A federal judge in Florida has dismissed two class action lawsuits against non-bank mortgage servicer Ocwen Financial, according to court filings.
U.S. District Judge William Dimitrouleas in the U.S. District Court, Southern District of Florida, dismissed lawsuits filed by Ocwen Financial shareholders and Altisource Portfolio Solutions shareholders accusing the Atlanta-based servicer of fraud.
"We are pleased that the Court has dismissed these two separate actions against the Company," Ocwen spokesman Jon Lovallo said in an email to DS News. "We agree with the Court’s rulings, and will continue to vigorously defend ourselves as necessary."
According to the court filings, Ocwen is the fourth largest mortgage servicer and the largest non-bank servicer in the United States.
Beginning in 2010, Ocwen's portfolio of mortgage servicing rights grew rapidly, which resulted in heightened regulatory scrutiny. In 2011, Ocwen was required by the New York Department of Financial Services to enter into an Agreement on Mortgage Servicing Practices in which Ocwen promised to comply with national mortgage standards.
Shareholders of Altisource, which spun off from Ocwen in 2009, sued Ocwen over alleged losses of $1 billion incurred when the price of Altisource stock plummeted (by 76 percent, from $170 per share to $31 per share) in response to a lengthy investigation of Ocwen's mortgage servicing practices by the New York DFS. The regulator suspended Ocwen's mortgage servicing rights from Wells Fargo in February 2014 due to "concerns about Ocwen’s servicing portfolio growth" and subsequently issued a series of letters regarding Ocwen's regulatory compliance. Ocwen eventually settled with the New York DFS for $150 million in December 2014 with an agreement that Ocwen founder and chairman Bill Erbey would resign.
"We agree with the Court’s rulings, and will continue to vigorously defend ourselves as necessary."
Ocwen countered in that case that "Plaintiffs cannot assert a federal securities fraud claim against Ocwen when their alleged losses stem solely from their purchases of stock in Altisource," according to the Court filing. The Court ruled that the Plaintiffs lacked standing to sue Ocwen in this case.
The lead plaintiffs in the Altisource case were the Pension Fund for the International Union of Painters and Allied Trades District Council 35 and the Annuity Fund for the International Union of Painters and Allied Trades District Council 35, acting on behalf of themselves and all persons and entities who purchased stock in Altisource between April 2013 and December 2014.
In the case of the Ocwen shareholders, Plaintiffs sued alleging that Ocwen made fast statements and omissions regarding Ocwen's business practices, compliance with the New York DFS, the efficacy and cost-effectiveness of Ocwen's servicing platforms with compliance, the nature of Ocwen's compliance controls regarding related party transactions, and Ocwen's ability to compete for mortgage servicing rights acquisitions, according to the Court filing. Plaintiffs sought to recover losses they incurred when Ocwen's common share price declined by 63 percent between February 2014 and December 2014 during the New York DFS's investigation, which culminated with the $150 settlement.
Ocwen responded in this case that the Plaintiffs "failed to plead a single actionable false statement of material fact." The Plantiffs' claims were all dismissed because "Regardless of the falsity of the alleged statements, the Complaint is deficient because Plaintiff has failed to adequately allege scienter (intent to deceive or defraud, or knowledge that the statements were false) as to any of the Defendants," according to the Court filing.
The lead plaintiff in the Ocwen shareholders case is Sjunde AP-Fonden, acting on behalf of itself and all persons and entities who purchased Ocwen common stock from May 2013 until December 2014.
Click here to see the complete court filing in the Ocwen shareholder case.
Click here to see the complete court filing in the Altisource shareholder case.