a customer for 3) in his payments and fees had been added that he did not understand, such as homeowners insurance and legal fees and late payment fees, totaling almost $2600. Mr. Smith made another payment in Nov 2005 which was returned by Ocwen stating they could not accept partial payments.
Mr. Smith was now receiving nearly daily calls from Ocwen collections, and Mr. Smith responded in writing trying to rectify the situation. In December Mr. Smith received another statement again with a promise of foreclosure and new fees added in order to become current Ocwen now claimed he had to pay a sum of almost $3600.
Now these fees were different from the statement he had received the month before for the same items. Homeowners insurance went up $120, legal fees increased by $277 and the house payment itself went down by $38.
How is this possible?
A former employee claims he knows exactly how it’s possible. “The RealServicing software used by Ocwen and the Nightly Processing that reconciles the loan accounts doesn’t work and hasn’t for several years. That’s why customers get different payment information from month to month. It was a running joke in IT on how long the system would be down everyday when it ran. This whole process generated huge error logs that no one ever reviewed and it had been clear to everyone involved in the process that it has major problems”.
Ocwen has sued a former consultant that performed a review on this software claiming he has posted confidential information on the Internet and reported this information to Government Agencies and this consultant has already testified in a case against the company in which Ocwen was hit with a $3 Million verdict in Guzman V. Ocwen. This testimony was specific on the problems with Ocwen software and account reconciliation.
We contacted this consultant for comment and were informed that because of an Injunction granted to Ocwen he could not discuss the matter, and was prevented from testifying in another case in which he was listed as a witness and the jury awarded the plaintiff $11.5 Million in damages in Davis V. Ocwen. However a hearing was being set to Vacate the Injunction that prevented the consultant from discussing the details of his work at the company.
Other former and current employees have confirmed this information and noted that Management has been aware of these issues at the highest levels inside the company. Two employees have even tried to get the company to take action to resolve the problems but have not been successful.
WOW. If the company is aware of these problems why haven’t they done something to fix it?
Ocwen has not responded to these specific issues yet but has commented and currently claim that they are not intentionally foreclosing on homes. The CEO William Ereby has stated publicly that the company doesn’t make money on foreclosures that their profit comes from servicing the loans themselves.
If this is true then why are their an overwhelming number of reports freely available on the internet that confirm the Mr. Smith experience with the company?
Why are there so many lawsuits pending against Ocwen?
Next month we will continue this series on Ocwen and report on Mr. Jones a very unusual Ocwen customer.
COURT OF APPEALS OF TEXAS, FIRST DISTRICT, HOUSTON
2006 TX App. Ct. Briefs 363C; 2006 TX App. Ct. Briefs LEXIS 949
October 30, 2006
On Appeal from the 212th District Court, Galveston County, Texas,
Initial Brief: Appellee-Respondent
COUNSEL: [**1] William H. Oliver, State Bar No. 15265200, Federal ID No. 13375, PIPKIN, OLIVER & BRADLEY, L.L.P., 1020 N.E. Loop 410, Ste. 810, San Antonio, Texas 78209, Telephone: (210) 820.0082, Telecopier: (210) 820.0077.
ORAL ARGUMENT REQUESTED
n1 It may be somewhat confusing as to the Ocwen entity that is the Defendant. At the start of this litigation, Ocwen was Ocwen Federal Bank, F.S.B. After entering the Consent Decree in 2004, Ocwen elected to "debank" and was no longer subject to supervision of the Office of Thrift Supervision or subject to the Consent Decree. Ocwen then became Ocwen Loan Servicing, LLC. (RR 5, pp. 13-15, 53)
B. No Privity is Required.
If, in context of a transaction in goods or services, any person engages in an unconscionable course of action which adversely affects a consumer, that person is subject to liability under the DTPA (citations omitted).
See Flenniken, supra at 707. In Flenniken, the bank's unconscionable cause of action occurred after the original note was assigned to the bank.
If the loan had, based on no equity, a lifeless loan, we would call it, we would change it to add more food, more electricity, any expense that would be for the home. If they put down cable, we would tell them we would erase it. That didn't count towards the affordability of their payment. So, we helped them with their financials based on the equity in the home, the amount of equity. That's what we did.
(RR 3, pp. 195-96) (emphasis added).
C. Ocwen's Actions Were Deceptive and Unconscionable.
(1) Ocwen has authority to modify Sealy Davis's loan (RR 4, p. 63);
Deutsche Bank's representative also testified:
Q: If Ocwen approved Sealy Davis for a forbearance plan, according to your testimony, then under the agreement with Mr. Madole's client, Deutsche Bank, that would be deceptive, correct?
(RR. 3, p. 144).
D. Ocwen's Violation of The Texas Debt Collection Act is "Actionable" Under the DTPA.
[*17] E. The DTPA Violations, and Debt Collection Act Violations, Were a Producing and Proximate Cause of Plaintiff's Damages.
F. The Evidence Factually Supports the Award of Mental Anguish.
I became extremely irritated. I go to the point where I don't know what was going to happen day after day. I became extremely worried not only about the house, but about myself because I wasn't myself. I didn't want to talk to anybody and I kind of secluded myself in the house. I stopped going to church. I was just sort of withdrawn like. (RR 5, p. 98).
[*19] [**33] A: I became so hysterical, my blood pressure went up and I had to lay down. And two or three hours later, I don't know who it was, someone knocked on the door. And I got behind the bed - I became afraid, and I wouldn't answer the door. And I got behind the bed and hid in the house.
(RR 5, p. 107-108).
I was getting calls back in Dallas when my mother was just getting sick and stuff and they were calling me in. And I was asking her, "Why is all these incidents happening? Why you always wind up in the emergency room and blood pressure up?" And she call telling me they were threatening to take her home, this and that.
(RR 4, p. 27). There was other testimony by Ms. Davis's daughter [**34] regarding mental anguish that was heard by the jury. (RR 4, pp. 29-30, 35).
G. Factually Sufficient Evidence Supports Plaintiff's Texas Debt Collection Act Claim.
When the servicing agent of Ocwen started sending payments back after the bankruptcy was filed, they are required under the bankruptcy law to accept those payments. When they sent them back to her, they charged her a late fee and never gave her credit by reducing that late fee. She also made two other payments which were on the list over there that they never gave her credit for.
[*22] (RR 7, pp. 54-55).
A. The Attorneys' Fees Were Reasonable, Particularly in Light of Actions Taken by Ocwen in Enjoining Plaintiff's Case.
B. Plaintiff's Attorneys' Fees Were not Required To be Segregated Because of Intertwined Claims.
A. Bankruptcy Filing Does Not Bar Post-Petition Chapter 7 Claims.
B. None of the Elements of Judicial Estoppel or Collateral Estoppel or Res Judicata are Met in This Case.
One of the things that I thought was significant in the trial, one of the most memorable moments that occurred, when I heard what I heard and I looked up and I could see that it made the same impression on every lawyer in the room because I could see it in their eyes, it was during Luke Madole's argument when in fact he told the jury that if they prevailed basically she wouldn't be kicked out for at least three or four days, a certain length of time. And I had the impression that might have been why, what I suspected [**49] that might be where the jury came up with the idea of awarding a little over 11 million dollars in damages.
(Supp. RR Vol. 1, p. 28 - entitled motions, April 12, 2006).