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26 MONITOR: OCWEN FAILS PART OF COMPLIANCE TEST; INTERNAL REVIEW GROUP HAS IMPROVED Retesting of Ocwen Financial's compliance with the terms of the 2012 National Mortgage Settlement (NMS) for the first quarter of 2014 revealed the Atlanta-based servicer failed one metric originally reported as a pass but passed the other eight metrics, according to a release from the Office of Mortgage Settlement Oversight. In a report filed with the U.S. District Court for the District of Columbia last month, NMS Monitor Joseph A. Smith, Jr., reported the results of the retesting for Q1 2014 and also outlined several actions Ocwen took to improve its internal review group (IRG), which Smith has been investigating since May 2014. "Since my last report, my team and I have been working to assess Ocwen's compliance with the NMS," Smith said. "Our retesting for the first quarter of 2014 of nine metrics that our in- vestigation determined to be 'at risk' showed that the servicer failed one metric (Metric 19) that it had previously reported as a pass. Metric 19 tests whether the servicer is complying with the requirement to notify borrowers of any missing or incomplete documents in a loan modification application. Ocwen has proposed a corrective action plan to address the reasons for its failure, and I am reviewing it." Smith said his team launched an investiga- tion of Ocwen's IRG in May 2014 after hearing from an employee about "serious deficiencies in Ocwen's internal review group process" and issues relating to backdated foreclosure notices sent to about 7,000 borrowers, which Ocwen attributed to computer errors. e erroneously- dated notices resulted in Ocwen reaching a $150 million settlement with the New York Depart- ment of Financial Services in December. "While our testing continues, Ocwen has taken a number of actions to address previous problems with its internal review group. Specifi- cally, Ocwen replaced the executive who leads the IRG and otherwise reorganized employees, adopted corporate governance principles, and enhanced my access to information," Smith said. "I also created a hotline to allow any concerned employees to contact me directly and anony- mously if they see problems. As a result of these actions, I report to the court that Ocwen internal review group's independence, competency, and capacity have shown measurable improvement." e NMS was originally finalized in April 2012 when 49 states and the District of Columbia reached a settlement with the federal govern- ment and five banks and/or mortgage servicers (Bank of America, Citi, JPMorgan Chase, ResCap Parties, and Wells Fargo). As part of the agreement, the five servicers were required to provide $20 billion in consumer relief and $5 billion in other payments. Ocwen falls under Smith's supervision due to the servicer's acquisi- tion of mortgage servicing rights from a unit of Ally Financial, one of the banks included in the settlement. Ocwen entered into a new consent judgment with the Consumer Financial Protection Bureau (CFPB) in February 2014 that requires Ocwen to provide $2.1 billion in consumer relief and to comply with the servicing standards set forth by the NMS. In April, Ocwen reported in its second update on consumer relief under the NMS that 21,257 borrowers completed first-lien modifica- tions and benefited from $1.9 billion in consumer relief through the end of Q 4 2014. Ocwen also reported an additional 284,089 borrowers had ei- ther started a trial modification or were approved for a trial modification by the end of Q 4. ese were Ocwen's self-reported numbers, and they have not been credited by the monitor as of yet. Smith planned to file a final report with the court that will include results of the letter dating metrics and at-risk metrics for Q2 2014. "Ocwen is committed to being fully compli- ant with all rules and regulations related to our business. e Monitor's compliance report re- leased on May 7, 2015, speaks for itself and de- scribes the positive steps Ocwen has undertaken resulting in significant progress," an Ocwen spokesman said in a statement. "According to the report, our internal review group's independence, competency, and capacity have shown measure- able improvement, and if a compliance matter is raised we immediately develop a corrective action plan. We are pleased with the progress we have made so far working with the Monitor, and we will continue to make every effort to improve all aspects of our compliance procedures and processes. Ocwen looks forward confidently to the Monitor's next report." DELINQUENCY RATE DROPS BELOW 5% FOR FIRST TIME SINCE 2007 e nationwide mortgage delinquency rate fell to an eight-year low following its largest month-over-month decline in nine years, according to Black Knight Financial Services' "First Look" at Mortgage Data for March 2015 released in April. e delinquency rate (percentage of residential mortgage loans 30 days or more past due but not in foreclosure) dropped to 4.70 percent for March (approximately 2.38 million loans), the first time the rate has been below 5 percent since August 2007. e rate fell by 12 percent since February, the largest month- over-month decline in nine years. e percentage of loans 90 days or more delinquent but not in foreclosure also declined substantially month-over-month and year-over-year in March by 96,000 and 228,000, respectively, down to 971,000 loans. e number of residential properties with loans 30 days or more overdue or in foreclosure was 3.16 million for March, a decline of 350,000 from February and from 678,000 in March 2014. Meanwhile, the monthly prepayment rate, which is historically a good indicator of refinance activity, increased by 40 percent from February to March and by a whopping 103 percent year- over-year in March, up to 1.62 percent. Although foreclosure starts spiked by 18 percent month-over-month up to 94,100 for March, the overall picture for foreclosure data was bright. e foreclosure rate, or the percentage of residential mortgage loans in some state of foreclosure, declined by 27 percent year-over-year in March down to 1.55 percent. at represented approximately 782,000 loans, the lowest total since December 2007. "Black Knight data shows that the national delinquency rate dropped 12 percent in March, marking the largest monthly decline in 9 years and pushing delinquencies below 5 percent for the first time since August 2007," said Trey Barnes, Black Knight's SVP of loan data products. "While foreclosure starts did spike 18 percent from the month prior, the increase doesn't seem to be driven by seasonality or any other clear influencer. Starts are actually trending slightly downward over the past two years, so we may be looking at a one month anomaly in March."

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