Ocwen Financial Corp. has reached a $56 million settlement to resolve a stock-drop suit arising from the company’s problematic servicing operations. The case was scheduled to start trial last month but the parties reached the agreement to settle through a mediation process.
Under the terms of the settlement, Ocwen will make a total cash payment of $49 million to the various Plaintiffs, of which it expects $12 million to $14 million to be covered by insurance. The balance of the settlement would come through the company’s issuance of a total of 2.5 million shares of company common stock.
In December 2014, Ocwen agreed to pay $150 million to settle claims by New York’s Department of Financial Services that the company’s shoddy mortgage servicing practices harmed homeowners. William Erbey was forced to step down from his position as executive chairman as part of that settlement. The instant class action case, which is a consolidation of several investor suits, was triggered by a 63 percent drop in Ocwen’s share price between February and December 2014 amid the investigation by New York regulators. Misrepresentations and omissions were made to purchasers of Ocwen’s common stock regarding the company’s compliance with regulations and requirements put in place by New York’s Department of Financial Services and through the National Mortgage Settlement. The settlement must receive final approval by the court.
Sjunde AP-Fonden, which is part of the Swedish national pension system and manages about $18 billion in pension assets for more than 6 million Swedish investors, is the lead Plaintiff in the case.