Think the fiasco within the mortgage industry was dying down? Think again. The seedy underbelly of the mortgage industry was on display in the bankruptcy adversary proceeding of Tolliver v. Ocwen Loan Servicing, LLC, et al., Adv. No. 09-2076 (Bankr. E.D. Ky. July 19, 2012). After recounting years of malfeasance by Ocwen Loan Servicing, LLC, including misapplication of the debtor’s payments and assessment of phantom late fees and charges to the debtor’s account, Bankruptcy Judge Tracey N. Wise swiftly rejected Ocwen’s proof of claim filed in the main bankruptcy case of In re Tolliver, Case No. 09-21742. Judge Wise found from the record that the debtor had actually paid her obligation to Ocwen in full years prior to the foreclosure action by Ocwen that forced the debtor into bankruptcy.
The court also ruled in the debtor’s favor on various counterclaims including fraud, breach of contract, and conversion. The court undercut Ocwen’s only real defense when it concluded that two forbearance agreements containing terms favorable to Ocwen were unenforceable because the debtor had paid her loan in full prior to entering into those agreements. The court went further, however, awarding the debtor $25,000 in punitive damages. The court found that Ocwen “recklessly disregarded terms of the Plaintiff’s loan documents” and “fraudulently induced the Plaintiff to enter into forbearance agreements with terms that allowed it to assess the charges that it wasn’t allowed to otherwise charge.” The Tolliver case presents yet another frightening story of rampant abuse within the mortgage industry – a story which appears for the moment to have a pleasant, albeit belated, ending.