December 2015 - Fortune Tellers

TheMReport — News and strategies for the evolving mortgage marketplace.

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46 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T SERVICING LOCAL EDITION LOCAL EDITION Nationstar Settles "Force Placed Insurance" Suits THE CLASS ACTION SUITS CLAIMED THE INSURANCE POLICIES WERE AUTOMATICALLY ISSUED TO HOMEOWNERS AT RATES APPROVED BY LENDERS, WHICH WERE MUCH HIGHER THAN MARKET RATES. TEXAS // Nationstar Mortgage agreed to pay $77 million to settle class-action suits filed by home- owners over the alleged inflating of homeowner insurance rates, according to media reports. The Nationstar settlement was approved in early November; combined with a similar lawsuit against Ocwen Loan Servicing (part of Ocwen Financial Corp.) that was settled in September, the two servicers will pay a com- bined total of $217 million to more than 1 million homeowners. The homeowners sued Ocwen and Nationstar, two of the country's largest mortgage servicers, over what foreclosure defenders call "force placed insurance." Third parties were searching the records of lend- ers and servicers to find homeown- ers who either had no insurance coverage or sufficient insurance coverage to satisfy their mortgages, according to a report from the Daily Business Review. The class action suits claim the insurance policies were automati - cally issued to homeowners at rates approved by lenders, which were much higher than market rates. Homeowners claim they did not have a choice in the matter, hence the term "force placed insurance." Lenders call the practice "creditor-placed insur - ance." According to the home- owners, lenders made as much as 25 percent commission from the insurers in some cases while homeowners struggled to pay the bill for the inflated insurance pre - miums during the financial crisis. U.S. Magistrate Judge Jonathan Goodman of the U.S. District Court for the Southern District of Florida (in Miami) approved the Nationstar settlement on November 10. He approved the Ocwen settlement September 14. According to the report, he wrote in his statement for Ocwen that, "The settlement is generous to class members, providing relief approximating a trial win and for many class members exceeding a trial win." The Ocwen settlement pays homeowners 12.5 percent of the net insurance premium. The deals provide $140 million in monetary relief from Atlanta-based Ocwen and $77 million from Dallas- based Nationstar, revising prac- tices that once allowed lenders and servicers to benefit from collateral protection insurance. Nationstar did not return the request from the MReport for comment. Ocwen spokesman John Lovallo said, 'We were pleased when the United States District Court for the Southern District of Florida issued its final approval on this settle - ment in September 2015. The Company established a reserve for its portion of the settlement during the third quarter of 2014, and believes that it is adequately reserved. We look forward to returning our full focus to what we do best–helping homeowners stay in their homes." Ocwen Closes Servicing Advance Securitization Worth $600 Million ACCORDING TO THE COMPANY, SUCH ADVANCES ARE THE MOST EFFICIENT AND LOWEST COST FORM OF BORROWING AVAILABLE TO MORTGAGE SERVICERS. GEORGIA // Ocwen Financial announced last month that it closed an offering of fixed-rate asset-backed term notes issued by Ocwen Master Advance Receivables Trust (OMART) and totaling $600 mil - lion in aggregate principal. The notes are used to finance the servicing advances that are used to fund RMBS investors, according to an Ocwen spokes - man, who also noted that the company believes the securitiza- tion of the advances is the most efficient and lowest cost form of borrowing available to mortgage servicers. "I am pleased to announce the closing of our recent servicing advance securitization," said Michael Bourque, EVP and CFO of Ocwen. "We believe that this execution, which replaces float - ing rate debt with longer dated fixed rate term debt at favorable rates, demonstrates continued confidence in Ocwen within the capital markets." The notes carry a weighted average fixed interest rate of 3.25 percent and include $200 million worth of one-year notes and $400 million worth of two-year notes, according to Ocwen. The notes were issued on November 13 and announced on November 16. SERVICING U.S. Magistrate Judge Jonathan Goodman of the U.S. District Court for the Southern District of Florida (in Miami) approved the Nationstar settlement on November 10.

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