News of the North Carolina actions and the CFPB lawsuit sent shares of Ocwen crashing by almost 60 percent in just over an hour.
North Carolina was among at least 20 states that also took actions against Ocwen. The once high-flying West Palm Beach, Fla., mortgage servicer grew quickly after the financial crisis only to get caught by regulators for allegedly violating mortgage servicing standards. Ocwen's primary software for servicing mortgages, known as REALServicing, was poorly designed and added errors to borrowers' files, regulators said.
"Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes", CFPB Director Richard Cordray said in a press release.
In one case, a borrower with a mortgage modification started having her payments rejected. "We can not allow this to continue".
The company immediately sent out a statement saying it "strongly disputes the CFPB's claim that Ocwen's mortgage loan servicing practices have caused substantial consumer harm".
In February, Ocwen reached a separate agreement with California regulators and agreed to pay more $225 million in refunds and loan forgiveness to Californians settling allegations that sloppy practices led to violations of state and federal mortgage rules over the last several years.
The company is one of the nation's largest non-bank mortgage servicers, focusing mostly on subprime and delinquent mortgages, handling 1.4 million mortgages in all 50 states as well as Washington, D.C., worth roughly $209 billion.
A company that services escrow accounts is required to make timely insurance and/or tax payment's on behalf of the borrowers.
Specifically, the Bureau claims that the system used by Ocwen to process and apply borrower payments, communication information to borrowers, and maintain loan balance information was riddled with errors. According to the lawsuit, Ocwen's head of services called the company's technology "an absolute train wreck".
Florida Attorney General Pam Bond and Florida's Commissioner of Financial Regulations filed its lawsuit against Ocwen and two mortgage servicing subsidiaries Ocwen Loan Servicing and Ocwen Mortgage Servicing for filing illegal foreclosures and other issues.
The CFPB, the state of Florida, and other state agencies are suing Ocwen or issuing cease-and-desist orders against the company in the joint action filed Thursday.
Following the legal actions against the company, Piper Jaffray recommended traders short shares of REIT New Residential Investment Corp (NYSE: NRZ), which owns some of Ocwen's servicing rights.