Wednesday, September 14, 2011

NY Banking Dept Reaches Servicing/Foreclosure Practices Agreement with Goldman, Litton, Ocwen

New York's Department of Financial Services and Banking Department entered into an agreement with Goldman Sachs Bank, Ocwen Financial Corp. and Litton Loan Servicing LP regarding certain servicing and foreclosure practices.

A copy of the Agreement on Mortgage Servicing Practices is available at:

As part of the Agreement, Goldman Sachs will write down approximately $13 million in unpaid principal, consisting of forgiveness on 25 percent of the principal balance all 60-day delinquent first-lien home loans in New York serviced by Litton and owned by Goldman Sachs and its subsidiaries as of August 1, 2011.

The Agreement is a condition of Ocwen's acquisition of Litton, and does not preclude any future investigations of past practices or release any future claims or actions.  In addition, if any party to this Agreement agrees with any other regulator to adopt greater consumer protections or other more rigorous standards than are contained in this Agreement, such other provisions shall be applicable to the party.

Among other things, the Agreement requires servicing and foreclosure practice changes in the following areas:

- Document execution
- Accuracy of documentation
- Standing to foreclose
- Identification and contact information of the note holder, and account/payment history, on request
- Compensation to borrowers, and voiding of third-party sales, in all wrongful foreclosures
- Regular quality assurance audits of foreclosure and bankruptcy proceedings
- Oversight of third-party vendors
- Adequate staffing and training
- Single-point-of-contact notices and related requirements
- Toll-free number set up for new loans upon acquisition or transfer of servicing
- Modification notices
- Independent review of loan mod denials
- Complaint handling and resolution procedures
- Limits on attorneys fees, late fees and delinquency charges, property valuation fees
- Limits on lender-placed insurance

Ocwen and Litton must implement these requirements within 60 days following the acquisition. Goldman, which is exiting the mortgage servicing business with the sale of Litton, has agreed to adopt these servicing practices if it should ever reenter the servicing industry.