BlackRock (BLK) is reportedly part of a group of mortgage bond investors that is currently threatening to sue Ocwen Financial (OCN), alleging that the company failed to properly collect payments on $82 billion of home loans.
The group of investors, which also reportedly includes MetLife and Pimco, sent a notice of non-performance to Ocwen and the trustees for 119 residential mortgage-backed securities trusts, via the law firm of Gibbs & Bruns. The Gibbs & Bruns letter specifically mentions “conflicted servicing practices” between Ocwen and its affiliates, including Altisource Portfolio Solutions (ASPS) and Home Loan Servicing Solutions (HLSS).
What the letter doesn’t mention is what interest the bond investors have in Ocwen and its affiliates, other than the mortgage-backed securities that is. But a Monday filing with the Securities and Exchange Commission shows that BlackRock is more than an interested party.
BlackRock is also the owner of 7.5% of the stock in Ocwen’s affiliated company, Altisource Residential Corporation (RESI).
According to the SEC filing, BlackRock owns 4,296,911 shares of Altisource Residential’s stock. The stock closed Monday at $17.78, making BlackRock’s shares worth $76.399 million.
Ocwen and its affiliates have been under fire in recent months, including this latest litigation threat from BlackRock and others.
According the letter from Gibbs & Bruns, Ocwen “used trust funds to ‘pay’ Ocwen’s required ‘borrower relief’ obligations under a regulatory settlement, through implementation of modifications on trust-owned mortgages that have shifted the costs of the settlement to the trusts and enriched Ocwen unjustly.”
The group also says that their experts’ analysis demonstrate that trusts serviced by Ocwen have performed materially worse than trusts serviced by other servicers, which they allege is a direct result of Ocwen’s “imprudent and improper servicing practices.”
The group also says that they intend take further action to recover these losses and protect the trusts’ assets and mortgages.
Ocwen responded to these claims on Monday, telling the investors that their objects are not as altruistic as it appears.
“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,” Ocwen said in the letter of response to claims that Ocwen failed to perform its contractual obligations as a servicer by failing to properly collect payments on $82 billion of home loans.
“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,” Ocwen added.
Ocwen also said that the letter, sent to the nonbank by the law firm of Gibbs & Bruns on behalf of the mortgage bond investors, was “drafted in an inflammatory tone, with misleading content, and coordinated with media release so as to create wildly false impressions.”
