Home Loan Servicing Solutions, Ltd. Securities Class Action
Company background
Home Loan Servicing Solutions, which has its principal executive offices in the Cayman Islands, was created to obtain mortgage servicing assets comprising associated servicing advances, mortgage servicing rights and also rights to fees and other income associated with servicing mortgage loans.
In addition to the aforementioned offices, the real estate company has offices located in Atlanta, Georgia and West Palm Beach. HLSS purchases the aforementioned assets, and then has Ocwen Financial Corporation service the mortgages that are tied to these assets. Ocwen, which is based in Atlanta, services both residential and commercial loans.
The Rosen Law Firm, P.A. announced on Jan. 29, 2015, that it had brought forth a securities class action to represent investors who bought the company’s common stock between Feb. 7, 2013, and Jan. 23, 2015. By filing the suit, the law firm is attempting to recover investor losses by making claims under federal securities laws.
Legal investigation
On Jan. 26, 2015, The Rosen Law Firm announced it was looking into potential claims against the real estate company because of allegations HLSS might have provided the investing public with materially misleading business information.
Hedge fund BlueMountain Capital Management, LLC announced Jan. 23, 2015, that it had delivered a notice of default against HLSS Servicer Advance Receivables Trust for notes that were sold by the trust and owned by BlueMountain.
The hedge fund emphasized Ocwen’s regulatory challenges and other issues in the notice of default, stating that these challenges “materially increase the risk of loss on the Notes that are collateralized by receivables affected by Ocwen’s standing as a servicer.” Company shares plunged more than 11 percent on this news to close at $13.76 on Jan. 23, 2015.
Securities class action claims
The securities class action has claimed that the company failed to disclose key matters, and also made statements that were materially false and or misleading. More specifically, the lawsuit alleged the company had violated provisions contained in notes held by BlueMountain. The suit claimed that defaulting on these securities could create material risk.
The securities class action also alleged HLSS did not reveal the key role played by Ocwen, as well as the risks faced by the mortgage servicer. According to the suit, the real estate company failed to disclose that its business hinged largely on Ocwen, and relied on the mortgage servicer conducting its business legally. In addition, Ocwen had systemic internal control weaknesses, which created material risk and uncertainty for HLSS.
The company also allegedly failed to reveal that it was being investigated by authorities for potentially breaking applicable state and federal regulations and laws.
“The suit claimed that defaulting on these securities could create material risk.”
The securities class action finally claimed that when markets came to know the aforementioned material matters, they responded by pushing company shares lower.
What investors should know
When announcing the securities class action, The Rosen Law Firm informed investors that the court system has not yet certified a class in the legal motion. As a result, eligible shareholders must find their own counsel if they wish to have representation. In addition, investors who want to serve as lead plaintiff have until March 30, 2015, to move the court.