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Ocwen Legal Fees charged to Trust?

Ocwen is the only servicer to have the extra line “Servicer Legal Fees” added to the Interest Fee section of the Deutsche Bank remittance reports. These legal fees are then withdrawn from the Interest Collection Account to reimburse Ocwen. We could not find any other servicer with anything similar to this on any remittance report. Deutsche Bank does impose an Extraordinary Expense Recovery charge, but Ocwen’s legal fees are many magnitudes higher. We know that other servicers are charging the Trust for legal fees, but these fees are usually taken out of the liquidation proceeds at the loan level. In the PSA for INDX 2006-AR2, Section 6.03 Limitation on Liability of the Depositor, the Seller, the Servicer, and Others, states:

"In such event, the legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Trust Fund, and the Depositor, the Seller, and the Servicer shall be entitled to be reimbursed therefor out of the Certificate Account."

These legal fees may be related to this clause.

We reviewed the remittance reports for 29 Ocwen serviced deals and discovered that Ocwen had removed over $17 million of legal fees from the Interest Collection Account over the past year. Although Ocwen cannot provide specifics on any one loan, they did state that:

“From time to time we have to defend the Trust in borrower litigated cases. Ocwen has to act in the best interest of the Trust and provide defense”

Ocwen’s statement does makes sense, however, the legal fees charged just seems high. These legal fees could be justified, but with limited details provided, we cannot make a fair judgment.

Contact us at 203-276-0672 to become a client and access all reports and attachments.

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