Ocwen Financial is fighting back against a group of large bondholders that have accused the Atlanta mortgage servicer of improper servicing practices and an alleged breach of trust.
On Sunday, Ocwen sent a letter to 119 investors refuting allegations that its servicing practices had triggered an "ongoing event of default."
Ocwen's letter was a response to allegations in January by the Houston law firm Gibbs & Bruns accusing Ocwen of major servicing violations. Gibbs & Bruns, which represents investors in private-label trusts such as BlackRock and Pimco, accused Ocwen of conflicts of interest, imprudent modification practices and a failure to account for principal and interest payments to the trusts.
Ocwen is claiming that the bondholders' ultimate aim is to limit the number of loan modifications it performs and instead foreclose on more borrowers. Foreclosures, Ocwen claims, would increase the returns to senior bondholders.
"Nothing alleged by the investors establishes that Ocwen breached the standard of servicing called for by the agreements," Timothy Hayes, Ocwen's executive vice president and general counsel, wrote in a 30-page response.
Ocwen said the allegations are part of an effort to "impose changes to standard servicing practices, with the goal of forcing more home foreclosures and fewer loan modifications."
The company said each modification it performs "is designed to yield a higher anticipated recovery to investors than foreclosure."