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Ocwen calls investor claims "baseless"
[NEW YORK] Mortgage servicer Ocwen Financial Group said on Monday a group of investors had no basis for claiming it failed to live up to its agreements to collect payments on US$82 billion worth of home loans.
Ocwen's shares were up 47 per cent in premarket trading after the company reached a US$2.5 million settlement with the California Department of Business Oversight, which had threatened to suspend Ocwen's license to operate in the state.
Investors including BlackRock, Metlife and Pimco sent a notice of non-performance to the company and trustees for 119 residential mortgage-backed securities trusts, the first step toward a lawsuit.
The investor group's demands stem from its special interests and are not in the best interests of the trusts as a whole, a lawyer for Ocwen said in a Jan 26 letter.
The investors claim Ocwen performed worse than other servicers and that the trusts had losses of more than US$1 billion because of the company's performance.
Ocwen used conflicted servicing practices that enriched its affiliates, engaged in improper loan modification and advance recovery practices and failed to properly account for trust cash flows, the investors said.
They also say the company should not use trust funds to "pay" Ocwen's borrower relief obligations under a national mortgage settlement.
"Ocwen denies that there is any basis for a default under the trust agreements," attorney Richard Jacobsen, who represents Ocwen, wrote in the letter to Kathy Patrick, a lawyer for the investor group.
The investors, he said, were "asking Ocwen to turn its back on the trusts as whole, on the borrowers, and on public policy."
Up to Friday's close, Ocwen's stock had fallen 86.4 per cent in the last 12 months.