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Ocwen Financial Corporation has sent a Letter of Rebuttal to Trustees and Master Servicers for 119 residential mortgage-backed securities (RMBS) trusts in response to a notice of alleged non-performance issued on Jan. 23, 2015 by Gibbs & Bruns LLP. That notice was sent on behalf of a group of RMBS investors, including BlackRock Financial Management Inc., Pacific Investment Management Company LLC (PIMCO), Kore Advisors LP, Metropolitan Life Insurance Company and Neuberger Berman Europe Limited.
Ocwen’s rebuttal letter made clear the following key points:
►The notice is the latest effort in a long campaign by Blackrock, PIMCO, Kore, Met Life and Neuberger to try and impose changes to standard servicing practices, with the goal of forcing more home foreclosures and fewer loan modifications. Ocwen is a provider of loan modifications under HAMP, the Home Affordable Modification Program (HAMP) administered by the United States Department of the Treasury. HAMP furthers the Treasury Department’s strong public policy to help struggling borrowers remain in their homes by encouraging and guiding servicers like Ocwen to pursue profitable loan modifications rather than rushing to foreclosure. Instead, these investors’ pro‑foreclosure, anti‑modification agenda is driven by their desire to increase their own financial returns on their specific tranche-level holdings in RMBS trusts, at the expense of long-term gains to the Trusts as whole, through sustainable modifications.
►The allegations in the notice are substantially the same claims that were refuted during a failed attempt to prevent Ocwen from acquiring a competitor’s servicing portfolio in 2013. Those allegations were ultimately dismissed after being found to have no merit by independent experts.
►The current standard of servicing outlined in Ocwen’s agreements requires the company to service loans in the best interest of all investors and in conformance with accepted industry practices. Ocwen is compliant with this standard of servicing. Each modification Ocwen performs is designed to yield a higher anticipated recovery to investors than foreclosure. Nothing alleged by the investors establishes that Ocwen breached the standard of servicing called for by the agreements.
►Unable to establish otherwise, the investors instead malign Ocwen’s modifications through selectively presented data that does not comport with the facts, as well as allegations of imprudent modification practices that are belied by Ocwen’s use of standard industry practices and compliance with applicable regulations.
►Ocwen is positioned in the market to handle the special demands of servicing subprime loans in a manner consistent with servicing standards that achieve positive investor outcomes.
A February 2015 independent recent research report from Morgan Stanley’s RMBS strategy team details many aspects of Ocwen’s servicing business including that Ocwen’s “modification style” is effective. The report states that “Whether a borrower first went delinquent while being serviced by Ocwen, or fell delinquent and was then transferred to Ocwen, we find that these borrowers are more likely to be in their homes today than if the MSRs were held elsewhere.” Moreover, the report goes on to say that “It doesn’t appear in investors’ best interest to replace Ocwen as servicer.”