Ocwen Financial (OCN) is not taking one of its latest legal threats lying down.
The nonbank stands accused by mortgage bond investors of failing to properly collect payments on mortgage loans thereby breaching its bond covenants, but the company issued several statements Monday, in which the company strongly denies the charges and says it plans to “vigorously” defend itself against the claims.
The nonbank also says that the group of investors, which reportedly includes BlackRock, MetLife, and Pimco, have a far different goal than it appears.
“Your letter obscures the ultimate objective of your investor clients: to stop servicers from modifying loans and force them to foreclose on and evict as many struggling homeowners as quickly as possible,” Ocwen said in the letter of response to claims that Ocwen failed to perform its contractual obligations as a servicer by failing to properly collect payments on $82 billion of home loans.
“While knee-jerk foreclosures may redound to the special economic interests of your clients, they are not in the best interests of the trusts as a whole, not consistent with industry practice, and therefore prohibited under the servicing agreements,” Ocwen added.
Ocwen also said that the letter, sent to the nonbank by the law firm of Gibbs & Bruns on behalf of the mortgage bond investors, was “drafted in an inflammatory tone, with misleading content, and coordinated with media release so as to create wildly false impressions.”
The group of investors claims that Ocwen failed as a servicer in several ways, including:
- Employing conflicted servicing practices that enriched Ocwen’s corporate affiliates, including Altisource Portfolio Solutions (ASPS) and Home Loan Servicing Solutions (HLSS), to the detriment of the trusts, investors, and borrowers
- Engaging in imprudent and wholly improper loan modification, advancing, and advance recovery practices
- Failure to maintain adequate records, communicate effectively with borrowers, or comply with applicable laws, including consumer protection and foreclosure laws
- Failure to account for and remit accurately to the trusts cash flows from, and amounts realized on, trust-owned mortgages
“These are essentially the same baseless allegations that you have already asserted on behalf of some of these same investors in their failed attempt to block the transfer of servicing from OneWest to Ocwen,” Ocwen said in its letter. “As you know, those claims were thoroughly reviewed by an independent expert firm retained by the Trustees, and after reviewing that expert report, the Trustees cleared the transfer to Ocwen. The allegations are as groundless now as they were then.”
Ocwen also said that will not “accede to the special interests of your institutional investor clients, based on their particular tranche positions, to the detriment of the trusts as a whole.”
Ocwen’s letter states that the bond investors continually object to Ocwen’s loan modifications.
“Contrary to the suggestions in your letter, all of Ocwen's mortgage loan modifications, including principal reductions, are designed to be net present value positive,” Ocwen said in its letter.
“As a result, Ocwen's approach makes sound economic sense because, again, it seeks to service loans in the best interest of the trusts as a whole. Perhaps most egregious is your clients' continuing objection to the principal reduction modification targets in the government's national mortgage settlements with RMBS issuers and servicers,” Ocwen’s letter continues. “Indeed, Ocwen's national mortgage settlement provides that such modifications shall be done subject to, and within the confines of, the servicing agreements.”
Ocwen adds that the mortgage bond investors “ill-conceived effort” to push foreclosures is “part of their ongoing industry-wide pro-foreclosure campaign, which has been roundly criticized by numerous national housing, consumer protection and civil rights groups as anti-consumer and contrary to good public policy.”
Ocwen said that it continues to be committed to meeting all of its servicing obligations. “Your clients, on the other hand, are asking Ocwen to turn its back on the trusts as a whole, on the borrowers, and on public policy,” Ocwen concludes. “Ocwen declines to do so and reserves all its rights and remedies.”
Ocwen and its affiliated company, Home Loan Servicing Solutions, also stand accused of breaching bond covenants by hedge fund BlueMountain Capital Management.
In a letter sent to Ocwen and HLSS on Friday, BlueMountain claimed that Ocwen’s regulatory troubles have caused an “irrefutable” default on notes the hedge fund holds in connection with the HLSS Servicer Advance Receivables Trust.
BlueMountatin Capital also stated in a letter addressed to Home Loan Servicing Solutions, Ocwen Loan Servicing, HLSS Servicer Advance Receivables Trust, and Deutsche Bank National Trust Company that Ocwen’s servicing issues caused a default on “certain residential mortgage-backed securities collateralized by loans serviced by Ocwen Loan Servicing” that BlueMountain Capital owns.
“The facts establishing these events of default are irrefutable,” BlueMountain added in the letter. “BlueMountain also has directed the trustees of certain of the RMBS Certificates to investigate and/or take action with respect to Ocwen Loan Servicing.”
Ocwen responded to these claims as well, saying in joint releases from Ocwen and HLSS, that the companies plan to “vigorously defend” themselves against the charges laid out by BlueMountain.
