The Consumer Financial Protection Bureau sued Ocwen Financial Corp., one of the nation's largest mortgage servicers, on Thursday, alleging the company engaged in "significant and systemic misconduct" that caused borrowers to lose their homes.
In addition to the lawsuit filed in U.S. District Court in Florida, more than 20 state regulators took action against the company, limiting its operations in their states.
The dual actions caused the company's stock to plunge more than 50 percent.
The federal consumer agency alleged that Ocwen conducted an error-plagued operation that failed to credit borrower payments, sent inaccurate statements and didn't make insurance payments on time, leading to a lapse of coverage.
The West Palm Beach, Fla., company also was accused of illegally starting foreclosure on at least 1,000 consumers and relying on a system to service loans that even an Ocwen executive called "ridiculous" and a "train wreck," the bureau said in news release.
"Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes," bureau Director Richard Cordray said in a statement.
Ocwen, in a statement, called the consumer agency's allegations "inaccurate and unfounded" and promised to "vigorously defend" against the lawsuit.
"The CFPB suit is primarily based on the CFPB's flawed review of data and its self-serving conclusion about isolated instances where Ocwen self-identified ways we can do better," the company said.
The North Carolina Office of the Commissioner of Banks said the majority of the state actions stop the firm from acquiring additional mortgage servicing rights or originating loans until Ocwen can properly manage its existing escrow accounts.
In a cease-and-desist order, the North Carolina commissioner said that according to a business plan Ocwen submitted to the state regulators, the company might not be able to remain afloat if it fixed all its problems, given the considerable costs to its systems and anticipated regulatory penalties.
Ocwen said it received the orders from state regulators and "are in the process of reviewing them in detail."
At the end of last year, Ocwen serviced nearly 1.4 million loans with an unpaid principal balance of $209 billion, according to the consumer bureau.
In February, Ocwen reached a separate agreement with California regulators and agreed to pay more $225 million in refunds and loan forgiveness to Californians settling allegations that sloppy practices led to violations of state and federal mortgage rules over the last several years.
The deal allowed the company to add new California mortgages to its books, which it had been barred from doing since January 2015.
The actions by the federal and state governments are the latest black eye for Ocwen, which grew to become one of the nation's largest nonbank mortgage servicing firms after the housing crash but has been swamped by regulatory problems and consumer complaints.
In 2013, it reached a $2.1 billion national settlement with 49 states and the federal consumer bureau for improperly denying loan modifications, charging unauthorized fees and failing to properly apply payments.