Shares of mortgage servicer Ocwen Financial Corporation (NYSE:OCN) are up almost 31% to $8.21 in pre-market trading Monday, after the company today said that it sent the following letter to Gibbs & Bruns LLP in response to its letter dated Friday, January 23, 2015:
January 26, 2015
VIA EMAIL AND FEDERAL EXPRESS
Kathy Patrick, Esq.
Gibbs & Bruns LLP
1100 Louisiana, Suite 5300
Houston, Texas 77002
Dear Ms. Patrick:
We represent Ocwen Financial Corporation and respond to your letter on behalf of certain hedge funds and other RMBS investors to trustees and master servicers, dated January 23, 2015, in connection with 119 RMBS trusts (the “Trusts”), which are serviced by Ocwen. The letter purports to describe certain contractual breaches that you contend could result in Events of Default under the Trust transaction documents. 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. 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 denies that there is any basis for a default under the Trust agreements, and it will respond, at the appropriate time, after it has had a chance to review the exhibits mentioned in your letter. In the meantime, however, because it is apparent that your letter was drafted in an inflammatory tone, with misleading content, and coordinated with media release so as to create wildly false impressions, we make the following initial points in response.
As a threshold matter, your letter overlooks that, as servicer for the Trusts, Ocwen’s obligations under the various agreements are to service the loans to the benefit of the Trusts as a whole and in accordance with the terms of the pertinent governing agreements. Ocwen does not, will not, and indeed may 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.
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. 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.
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. 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. Indeed, Ocwen’s national mortgage settlement provides that such modifications shall be done subject to, and within the confines of, the servicing agreements.
We note that your clients’ ill-conceived effort to push foreclosures and stop principal reduction is not directly solely at Ocwen but 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 continues to be committed to meeting all of its servicing obligations in accordance with its contractual arrangements in the over 2,500 Trusts that it services, and in full cooperation and compliance with its industry regulators. 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 declines to do so and reserves all its rights and remedies.
Sincerely,
Richard A. Jacobsen
In other OCN news, the residential and commercial mortgage provider agreed to pay a $2.5 million penalty and hire outside accountants to settle a mortgage servicing dispute with the state of California. Separately, Reuters reports major mortgage bond investors including BlackRock (BLK), MetLife (MET) and Pimco have taken the first legal step toward suing Ocwen, saying it failed to properly collect payments on $82 billion in mortgages.
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