Ocwen must face claims it wrongly denied mortgage help – ruling

(Reuters) – A federal judge has ruled that a class action can go forward accusing Ocwen Loan Servicing and Litton Loan Servicing of consumer fraud for allegedly violating agreements to help homeowners avoid foreclosures during the housing crisis.

Judge Edgardo Ramos in U.S. District Court in Manhattan ruled Wednesday that Ocwen must face breach of contract claims and both servicers must face claims they violated the New Jersey Consumer Fraud Act.

To read the full story on WestlawNext Practitioner Insights, click here: bit.ly/1DgqX8u

Source: Reuters

Zervos v. OCWEN LOAN SERVICING, LLC, Dist. Court, D. Maryland 2012 | NEW SERVICER AFTER DEFAULT *IS* A DEBT COLLECTOR

It is expected that Plaintiffs will seek leave to amend the Complaint to allege that Ocwen took over servicing from Litton Loan Servicing, L.P. (“Litton”) when the loan was in default. 

Here is the complaint. Click here.

Former Litton Loan servicing employee: At Goldman Sachs servicer, ‘total disaster’

Former Litton Loan servicing employee: At Goldman Sachs servicer, ‘total disaster’

by Paul Kiel
ProPublica, April 11, 2012, 7:53 a.m

Chris Wyatt, a former employee of Litton Loan Servicing, then a Goldman Sachs subsidiary, tells what it was like at the company during the first, crucial years of the government’s loan modification program.

Wyatt led Litton’s “Executive Response Team,” which was charged with handling customer complaints. Litton employees, overwhelmed and undertrained, frequently made basic errors when calculating a homeowner’s income, he says. HAMP guidelines often weren’t followed, because Litton was “way understaffed” and couldn’t keep up, he recalls. But the worst part was the way Litton dealt with homeowners’ documents, he says.

When homeowners faxed their documents, they didn’t go to Litton, Wyatt says. They went to India, where a low-cost company scanned and filed the documents — but often misfiled or lost them. Wyatt says Litton routinely denied modifications because homeowners had not sent their documents when, in fact, they had.

In a process internally referred to as a “denial sweep,” Litton’s computers would automatically generate denial letters for every homeowner who, according to Litton’s records, hadn’t sent their documents. But untold numbers of those documents had been lost on another continent. Wyatt complained about the practice in multiple meetings with senior management, he says, but managers were chiefly worried about reducing the overwhelming backlog.

In general, Wyatt recalls, Litton was much more careful about granting modifications than denying them. Yes, HAMP gave financial incentives for each modification Litton and other servicers made, but modifications also meant closer scrutiny from the program’s auditors.

As of the end of 2010, fewer than 12 percent of the borrowers who’d applied for a HAMP modification with Litton were granted one. The vast majority of those denials, Wyatt says, were not legitimate. Goldman Sachs’ emphasis on maximizing profits rather than preventing foreclosures is typical of the servicing industry, he says, particularly the larger banks.