Ocwen agrees to settle allegations over undisclosed fees

Ocwen Financial Corp. has agreed to terms of a class action settlement involving allegations it overcharged borrowers for appraisals.

In the original case filed in 2017, California homeowner David Weiner claimed Ocwen added undisclosed fees to broker-price opinions or hybrid valuations after it took over servicing for his loan earlier in the decade. 

In court filings, the plaintiff said Ocwen assessed BPO fees of $109 and $110, despite knowing the market rate was only $85. His attorneys also suggested Ocwen managed to avoid detection by having its affiliated business Altisource, which it spun off in 2009, assess, manage and bundle such charges in its system. 

In 2022, Ocwen's counsel successfully argued for decertification of the class, based off of the verdict in a separate case, TransUnion LLC v. Ramirez. The decision was reversed last year, helping lead to the settlement. 

While denying claims of the plaintiff, both parties agreed to a settlement to "avoid the costs, risk, and delays associated with continuing this complex and time-consuming litigation," according to Ocwen's fee settlement website. 

Members of the class include all U.S. mortgage holders whose loans were serviced by Ocwen and who paid BPOs or hybrid appraisal charges between Nov. 2010 and Sept. 2017. The court also certified a subclass of California homeowners falling under the same criteria. 

Upon settlement approval, Ocwen will reimburse $60 to class members for each BPO fee and $70 for each hybrid paid during the seven-year time frame. The settlement also mandates Ocwen reverse unpaid charges by the same amount for the California subclass, as well as modify future borrower disclosures in the state to identify any "reconciliation" service added by vendors to BPO and hybrid products.

The court assigned the law firm of Baron & Budd to serve as settlement counsel. Administrators estimate payout at approximately $586,000 based on the number of claims counted. Counsel will also request attorneys fees of $8 million, plus $950,000 of reimbursable litigation costs, to be paid by Ocwen. 

A final hearing in the case is scheduled for Sept. 5. Claims for proceeds from the settlement are due by Sept. 29. Any class member opt-outs or objections have a deadline on July 12. 

Weiner's original lawsuit had also claimed Ocwen misallocated loan payments to an escrow account and charged him an annual $600 fee after he previously came to an agreement with the previous servicer to pay for taxes independently. The misallocation led to him defaulting on the loan, and ultimately, to the appraisal fees in question in the settlement. Weiner also claimed he was denied access to funds in the escrow account. 

The settlement comes as the cost and perceived lack of clarity behind servicing fees receive heightened attention. Last week, the Consumer Financial Protection Bureau issued a report regarding confusion behind some mortgage servicing charges, including fees on prohibited inspections and generic itemization.  

The CFPB's focus coincides with the Biden administration's ongoing battle to eliminate so-called "junk fees" charged by banks and financial institutions. In its recent analysis of mortgage industy complaints during 2023, the bureau found that over 11,000 were related to difficulties encountered during the payment process, including confusion surrounding amounts owed.