Ocwen Loan Servicing Taking Heat for Illegal 'Post-Payment Interest'

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A 29-page proposed class action lawsuit filed in Georgia claims defendant Ocwen Loan Servicing, LLC breached its contracts with consumers through a “systematic” practice of charging illegal prepayment penalties in the form of “post-payment” interest on loans insured by the Federal Housing Administration (FHA). Post-payment interest is the interest that a lender collects after he or she has paid the full unpaid principal of a loan, the lawsuit explains. The complaint alleges that this was done without the defendant first complying with the uniform provisions of promissory notes and FHA regulations governing such loans.

“As a result, [Ocwen Loan Servicing] has collected hundreds of millions of dollars in post-payment interest in an unlawful manner,” the complaint contends.

The case notes that the FHA allows lenders like the defendant to collect post-payment interest for the remainder of the month in which full payment is made under only two conditions:

The defendant does not provide borrowers with an FHA-approved form, the lawsuit argues, and therefore has no right to charge post-payment interest.