Ocwen’s misconduct led the bankruptcy court to not only grant the debtor’s motion for temporary restraining order but to order Ocwen, as servicer for U.S. Bank, to show cause why it should not be held in contempt for violation of a Consent Order entered between the debtor and lender during her chapter 13 bankruptcy. Arrington v. Ocwen Loan Servicing, LLC, No. 12-70435, Adv. Proc. No. 17-70029 (Bankr. N.D. Ala. Sept. 25, 2017).
Denise Arrington’s confirmed chapter 13 plan provided for her to cure pre-petition mortgage arrears on two loans through the plan while making regular payments outside the plan. Ms. Arrington testified that, in 2012, during her bankruptcy, she and Ocwen, as servicer for U.S. Bank, entered into a loan modification agreement under which the principal owed on the first loan was increased and the second loan was forgiven. In October, 2016, while Ms. Arrington’s bankruptcy was pending, Ocwen moved for relief from stay to exercise its rights under the lending agreements. That issue was resolved by a court-approved Consent Order which, among other things, acknowledged the 2012 Loan Modification, provided for post-petition arrears, and acknowledged that Ms. Arrington was current on the loan as of the date of the Consent Order.
Shortly after the Consent Order was issued, Ocwen filed a Notice of Fees representing the filing fee for the stay motion. Under the terms of the Consent Order, however, Ms. Arrington was not responsible for that fee. Ms. Arrington completed her plan payments and received her discharge. She continued to make payments according to the terms of the Consent Order and lending agreement, but, claiming she had defaulted on the loan, Ocwen wrongfully returned the her payments. Ocwen then notified Ms. Arrington that it had accelerated her loan and scheduled a foreclosure, all in violation of the terms of the Consent Order and lending agreement.
The case was before the court on Arrington’s adversary complaint seeking a Temporary Restraining Order to prevent Ocwen from going forward with a threatened foreclosure. The court stated four considerations for issuing a TRO: “(1) a substantial likelihood of success on the merits; (2) that irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest.”
Applying the considerations, the court found: 1) Ocwen’s refusal to apply Ms. Arrington’s payments to the loan in accordance with the Consent Order and her chapter 13 plan, was substantially likely to be a violation of the Consent Order and/or the discharge injunction, 2) Ms. Arrington would suffer irreparable injury if the planned foreclosure were to go forward, 3) Ocwen would suffer no injury by reason of the TRO because Ms. Arrington tendered all the money due, and 4) there was no danger that the TRO would be adverse to public interest.
Based on these findings, the court granted the TRO and scheduled a hearing for preliminary injunction. Furthermore, the court ordered representatives of Ocwen to appear in person at the Preliminary Injunction Hearing to show cause why Ocwen should not also be held in contempt for its conduct in violation of the Consent Order.
Arrington Bankr ND Ala Sept 2017
Tags: Contempt, foreclosure
