According to the order issued by the North Carolina Commissioner of Banks, the West Palm Beach, Fla. -based Ocwen entered a memorandum of understanding with the states last December, which required the servicer to perform a complete reconciliation of its escrow accounts.
"We allege that these violations were significant and systemic, and harmed thousands of consumers", CFPB director Richard Cordray said on a conference call this afternoon.
The regulators also found that Ocwen had for years operated unlicensed mortgage servicing facilities in some states, apparently in violation of state statutes.
The Consumer Financial Protection Bureau (CFPB) filed a lawsuit Thursday against Ocwen Financial Corporation.
The letter comes as part of a multi-state investigation into Ocwen's handling of tax-and-insurance escrow accounts, including the alleged failure to make timely payments from the accounts and the improper withholding of money from borrowers.
Ocwen, one of the largest mortgage servicers, services roughly 1.4 million loans with a total principal balance of $209 billion.
The company also "illegally foreclosed on struggling borrowers, ignored customer complaints, and sold off the servicing rights to loans without fully disclosing the mistakes it made in borrowers' records", the CFPB said. Additionally, over 18 state authorities have issued cease-and-desist orders against Ocwen prohibiting the Company from acquiring new mortgage servicing rights and originating mortgage loans.
In fact, the CFPB says that borrowers still have to complain at least five times in nine days before Ocwen automatically escalates their complaint to be resolved.
The CFPB claimed that Ocwen loaded inaccurate and incomplete information into a proprietary technology system and used the faulty information to service loans.
According to the complaint, when servicing borrowers' loans Ocwen allegedly enrolled consumers in add-on predicted through deceptive solicitations and without consent.
In addition to the lawsuit filed in U.S. District Court in Florida, more than 20 state regulators took action against the company, limiting its operations in their states.
Ocwen also had been prohibited from purchasing mortgage servicing rights - which it needs to do to grow its business - because of past consent orders in NY and California.
That same order said that if Ocwen properly accounted for known or anticipated regulatory penalties and required operational fixes, "it would indicate that Ocwen continuing as a going concern would be in doubt".
The U.S. Consumer Financial Protection Bureau, in a statement describing its lawsuit, didn't mince words.