Ocwen Financial (OCN) is doubling down in its fight against a group of mortgage bond investors that accused the nonbank off ailing to properly collect payments on mortgage loans and breaching its bond covenants.
In January, a group of investors, which includes BlackRock, MetLife, and PIMCO, said that Ocwen failed to perform its contractual obligations as a servicer by failing to properly collect payments on $82 billion of home loans. In a subsequent letter, cited in a report from Compass Point Research and Trading, the investors said that Ocwen’s failures as a mortgage servicer cost bond investors approximately $26 billion.
Ocwen previously responded to these claims, calling the charges “baseless” and “groundless” and accusing the bond investors of pushing foreclosures. Now, in a new letter sent the trustees and master servicers for 119 residential mortgage-backed securities, Ocwen is again accusing the bond investors of having a “pro-foreclosure, anti-modification” agenda.
“The notice is the latest effort in a long campaign by Blackrock, PIMCO, Kore Advisors, MetLife and Neuberger Berman Europe Limited to try and impose changes to standard servicing practices, with the goal of forcing more home foreclosures and fewer loan modifications,” Ocwen said in a release.
“These investors’ pro-foreclosure, anti-modification agenda is driven by their desire to increase their own financial returns on their specific tranche-level holdings in RMBS trusts, at the expense of long-term gains to the trusts as whole, through sustainable modifications,” Ocwen continued.
In the letter, Ocwen said that the bond holders have a “clear” goal – keeping underwater borrowers underwater.
According to Ocwen’s letter, the bond holders do not want Ocwen to engage in loan modifications under the government’s Home Affordable Modification Program, claiming that loan modifications yield lower cash flows to bond holders.
But Ocwen says that those claims are “unfounded” and use an extremely small sample size to demonstrate their point.
“The holders purport to have undertaken ‘robust’ analyses that show Ocwen’s servicing practices harm the trusts,” Ocwen said in the letter. “Instead, the holders have analyzed only a small piece of a much larger picture to ensure that the results support their pro-foreclosure agenda.”
Ocwen said that by basing their claims on that small sample, the bond holders’ conclusions are disingenuous.
“In fact, without conceding that any of the holders’ results are accurate (we believe they are not), it would be unsurprising to find that certain Ocwen-serviced trusts collected less money during an arbitrary time period thus far in the life of a trust, than did trusts serviced by more foreclosure-inclined servicers who prioritize small short term gains at the expense of larger profits for the trusts over the long-term,” Ocwen said.
“Judging ‘trust performance’ by collections to date is short-sighted, illogical, and misleading,” Ocwen continued. “The holders opted for the trees over the forest because doing otherwise would have highlighted the ultimate benefits of Ocwen’s servicing for all investors.”
Ocwen states that the bond holders’ alleged re-default rate data is “likely inaccurate” and suggests that a review of the bond holders’ work would “show a significant flaw in the methodology or data.”
Ocwen adds that its current standard of servicing requires the company to service loans in the “best interest” of all investors and in line with accepted industry practices.
“Ocwen is compliant with this standard of servicing.” Ocwen said. “Each modification Ocwen performs is designed to yield a higher anticipated recovery to investors than foreclosure. Nothing alleged by the investors establishes that Ocwen breached the standard of servicing called for by the agreements.”
Click here to see Ocwen’s letter to the bond holders.