borrowers, and funneling work to affiliates that may have led to improper foreclosures.
In the bond investor case, investors are also seeking more than $153 million that they say Ocwen improperly recovered from the mortgage bond trusts. Ocwen should not have recouped the funds, known as “advances,” when the loans were modified, the investors say.
They also want over $78 million after Ocwen forgave principal as part of a settlement with the Consumer Financial Protection Bureau in December 2013. The investors allege it was improper for Ocwen to modify loans in the trusts to claim credit under the settlement.
“The notice issued today raises serious concerns about the quality and accuracy of Ocwen’s servicing of mortgages held by these trusts,” said Kathy Patrick, a partner at the Houston-based law firm Gibbs & Bruns, which initiated the legal action on behalf of the group of investors. “Ocwen must now address these concerns promptly,” she added.
Under the mortgage bond trusts’ contracts, Ocwen has 60 days to fix the practices that the investors are complaining about. After that, the investors can demand that the six trustees sue Ocwen or seek other relief.
The trustees include Bank of New York Mellon Corp, Citibank, Wells Fargo & Co, HSBC, Deutsche Bank and US Bank. Spokespeople for Wells, HSBC, Citi, and USB declined comment. BNY Mellon and Deutsche Bank did not immediately respond.
Gibbs & Bruns also represents investors in a $8.5 billion settlement with Bank of America Corp and a $4 billion-plus proposed deal with JPMorgan Chase & Co over mortgage-backed securities.
Aside from money manager BlackRock Inc, insurer MetLife Inc and fund manager Pimco, owned by Germany’s Allianz, the investor group taking the action on Friday also includes European investment fund Sealink Funding Ltd and investment management firm Kore Capital, the person familiar with the matter said.
BlackRock declined comment as did a representative for Sealink. Calls to Pimco and other members of the investment group were not immediately returned.
The notice referenced problems raised by New York’s Department of Financial Services, the US Consumer Financial Protection Bureau, and a nearly year-long investigation by the investor group with the help of outside experts.
The notice also alleges that trusts serviced by Ocwen do a lot worse than others, and returned about 1 percent less in cash to investors annually from 2009 through 2013. Shares of Ocwen fell nearly 17 percent on Friday and Home Loan Servicing Solutions fell more than 10 percent.