Wednesday, October 22, 2014

Ocwen Letter Spooks the Market

Ocwen just can't seem to get a break.

After a rough first 9 months to the year -- stock was down 53.5% YTD as of Monday's close -- the release of NY State Fin. Dept. Superintendent Benjamin Lawsky's letter to Ocwen's general counsel sent the stock tumbling again. 

Our last coverage was back in February, after Ocwen had agreed to a settlement fee, with the CFPB, of $2.2 billion, for its missteps from 2009-2012.  We showed the potential for this litigation expense to grow, as there were even more complaints in 2013 against Ocwen than in 2012.

The stock is now down 24.8% from Monday's close: Lawsky's letter included some powerful language, some of which could have repercussions to Ocwen beyond the immediate scope of the letter.

Lawsky's previous letter to Ocwen, dated April 2014, brought to the fore what Lawsky's office saw to be a "particularly troubling issue" - "the relationship between Ocwen and Altisource Portfolio’s subsidiary, Hubzu, which Ocwen uses as its principal online auction site for the sale of its borrowers’ homes facing foreclosure, as well as investor-owned properties following foreclosure." 
Hubzu appears to be charging auction fees on Ocwen-serviced properties that are up to three times the fees charged to non-Ocwen customers. In other words, when Ocwen selects its affiliate Hubzu to host foreclosure or short sale auctions on behalf of mortgage investors and borrowers, the Hubzu auction fee is 4.5%; when Hubzu is competing for auction business on the open market, its fee is as low as 1.5%. These higher fees, of course, ultimately get passed on to the investors and struggling borrowers who are typically trying to mitigate their losses and are not involved in the selection of Hubzu as the host site.
In August, Moody's downgraded Ocwen's primary servicer and special servicer ratings - and left both assessments on watch for further downgrade.  The shareholder class action complaints started to trickle in in August, and by September 2014 a handful of shareholder complaints had been filed.  (See for example NORBERT TUSEO, Individually and on Behalf of All Others Similarly Situated v. OCWEN FINANCIAL CORPORATION, RONALD M. FARIS, JOHN V. BRITTI and WILLIAM C. ERBEY)

The recent information about Ocwen's potentially backdating thousands of foreclosure documents is relevant not just insofar as it affects the nature of all current shareholder litigation, but insofar as Ocwen is being sued by mortgage borrowers, directly, and by mortgage market players and investors.  Crucially, Ocwen's servicing performance can be critical to the performance of RMBS securities.

For example, at least five third-party complaints have recently been filed by Nomura Credit & Capital, Inc. against, among other co-defendants, Ocwen as the servicer of the RMBS trusts. The complaints argue that Ocwen's underperformance has harmed the plaintiff, or that the breaches ought alternatively to relieve Nomura of certain of its duties to the trust.  The following excerpt comes from Nomura Credit & Capital, Inc. v Wells Fargo Bank, N.A., and Ocwen Loan Servicing, LLC, filed 8/11/14.

This public embarrassment can make it more difficult for Ocwen to defend itself in the existing and future litigation as it will inevitable have suffered a deterioration in reputation capital.  Last but not least, it will likely further hinder any near-term hopes Ocwen may have had of buying additional mortgage servicing rights (MSRs), and expanding its business.


Anonymous said...

Yes they are criminals to the fullest extent from each and every person that works for them. If they are not from the beginning they make them into some of the dirtiest folks on earth. I got sold out by a really good sales person at New century mortgage Dec.2005 the stupidest thing I ever done in my life. If my elders were around today they would have killed me first!!! I trusted a greedy sales pitch and took out a loan with them January of 06 came I just felt like hell but it was cool they sent me a bill I paid it February,March April same thing them they hit me with homeq servicing (omg !!) I own a very busy pest control company in Madera California with service techs acting like 10 years old .California law allows employees to have with more rights than employers( that's why it's a mess out here) anyway homeq don't bother billing me they said that is all up to me and the fight was one i wanted a monthly statement and they refused.What a mess absolutely the worst idiot's to work with. October 31 2008 came there was the 3 day notice my little 1100 square foot home that my grandparents bought new in 1946 that I loved and it was just like New for it's age. I called every body I could in the world except for the president of this mess today and found absolutely no help especially in California. Spent thousands on attorneys from la to SF found a young man in Fresno went straight to federal court and I refused to leave finally got me out May 09 it was ugly I was livid.homeq ends up selling to Ocwen now it's like almost 2011 I actually take my house back I moved back into it because no one took care of it.long store short after all the different attorneys from Houser and Allison in la California (fucking hood rat's) i finally just gave up in June of 2014 the dam judges in Madera California could not make up their mind I couldn't take anymore.the whole thing was scam from the government and Hitler Deutsche bank and many more just over plain greed and stupidity of my part but I was teased out by a lying sales fuck!. And now I am homeless let me tell everyone never trust a banker you can't see especially anyone from los Angeles California I learned more from those short years then my entire school career and being self employed since high school 1984 . Carma will get them in the long run in which they deserve every bit of it! Sincerely Douglas lee Smith 418 Rotan Ave. Madera California 93637

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