Another Mortgage Company Under Fire

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The country's fourth largest home loan servicer, Ocwen Financial Corp., is under fire for backdating foreclosure letters and other home loan correspondence, making appeals by borrowers almost impossible. Mortgage borrowers who were struggling to keep up their payments were denied the opportunity to rectify the problems with their loans and avoid foreclosure, according to an investigation by the New York State Department of Financial Services.

The Atlanta-based Ocwen insists that the backdating was a result of software errors, but officials purport that the act occurred because of a broader problem: A corporate culture that disregards the needs of borrowers in order to pursue monetary gain.

This incident is a reminder of the subprime mortgage crisis that coincided with U.S. recession that started in late 2007. That particular financial catastrophe was triggered first by a boom in lending for non-qualified buyers then by a drop in housing prices that was followed by payment delinquencies and foreclosures. This resulted in a drop in value for housing-related securities.

What occurred after that was a downward spiral of declining residential investments, drops in household spending, and drastic price drops on large homes.

All of these things merged to create an eventual global recession. In the U.S. and Europe, the recession hit hard. In the United States, it was estimated that nearly 9 million jobs were lost during 2008 and 2009. Housing prices in the U.S. dropped by about 30 percent and by 2009, the U.S. stock market had fallen by about 50 percent.

This latest scandal with Ocwen hits less than 12 months after the company made an agreement to reduce $2 billion dollars' worth of loan balances for borrowers who were struggling to make payments. This was part of a settlement over foreclosure abuses between Ocwen, federal regulators and 49 states.

Perhaps this is a signal that the corporate abuses that escalated the housing crisis and the Great Recession seven years ago have never truly died off.

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