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Note 28 REGULATORY REQUIREMENTS

12 Months Ended

Dec. 31, 2012

NOTE 28

REGULATORY REQUIREMENTS

Our business is subject to extensive regulation by federal, state and local governmental authorities, including the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), the SEC and various state agencies that license, audit and conduct examinations of our mortgage originations, servicing and collection activities in a number of states. The CFPB asserts supervisory authority (including the authority to conduct examinations) over Ocwen and its affiliates, including Homeward. From time to time, we also receive requests from federal, state and local agencies for records, documents and information relating to our policies, procedures and practices regarding our loan origination, loan servicing and debt collection business activities. We incur significant ongoing costs to comply with new and existing laws and governmental regulation of our business.

We must comply with a number of federal, state and local consumer protection laws including, among others, the Gramm-Leach-Bliley Act, the Fair Debt Collection Practices Act, the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), the Fair Credit Reporting Act, the Servicemembers Civil Relief Act, Homeowners Protection Act, the Federal Trade Commission Act and, more recently, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and state mortgage origination, mortgage servicing and foreclosure laws. These laws apply to loan origination, loan servicing, debt collection, use of credit reports, safeguarding of non−public personally identifiable information about our customers, foreclosure and claims handling, investment of and interest payments on escrow balances and escrow payment features, and mandate certain disclosures and notices to borrowers. These requirements can and do change as statutes and regulations are enacted, promulgated or amended.

On January 17, 2013, the CFPB issued a set of new rules under the Dodd-Frank Act that will require mortgage servicers and mortgage holders, as applicable, to (i) with respect to adjustable-rate mortgage transactions, provide notices to borrowers in advance of any adjustment to the initial interest rate the borrower’s mortgage loan and in advance of any later adjustments to the interest rate resulting in changes in the borrower’s monthly payment, (ii) provide enhanced disclosures to borrowers relating to mortgage servicing transfers, (iii) provide monthly mortgage statements to borrowers that explicitly breakdown break down outstanding principal, due date, amount due (principal, interest and escrow amounts), transaction activity in the last payment cycle and past payment history, (iv) establish a reasonable basis for requiring lender-placed, or “force-placed” insurance before charging a fee for it and provide advance notices and reminder notices to borrowers before purchasing force place insurance, (v) provide early outreach (by live contact and written notice) to delinquent borrowers regarding options to avoid foreclosure, (vi) provide that payments be credited to borrower accounts the day they are received, (vii) require borrower account records be kept current, (viii) provide increased accessibility to servicing staff during loss mitigation efforts, (ix) adopt and follow prescribed loss mitigation timelines for receipt, evaluation and denial or approval of loss mitigation or foreclosure avoidance options, and (x) investigate errors and respond to borrower notices of error within 30 days and timely respond to borrower requests for loan account information, among other things. The new rules are scheduled to go into effect on January 10, 2014 and could cause us to modify servicing processes and procedures and to incur additional costs in connection therewith. Certain of these requirements, if not met, could result in private causes of action under the applicable federal laws (for example, TILA or RESPA) or administrative or civil fines or penalties imposed by regulators with supervisory authority over Ocwen, such as the CFPB.

The CFPB has also promulgated an extensive array of final regulations under the Dodd-Frank Act governing mortgage loan originations. As with the mortgage servicing regulations, the CFPB finalized these regulations in January 2013 to become effective in January 2014. Compliance with these regulations likely will lead to increased costs and expenditures for compliance staff, systems and resources. The CFPB’s recent mortgage origination regulations include rules:

	•	Requiring the loan originator to determine, prior to consummation, the borrower’s reasonable ability to repay the loan. Legal liability for violations of this rule is limited if the lender follows certain procedures related to determination of the borrower’s repayment ability based on verified documentation. The rule provides a so-called “safe harbor” from liability for loans eligible for purchase by Fannie Mae or Freddie Mac or for insurance or guaranty under certain U.S. government lending programs.
	•	Expanding the coverage of, lowering the pricing thresholds with respect to and expanding limitations and prohibitions on high-cost mortgages under the Home Ownership and Equity Protection Act (HOEPA).
	•	Amending the Federal Reserve Board’s loan originator compensation and anti-steering regulation. This rule, inter alia, follows the Federal Reserve Board rule in prohibiting loan originator compensation based on a residential mortgage transaction’s terms. This rule also places restrictions on the payment of bonuses or other incentive compensation to individual loan originators employed by mortgage lenders.
	•	Implementing the Dodd-Frank Act’s concerning appraisals for higher-priced mortgage transactions and a rule requiring escrows for higher-priced mortgage transactions.

There are a number of foreign laws and regulations that are applicable to our operations in India and Uruguay, including acts that govern licensing, employment, safety, taxes, insurance, and the laws and regulations that govern the creation, continuation and the winding up of companies as well as the relationships between the shareholders, the company, the public and the government in both countries.