It’s Never Ending: OCWEN’s Alter Ego Altisource Settles with Boston Massachusetts Over More Illegal Takings

The assurance of discontinuance, filed in Suffolk Superior Court, resolves allegations that Altisource Solutions Inc. performed unnecessary and duplicative pre-foreclosure inspections and property maintenance services. The company also received improper commissions for procuring force-placed insurance policies on behalf of the mortgage servicer Ocwen Loan Servicing LLC. Altisource then passed the costs of these unnecessary services and commissions on to the accounts of distressed homeowners through Ocwen.

“Altisource, through its close relationship with Ocwen, unfairly profited from charging homeowners for expensive and duplicative coverage and services that they did not need,” said AG Healey. “This settlement will provide relief to borrowers and require the company to change its practices going forward.”

In Massachusetts, Altisource provides exclusive property preservation services to Ocwen for the purpose of protecting the mortgagee’s interest in a distressed property. When a homeowner defaults on their mortgage payments, Altisource conducts regular property inspections to determine if the property is occupied or being maintained. Altisource also performs maintenance on the property ranging from grass cuts and snow shoveling, to major repairs and winterization.

Until 2009, Altisource’s parent company was a subsidiary of Ocwen. The AG’s Office began investigating Altisource after filing a lawsuit against Ocwen alleging that it charged homeowners unnecessary property preservation fees, failed to comply with homeowners account dispute processes, failed to properly administer insurance escrow accounts, and procured overpriced and often unneeded force-placed insurance policies for homeowners. The AG’s Office reached a $2 million settlement with Ocwen in March 2019.

Under the terms of the settlement, Altisource will pay $550,000, which will be used in part to reimburse homeowners who were charged excessive premiums for force-placed insurance. Altisource has also agreed to change its business practices to prevent unnecessary inspection and maintenance services.

This matter was handled by Assistant Attorneys General Michael Lecaroz and Sarah Petrie and Deputy Division Chief Shennan Kavanagh, all of the AG’s Consumer Protection Division, with assistance from Division Chief Glenn Kaplan and Deputy Director Arwen Thoman of the AG’s Insurance and Financial Services Division.

The consent judgment, entered in Suffolk Superior Court, settles a lawsuit filed by the AG’s Office in April 2017 against Ocwen Loan Servicing LLC, which services tens of thousands of mortgages for Massachusetts homeowners.

“Keeping families in their homes remains a top priority for my office,” said AG Healey. “This settlement will provide relief to thousands of Massachusetts homeowners harmed by abusive and unfair mortgage servicing practices.”

The AG’s complaint alleged that Ocwen committed widespread mortgage servicing violations that increased Massachusetts borrowers’ mortgage and insurance expenses, exposed borrowers to serious risk through insurance lapses, and contributed to loan delinquencies and foreclosures. When borrowers requested information about or disputed errors on their loan accounts, Ocwen failed to respond to the requests as required by law. According to the complaint, Ocwen’s violations include:

• Unnecessary flood insurance: Ocwen force-placed borrowers in expensive flood insurance policies for time periods when properties were not in special hazard flood area and did not require flood insurance. The force-placed policies carried high deductibles and did not provide critical liability and personal property coverage to borrowers.
• Improperly administering insurance premiums: Ocwen forced borrowers to pay their insurance premiums into an escrow account and then failed to disburse these escrowed insurance premiums to insurers, causing borrowers’ insurance policies to lapse and leaving them exposed to serious gaps in insurance coverage.
• Charging inflated and duplicative fees: Ocwen took advantage of struggling borrowers by charging duplicative and unnecessary pre-foreclosure property inspection and preservation fees for grass cuts, landscaping, and title review. In some cases, Ocwen conducted three property inspections in the same month and ordered several grass cuts within the same week, then passed the costs on to the borrower.
• Failing to respond to borrower disputes and requests for information: Ocwen failed to provide timely and adequate responses to borrowers’ requests for information, complaints, and notices of error, causing problems to go unaddressed.

Under the terms of the consent judgment, Ocwen will pay $2 million in restitution including direct cash refunds and account credits. Ocwen will send notifications to 4,000 borrowers who may be eligible to receive a loan modification and has also agreed to halt foreclosure proceedings for certain homeowners to allow them time to apply for the loan modification. Ocwen will also pay three times the damages for borrowers for whom the company wrongfully failed to disburse escrowed insurance premiums and reimburse borrowers who were unnecessarily charged for flood insurance policies. Finally, Ocwen will implement new policies relating to the handling of customer complaints.

The AG’s Office has been a national leader in securing restitution and other relief for borrowers from banks and servicers. The office has obtained recoveries and other relief from Morgan Stanley, Goldman Sachs, Royal Bank of Scotland, Citigroup, JPMorgan Chase, Countrywide, Fremont Investment & Loan, Option One, Ditech, HSBC, PHH, Nationstar, Shellpoint and others on behalf of Massachusetts homeowners.

The AG’s Office has also brought a string of force-placed insurance cases and obtained over $12 million in related recoveries under settlements with HSBC, American Security Insurance Company (Assurant), and QBE Insurance.

This matter was handled by Assistant Attorneys General Michael Lecaroz and Sarah Petrie, and Deputy Division Chief Shennan Kavanagh, all of the AG’s Consumer Protection Division; and Assistant Attorney General Tim Hoitink and Deputy Director Arwen Thoman of the AG’s Insurance and Financial Services Division.