Updated, 8:53 p.m. | A $2.2 billion agreement is settling accusations against a large but little known player in the mortgage industry that escaped last year’s sweeping mortgage settlement.
The Ocwen Financial Corporation, which has ridden its specialty in servicing subprime loans to become the fourth-largest mortgage servicer in the country, was accused of improperly handling the loans of homeowners after the financial crisis. The agreement with the Consumer Financial Protection Bureau and 49 states covers similar ground to a $25 billion settlement made last year with the largest banks.
Ocwen was not included in the larger settlement because its nonbank status allowed it to slip through the cracks of the different regulatory agencies. The company, which is publicly traded, now falls under the oversight of the bureau, which began in 2011.
Ocwen has prided itself as a specialist at the tricky work of servicing mortgages, something the banks have struggled to do well. But the agreement announced Thursday, which still requires court approval, made it clear that Ocwen has had many of the same problems as those banks.
Updated, 8:48 p.m. | “We believe that Ocwen violated federal consumer financial laws at every stage of the mortgage servicing process,” Richard Cordray, the director of the bureau, said in a conference call on Thursday.
The settlement covers several types of activities from 2009 to 2012 by Ocwen and two other companies it recently acquired, Litton Loan Servicing, which used to be owned by Goldman Sachs, and Homeward Residential Holdings.
The companies are accused of charging borrowers unauthorized fees, deceiving consumers about foreclosure alternatives and providing false or misleading information about the status of foreclosure proceedings. Mr. Cordray said that because of these violations, “Ocwen made troubled borrowers even more vulnerable to foreclosure.”
Ocwen did not have to admit wrongdoing as part of the settlement. The company said in a statement that the agreement “is in alignment with the same ultimate goals that we share with the regulators — to prevent foreclosures and help struggling families keep their homes.”
Ocwen, which was founded in 1988, does not issue mortgages itself. Instead, it buys the rights to service the loans issued by banks, taking a cut of all the payments it receives from homeowners. It also has to do the unpleasant work of dealing with homeowners who fall behind on their payments and eventually face foreclosure.
The company has expanded rapidly since the financial crisis and its business model has proved to be lucrative, pushing up its stock price 500 percent since 2009. On Thursday, its stock fell 1.9 percent after the settlement was announced.
Lisa Sitkin, a lawyer at Housing and Economic Rights Advocates, said that Ocwen had been more efficient and orderly than many of the banks that service mortgages. The company also won a reputation for working with homeowners to make principal reductions for loans that were underwater. Ocwen says it has helped more than 280,000 families avoid foreclosure.
But Ms. Sitkin said that when something goes awry for a customer, Ocwen’s stripped-down operation, which helps its profits, can make the company difficult to communicate with.
“There’s a certain automated quality to all the interactions with them — it doesn’t feel as if someone is watching,” Ms. Sitkin said. “When anything goes wrong, which it does, it’s extremely difficult to unravel it.”
Ocwen said that it works “closely with many highly effective groups and are expanding our partnerships with housing advocacy and counseling groups across the country.”
The bulk of the money in the settlement, $2 billion, will go to principal reductions for people whose loans are serviced by Ocwen. The biggest banks agreed to do something similar last year, and it has proved to be controversial, with many complaints from homeowners who said that the banks had too much control over the process.
An additional $125 million will be divided among people whose homes were foreclosed on by Ocwen. The Florida attorney general, Pam Bondi, estimated that most homeowners would receive about $1,200.