Ocwen loses two mortgage servicing contracts

by MPA02 Mar 2015
Troubled mortgage servicer Ocwen Financial Corp. has announced that it had is been terminated from overseeing debt backing two bond deals and for their handling of home loans.

Ocwen was fired from two deals, representing $264 million in unpaid principal. Wells Fargo & Co, the trustee for the transactions, put a vote to investors on whether to terminate the Atlanta-based mortgage servicer.

"We regret the decision made by this particular group of investors who have been critical of Ocwen's superior loan-modification results, but are pleased that in the majority of the affected securities, investors are keeping Ocwen as their servicer," Ron Faris, Ocwen's president and CEO, said.

However, analysts expect much more fallout ahead. Shares of Ocwen fell 15% Friday to $8.31 a share.The company has seen its shares tumble 74% over the past year to $9.78.

Some of the bondholders, who had directed Wells Fargo to terminate its relationship with Ocwen, accused the servicer of “imprudent and improper servicing practices,” according to Bloomberg.

Wells Fargo plans to transfer servicing to the Credit Suisse Group AG, but first it would need to have a approvals from rating firms for the choices, Nomura analysts Paul Nikodem and Pratik K. Gupta told the media outlet.

Moody’s Investor Service downgraded Ocwen’s servicer ratings after it was found the company had backdated foreclosure letters.

Last week, Mortgage REIT New Residential Investment Corp. announced it had agreed to purchase Ocwen Financial spinoff Home Loan Servicing Solutions (HLSS) for $1.3 billion, just weeks after HLSS was urged to cut ties with Ocwen.

In February Mangrove Partners Master Fund Ltd. had urged Home Loan Servicing to cut ties with the troubled mortgage-servicing firm Ocwen, threatening to launch a campaign to replace HLSS' board at its annual meeting, according to the Wall Street Journal.

In January, hedge fund BlueMountain Capital took a major bet against HLSS by stating the company would collapse after it claimed a default against the company’s notes.


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