Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Mortgage service provider Ocwen Financial Corp. has been hit with a proposed class action saying the company’s handling of securitized subprime mortgages violated federal employee benefits law.
The lawsuit, filed March 5 on behalf of pension funds that invested in mortgage-backed securities, is an attempt to hold Ocwen liable as a fiduciary under the Employee Retirement Income Security Act. Ocwen’s interests weren’t aligned with the interests of the pension plans that invested in the securities, and the company acted to enrich itself at the expense of those plans, the lawsuit claims.
Ocwen is one of the country’s largest mortgage companies and a frequent target for litigation involving real estate, foreclosures, and consumer protection laws. This appears to be one of the first times the company has been sued under ERISA in the past five years, according to Bloomberg Law Litigation Analytics.
In this case, pension fund trustees claim Ocwen exercised “sweeping, unchecked control” over the management of securitized mortgages. Ocwen “sabotaged” mortgage modifications and pushed homeowners into “needless default and foreclosure,” which caused losses to the investor pension plans, the lawsuit claims. Ocwen also took “illegal profits” from these securitized mortgages, which caused benefit plans “enormous losses,” according to the lawsuit.
A spokesman for Ocwen vowed to defend the lawsuit.
“Ocwen is reviewing this matter, and intends to defend itself vigorously,” Ocwen spokesman John Lovallo told Bloomberg Law in an email.
Mortgage securitization involves pooling unrelated contractual debts together and selling investors an interest in the income stream generated by those debts. The securitization of subprime mortgages was a contributing cause of the 2008 financial crisis.
The lawsuit was filed by trustees of the United Food & Commercial Workers Union & Employers Midwest Pension Fund. They seek to represent a class of “thousands, if not tens of thousands,” of trustees of benefit plans that invested in securitized mortgages serviced by Ocwen.
The trustees are represented by Lowey Dannenberg PC, Guttman Buschner & Brooks PLLC, and Karmel Law Firm.
The case is Powell v. Ocwen Fin. Corp., S.D.N.Y., No. 1:18-cv-01951, complaint 3/5/18.
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