A Pennsylvania law firm announced Wednesday it has filed a class action lawsuit against Ocwen, claiming the company misled shareholders about its practices and earnings.
In a complaint filed with the U.S. District Court for Southern Florida, the Law Offices of Howard G. Smith, a firm focused on representing investors, accused the Atlanta-based mortgage company of failing to disclose to its shareholders that its servicing practices "violated applicable regulations and laws" and that its executives were involved in funneling millions of dollars in fees through Altisource Portfolio Solutions, a related company.
The class action comes as Ocwen continues working to get out from under the microscope of financial regulators like Benjamin Lawsky, New York's superintendent of financial services. In a letter addressed to company's executive board in early August, Lawsky said his department is currently reviewing a "troubling transaction" between Ocwen and Altisource, which he said "appears [to be] designed to funnel as much as $65 million in fees annually from already-distressed homeowners ... for minimal work."
That letter came months after Lawsky first voiced his concerns about Ocwen's relationship with affiliate companies that provide fee-based services and whether those transactions are priced fairly.
In another headache for the company, Ocwen recently announced that an audit of financial statements for 2013 and the first quarter of 2014 revealed they "can no longer be relied upon as being in compliance with generally accepted accounting principles."
Ocwen said the discovered flaw dealt with how the company recorded the value of mortgage servicing rights sold in a transaction with Home Loan Servicing Solutions, Ltd. Due to the change, the company plans to restate its financial results, anticipating a $17 million increase in pre-tax income for 2013 and a decline of the same amount for Q1 2014.
The class action complaint also cites that announcement, saying Ocwen's financial results were "artificially inflated" between May 2, 2013 and August 11, 2014, the period covered in the suit.
Ocwen did not immediately respond to a message seeking comment.