Ocwen Financial: Calling Republican Lawmakers What Is Going On With The CFPB

| About: Ocwen Financial (OCN)

Summary

Lawmakers need to understand bad behavior might have have occurred by industry participants in their lobbying of the CFPB and other State officials to further their pro-foreclosure agenda.

Discussion of Ocwen Financial and Altisource Portfolio Solutions current valuation.

I recommend that company management of OCN and ASPS explore if other firms in fact hurt the company through misrepresentations or short selling and pursue tort claims.

05/01/2017

John Devaney, CEO United Capital Markets

The following communication is to:

1.) President Trump

2.) The House Financial Services Committee

3.) The U.S. Senate Committee on Banking, Housing, and Urban Affairs

4.) The United States Department of Justice

5.) The Securities and Exchange Commission

6.) The Ocwen Financial (NYSE:OCN) Board of Directors

7.) The Altisource Portfolio Solutions (NASDAQ:ASPS) Board of Directors

8.) Ocwen Financial and Altisource Portfolio Solutions equity investors, corporate bond investors, and bank term loan investors having owned any of the securities between around 2013 and present.

9.) All current and prior owners of Home Loan Servicing Solutions (OTCPK:HLSSF), (Altisource Asset Management (NYSEMKT:AAMC) and Altisource Residential Corporation (NYSE:RESI) RESI equity and debt instruments that were owned between the periods of 2013 and present.

Introduction:

I feel that there has been wrongdoing over the past several years by various industry participants that might have broken various federal and state securities rules such as insider trading, securities fraud, violations of the RICO act, illegal or inappropriate communications between government organizations such as the CFPB, State Ags and public and private companies attempting to gain a profit advantage or gain confidential information, and illegal or inappropriate lobbying that might have occurred between public officials and the private sector that are governed by strict rules.

I am also asking for the above mentioned companies and their respective Board of Directors, in the center of below narrative, mainly Ocwen Financial and Altisource Portfolio Solutions, to ascertain whether the actions of others might have created a tort claim that the companies should pursue for the benefit of shareholders.

The recent actions of the CFPB, the members of the MMC (Multistate Mortgage Coalition) against Ocwen Financial seem to be politically motivated and coordinated. There is quite a bit of back story to Ocwen's history of growing too quickly taking on mainly subprime loans that the large banks didn't want to deal with anymore. Yes, Ocwen has made mistakes and has had issues resulting from this rapid prior growth. The full story in many ways is not what it appears.

By any measure, Ocwen has helped preserve home ownership of struggling Americans with low credit scores far better than any other mortgage servicer. Ocwen Financial has done as reported on page 18 of the fourth-quarter earnings presentation, 330,464 HAMP loan modifications beating the next highest servicer Wells Fargo (NYSE:WFC) by 53%. For sure this has provided tremendous benefits to these struggling homeowners. The CFPB wants folks to think Ocwen has hurt homeowners, but quite the opposite is true. These loan mods did far more overpowering good since this was on such a large scale than the legacy issues from 2012 to 2015 brought up in the recent CFPB complaint.

The incredible recent overreach of the CFPB in its coordinated attack of Ocwen Financial with the MMC is very problematic to the very homeowners that these organizations are installed to protect. Reform in the servicing industry is ongoing and as evidenced by serious infractions found by the biggest banks in the country as evidenced by the National Mortgage Settlement (NMS 2012). The subprime machine was created by the banks' origination and securitization of the shaky loans that contributed to the financial crisis. These loans were not created and underwritten by Ocwen.

This incredible overreach of the CFPB in its actions against PHH Corporation (NYSE:PHH) and Ocwen Financial are symptoms of a grossly broken regulatory environment that needs to be fixed for the benefit of consumers, homeowners, and now mainly smaller public and private companies that employ hundreds of thousands of hard working Americans. The investors in public debt and equity that have felt the wrath of these overreaching government actions also are affecting the very foundations of capitalism.

I am an owner of a couple companies that have been on the receiving end of the above described overreach, namely Ocwen Financial and Altisource Portfolio Solutions, and both of these public equity securities have fallen after the coordinated attack by the CFPB and states by more than 50% after these actions were announced.

Yes, I am an upset investor. But this communication below has details of quite a bit more of a back story involving these companies and the interplay between regulators, profit motivated investors that I believe have created a phony data narrative provided to the regulators and also wielded powerful influence over these regulators for their own profit motives. These powerful investors driving much of these inappropriate exchanges with regulators are some of the largest money managers in the world. I hope the House and Senate representatives will all read this communication, along with the SEC and DOJ.

For the affected shareholders, because this back story involved behavior that I believe could create tort actions that the companies should pursue, I am currently working on a strategy that will protect investor rights that are owners of OCN and ASPS. If the companies do not take actions, I feel like investors might want to consider taking actions on behalf of the company.

This strategy might entail civil litigation, whistle blower complaints to various federal agencies like the SEC and DOJ for insider trading allegations, fraud committed by large companies that knowingly created phony data released to the public regarding OCN, trading before or after releasing knowingly false data is securities fraud, contacting politicians such as is intended in this communication and especially to get the attention of Jeb Hensarling that outlines wrong doing and illegal behavior by industry participants and conflicted interactions between large investors and the CFPB and State Ags, as well as interviewing expert data technicians to help prove some of the above and below.

I believe the company is also involved in fighting back, but I feel like shareholders, many of whom are experts in the area of mortgage finance, should take a few of their own independent steps to counter this full out political assault on Ocwen which is a dual assault by profit motivated investors and by the CFPB's and various democratic State AG's dwindling power in Washington.

"PAWNS OF WALL STREET"

The most egregious thing of all remains that much of the attack on Ocwen started with lobbying from large money managers such as BlackRock (NYSE:BLK), Pimco, Neuberger and Berman, Metlife (NYSE:MET), and Kore Advisors (The Gibbs & Bruns Group) that are pro-foreclosure and on January 15, 2015, declared what I consider to be a phony Event of Default (EOD) on 119 of Ocwen serviced RMBS bonds. These industry participants are managing money for hard working Americans in their retirement accounts and they are in favor of foreclosure and against the loan mods that have helped Ocwen stay in their homes. A very interesting piece was faxed to me from an anonymous author that was making rounds on trading desks last week, titled "PAWNS OF WALL STREET".

I heard this is from a market participant with more than 100bb of assets under management who apparently does not agree with the "kick the struggling homeowners on the street" agenda. I think this firm has an extensive private label RMBS bond portfolio (subprime) at the heart of these issues. He is saying in his paper that these large firms duped the CFPB and State AG's into doing their dirty work for them so that their subprime mortgage bonds might make slightly more money at the expense of the struggling homeowner.

Basically, the Gibbs group created in my opinion a phony list of allegations found in this link in an effort to profit off their equity OCN, ASPS, HLSS, RESI, and AAMC short positions as well as to transfer servicing away from Ocwen to another servicer that would make their RMBS bonds slightly more money in their pro foreclosure agenda. I also believe that these parties traded in the Ocwen serviced RMBS bonds dumping their holdings of riskier pieces ahead of their knowing damaging EOD notice.

I believe it is very likely that this phony narrative was given to Ben Lawsky at the NY DFS considering this same Gibbs group was already quoted as lobbying Lawsky to stop an acquisition Ocwen was trying to make.

Ocwen fires back with a detailed retort to the entire list of allegations with fairly straight forward answers found here.

A year later after very severe financial harm has been done to Ocwen as a result of this group declaring an official EOD in its public communications and allowing, I believe various members of this conspiracy to profit on Ocwen's price decline, ASPS price decline, and other parties to profit from Ocwen's fire sale of assets - Duff and Phelps who was engaged by Wells Fargo to conduct a detailed study to see if any wrong doing alleged in the Gibbs report was true declared there was no evidence. The Duff and Phelps report said:

Ocwen Financial Corporation, a leading financial services holding company, today commented on the Duff & Phelps, LLP (Duff & Phelps) independent analysis, which determined that none of the allegations in the Gibbs & Bruns, LLP's January 23, 2015, Notice of Non-Performance investigated by Duff & Phelps were supported by evidence.

As I describe above and below, I believe that this phony narrative and what now has been proved to have been phony data was provided to the CFPB and various State AGs encouraging these regulators to take enforcement actions to the benefit of these investors.

This is why the Dodd-Frank regulations and the CFPB must be reformed. None of the above and below narrative I believe might have occurred not for the unlimited power held currently by the CFPB.

My history in this narrative:

My broker dealer, United Capital Markets (UCM), is 18 years old and has traded with hundreds of institutional counterparties. At the age of 29, I purchased a broker dealer and believe I was one of the youngest such approved owners in the industry at that time by the regulator NASD now known as Finra. Since my firm's inception, I decided to study, model, trade, and invest as principal in the riskiest tranches of the structured finance marketplace. My firm grew very quickly handling a niche that the largest primary dealers wouldn't touch at the time. My firm has traded between 50bb and 75bb of bonds in structured finance risky subordinate tranches in the firm's history making UCM a leader. The firm has traded with most of the nations large and small money managers, insurance companies, government entities such as Fannie Mae (OTCQB:FNMA), mutual funds, hedge funds, banks, CDO managers, and over a hundred other regional dealers. I am proud of the liquidity and research my firm has provided over many years to market participants.

My firm is well known to provide more transparency in our offerings of these hard to price subordinate tranches over other dealers. My offering sheets showing the bonds that I owned as principal increased in many periods to over 200mm in proceeds and hundreds of unique bonds all shown in an Excel offering sheet. Other dealers throughout my entire career did not want to show their entire hand and would show five or ten hard-to-price subordinate offerings at one time even though they might have owned more as principal.

So how did I get involved as an Ocwen equity owner and get involved in this?

For over 20 years I have been one of the top traders and dealers in subprime subordinate tranches. Investing in these riskier subordinate tranches required a far greater understanding of the structure, servicer performance, and projected collateral performance over the senior bonds. The risky bonds are levered to small changes in delinquencies, foreclosures, and losses so basically you have to know your stuff. My record specializing in this area has been very good having a down year only during the financial crisis investing in the structured finance space over all these years.

A few years after the financial crisis, starting in 2012, I identified and correctly predicted that the loan mods that Ocwen Financial was doing would be far more effective over any other servicer. I invested at bonds at $5 and $10 and $25 prices that went to $30, $50, $60, and even $80 prices in just a matter of a couple years. By far the loan mods that Ocwen did protected bondholders from principal losses far better than any servicer. I made a large amount of money on this specific trade, which is why I decided to respond to what I now consider "The phony Gibbs EOD Notice" with a letter I wrote to Moody's Investor Service that I decided to make public.

My letter to Moodys Investor Service is found here written on March 3, 2015:

Other Ocwen serviced RMBS bond investors came to Ocwen's defense including LL Funds which reported owning 1.8bb current face of Ocwen's RMBS bonds. This is over 1.2% of Ocwen's entire private label portfolio. They wrote one paper entitled "In Defense of Ocwen's Servicing" found here and then a little while later right before Ocwen received the much needed upgrade from Standard and Poor's, LL Funds wrote a follow up paper found here entitled "Update to Ocwen Paper". The first paper disputed the allegations in the above mentioned Gibbs & Bruns allegations using data from Loan Performance, an industry leading data vendor for loan level data in RMBS bond deals. They asserted that many of the tables created by who we now know was the Gibb's data expert, Scott Gimpel of Webbs Hill Advisors, were misleading talking about Ocwen's re-default rates on modified loans. LL funds found that Ocwen had the best re-default rate of anyone when comparing "subprime to subprime" or a apples-to-apples comparison instead of apples versus bananas. This first LL Funds report, which I agree with, says that Ocwen's servicing practices provided more "cash flow" back to the RMBS deals which is the overriding legal mandate that Ocwen has in following the Pooling and Servicing Agreement (PSA), or the official contract between the servicer and the RMBS trust. The second paper compared Ocwen's servicing in subprime loans to servicer SPS. SPS has a very high rating by the rating agencies as a servicer. The paper said in total, Ocwen's strategy resulted in 6% lower losses for its delinquent loans compared to SPS. This is saying in other words, that Ocwen prevented 6% of actual losses to the RMBS bond trusts going head to head with SPS which is considered to be the leading non-bank servicer.

Ocwen wins versus SPS in the subprime category in protecting the RMBS bonds from principal losses.

This is a very powerful conclusion and very different than the phony data that Gibbs Group decided to put out.

Additionally, in mid-2015, after all this saga unfolded with the NY DFS and Gibbs joint attack on Ocwen, I polled my entire account list, and over 100 institutional investors or 95% of all respondents told me that they would not move servicing away from Ocwen despite these Gibbs claims. I took this list in whole or in parts to the rating agencies who were downgrading Ocwen's corporate debt ratings and servicer ratings. I provided names phone numbers, and emails of many market participants that spoke up to the rating agencies to support Ocwen's servicing practices.

The Irony is the BIG BANKS that created these products skirted their responsibility to continue to service it, selling off subprime mortgage servicing rights to other such as Ocwen.

Republican lawmakers should be aware that the worst offenders of throwing the homeowners to the curb were the largest banks like Bank of America (NYSE:BAC), Citigroup (NYSE:C), JPMorgan (NYSE:JPM) and Wells Fargo (WFC) which the CFPB and all 50 states announced on February 9, 2012, in the National Mortgage Settlement (NMS) requiring the banks to do, you guessed it, "loan mods" to help struggling homeowners to stay in their homes. This order stipulated that these firms along with GMAC/RFC were ordered to provide 20bb of principal relief to homeowners through loan mods.

Who do you think was lobbying vehemently against this settlement?? You guessed it: PIMCO/BlackRock and the rest of the Gibbs group.

Those investors behind much of this lobbying were and are "pro-foreclosure" which is a horrible fact that is at the heart of the lobbying pressure against Ocwen to regulators and all this phony data they put out trying to influence the rating agencies, regulators, and the trustees.

I've said this before, I believe that the Gibbs Group (BlackRock, PIMCO, Metlife, Neuberger and Berman, and Kore Advisors) knowingly presented false and misleading data in the report that declared Ocwen's RMBS in an Event of Default in its notice to the RMBS bond trustees.

If they knew the things they were saying were not true, this is fraud. This could have brought great harm to Ocwen over the years and Republican lawmakers should investigate if these misrepresentations are fact is true. Additionally, like I have stated above, I believe that these companies owe it to their shareholders to take actions against these misrepresentations with a tort claim that could uncover thousands of emails that could discover the connections between these market participants, regulators, rating agencies, short sellers, lobbyists, and each other in this conspiracy.

Someone needs to get all the emails: The companies harmed regulators, or the lawmakers.

In no apparent order below is a list of important facts relating to this case in front of regulators, investors, and lawmakers.

A.) If in fact, any of these firms traded after releasing knowingly false data to the public, this is securities fraud.

The House and Senate should invite these industry participants to testify before congress on these points. Did this EOD notice provide inaccurate data? Did any members of the group created the EOD notice know that data they presented was not true when written?

And was this EOD notice motivated by a pro foreclosure agenda that would hurt struggling American Home Owners?

The SEC should investigate to ensure that market participants did not commit securities fraud.

B.) Did any of this Gibbs Group EOD Group (BlackRock PIMCO, Metlife, Neuberger and Berman, and Kore Advisors} short OCN equity, HLSS equity, ASPS equity, RESI equity, shorted the bank debt, corporate bonds, or credit derivatives of any of these Ocwen related entities prior to the release of the EOD notice?

Did any friends or family members connected to the above short the securities ahead of the EOD notice?

Did any of this group pass inside information about the EOD notice to other investors in their network or other dealers with whom they trade with?

They all knew this legal EOD notice was coming and might have guessed that a bombshell in fact did make OCN's and all these other stocks get pretty much cut in half after the release happened.

The House and Senate should open up an investigation to see if in fact any impropriety was done that broke federal or state laws regarding trading on material and nonpublic pending information. The SEC should look into this.

This is all important to the current Dodd frank and the CFPB suggested reform. This is an example of the CFPB and potentially State AG's collaborating so closely with the private sector that these agencies could have actually helped set these folks up for insider trading violations and the lines between regulations might have mistakenly been blurred into the public sector.

C.) Did any of this group or other short sellers get inside information from collaborating with the CFPB or State AG's like the NY DFS or California DBO and know that these actions were coming?

If they shorted any of these stocks after being tipped off by regulators as the short interest did skyrocket on OCN just before the NY DFS order against Ocwen, a slew of market participants should be looked at to see if they were lobbying this same phony narrative to the State AGs and it is possible they received feedback from regulators that lead them to trade on material and nonpublic information if they were told enforcement was eminent.

Republican lawmakers should be very interested if these types of communications were in fact going back and forth between the CFPB and any public or private investment managers who have shown that their pro-foreclosure agenda favored higher returns on their more senior bonds in these deals at the expense of homeowners.

D.) I believe that the group provided this phony data and narrative to the CFPB, the NY DFS, and the California DBO and could have partially been behind the actions against OCN that regulators decided to take against Ocwen Financial.

I would hope that the CFPB did enough of their own homework on the facts in interpreting the data that might have been provided by this group, which we know now has been proven by Duff and Phelps to have no evidence.

This is at the very heart of the assertions that the Republican Chairman of the House Financial Services Committee is making against the director Richard Cordray.

The House Financial Services Committee Chairman, Jeb Hensarling should require the all members of the Gibbs and Bruns EOD RMBS Notice (PIMCO, BlackRock, Neuberger Berman, Metlife, and Kore Advisors ) to testify before the House to investigate the above.

Did they had interactions with the CFPB that could be deemed inappropriate and further the case for Cordray's dismissal. The House should use their powers to subpoena all email communications between these parties and ask them to testify.

An investigation should be done by the House to discover if communications from outside investors with their own profit motives influenced the actions that the CFPB decided to take against Ocwen and other firms in the financial services arena such as PHH and others.

I believe the emails might be explosive.

E.) I believe that the above Gibbs and Bruns Group colluded with a hedge fund Blue Mountain.

Blue Mountain released a white paper spelling out that they thought all of the OCN, ASPS, HLSS, AAMC, and RESI (all of the related companies) had an EOD on their bank debt. They released this notice on January 15, 2015.

The Gibbs Group (PIMCO, BlackRock, Neuberger Berman, Metlife, and Kore Advisors) released their phony EOD claim on the 119 RMBS bond trusts serviced by Ocwen also on January 15, 2015.

Oh, and also on this same day, January 15th, 2015, the California DBO took action threatening to suspend Ocwen's California License.

How on earth could this not be collusion? This hedge fund manager Blue Mountain, just by sheer coincidence, decided to publish a white paper saying that all of the public Ocwen companies affiliated bank debt were in an Event of Default on the exact same day as Kathy Patrick's Gibbs and Bruns issued a notice to the Ocwen RMBS bond trustees, that an EOD had occurred.

RICO? Collusion?

The House, Senate, and DOJ should be very interested if these members of the Gibbs Group were shorting OCN stock and related securities mentioned above, while colluding with other outside parties like Blue Mountain to release these damaging reports on the same day to earn the largest windfall possible on the short investments.

Why do this on the same day? Was Blue Mountain talking to the Giibs Group?

All of the emails between any of the Gibbs Group members and Blue Mountain should be discovered to see if any collusion was occurring and if there were parties that were trading ahead of this very damaging nonpublic information, most of which has now proven to have been false.

If Blue Mountain is shown to have known about the Gibbs Phony EOD notice in advance and traded on this material nonpublic information, then Blue Mountain should be investigated for insider trading. The emails will wind up showing everything.

The case against Steve Cohen's SAC capital just moved forward after the appellate court of New Jersey said there is enough evidence to proceed and some of the allegations are similar discussing providing phony research to regulators, racketeering, false research reports released to the public, short selling, tort claims, and collusion with others.

F.) Unlock the key to the Puzzle - The Gibbs Group data expert: Scott Gimpel

The data expert for the phony data for the Gibbs Group members is Scott Gimpel. He worked for over 20 years at RBS Greenwich and now has his own research firm called Webbs Hill Advisors. He gained enormous credibility in the RMBS community when he correctly predicted that certain RMBS deals that had a loan modification called "forbearance" might wind up triggering giant losses if the trustee instructed the servicer to rethink the treatment. He was right. He had quite a few other very astute observations regarding loan level data servicers and loved to talk about data he found in the loan files that didn't add up or he would talk about the all-time biggest principal mod reductions of all time. His nerdy data commentaries were also laced with some humor. I would have thought he has quite a bit of credibility.

He now I think has a subscriber base to his weekly data comments of about 30 institutional investors that are paying him about 30k a year each.

One market participant that knows Scott said that he confided to him that:

i.) He regrets taking on the Gibbs assignment

ii.) The data was twisted around and did not reflect much of the work he did.

If it turns out that Cordray at the CFPB relied on this phony narrative from these large RMBS investors, a good place to start would be calling in Scott Gimpel to testify to the House regarding the exact work he did mining data that was presented in a way that accused Ocwen as such serious offenses as "missing money" or "fraud." Scott Gimpel interviewed with my firm and then decided to leave RBS Greenwich and his first assignment that made him any meaningful money was the contract with the Gibbs and Bruns Group. He asked me for 1mm salary or 1mm guarantee. I said no.

How much was he paid by this group?

The House should conduct an investigation to see if this data expert was in email communication or other communication with the CFPB. Again, the data analysis in the EOD complaint was found to have no evidence by Duff and Phelps founded in 1932. The Gibbs data expert was a guy that was a one or two man band firm that quit a primary dealer and took on this assignment pretty much as his first client.

G.) Gary Kosinsky, Kore Advisors (Member of the Gibbs phony EOD notice)

Ring leader of phony data campaign among the Gibbs Group?

My broker dealer, United Capital Markets has been counterparty over the years trading RMBS securities with Kore Advisors and Gary Kosinsky. Over about 12 years, I took Gary off of my email loop showing my extensive list of offerings discussed above three times for periods of at least one year each. Many times he would ask to be put back on. Normally broker dealers do not cut off customers. Broker dealers are always trying to get more business and more customers. I think that, without getting too much into it, that the interactions I had with him I felt in some cases were not in my best interest.

1.) Kosinsky Part one

Shortly after I wrote my letter to Moody's Investor Service on March 3, 2015, Gary called me and let me know a yacht he chartered that was anchored off my house on Key Biscayne. He invited me to quit work early on a Friday, that normally I would never do, and join him aboard this yacht he got for some college buddies in town for a bachelor party.

After I got on board, he seemed very interested in convincing me not to support Ocwen and how wrong I was to have published my letter to Moodys Investor Service discussed above supporting Ocwen's performance as I knew it at that time as a RMBS bond investor. I told Gary, why are you doing this? You and I both made a fortune owning the low dollar Ocwen Mez/Sub bonds that have tripled or quadrupled in price over the last few years.

He bragged to me that he was on the committee for the settlement against Bank of America, also represented by Kathy Patrick and the Gibbs and Bruns Law firm. He said he was on the "servicing practices committee" and had a hand in the settlement that made Banc of America agree to change their own servicing behavior to suit the interests of that group. These two Gibbs groups were pretty much the same meaning the Bank of America suit and the Ocwen EOD suit had the vast majority of the same members.

Considering Gary said he was in the servicer practices committee in the Gibbs litigation against Bank of America for the Rep and Warranty claims, which I wholeheartedly supported, I believe that Gary worked again on servicer practices against Ocwen and was very involved in building the EOD notice all for "servicing practices" violations that could create an EOD.

At this meeting on the yacht he chartered, he told me a string of very surprising things about Ocwen and their management such as:

Ocwen equity is going to zero. Bill Erby is a criminal and is going to wind up in jail. We looked at several deals and discovered like 11mm of missing money in just a couple of deals and this might have just went into their bank accounts. The related deals done between the affiliates are as bad as it gets and they are going to get fried for this. There are other States that are going to go after them. He said that yes, Ocwen raised money selling some MSR's but they sold the best stuff, and the rest won't get them much money. He said, the 119 deals in our complaint are will just be a small part of Ocwen's problems; when the trustees see the fraud and the missing money, they will have to put "all of Ocwen's deals" into default and will result in a bankruptcy of Ocwen.

I believe that Gary was trying to convince me to pull any support I showed to Ocwen through my Moodys letter. I think he thought I was supportive because I had told him, and he likely was well aware that I made a very large amount of money, in the higher tens of millions of dollars as a result of investing in Ocwen's lower prices riskiest bonds in the RMBS deals over the prior few years up until this meeting.

At the end of this get together I told Gary I had recently bought 500-600k shares of Ocwen taking a "Yo" of sorts as I don't invest in equities. This seemed to make him somewhat uncomfortable and I had a small boat kept at my house come and take me back from his chartered yacht very shortly after.

The SEC should ask Kore Advisors if they were shorting Ocwen's stock, corporate bonds, credit default swaps on corporate bonds, or any other equities of the Ocwen public affiliates prior to releasing this EOD notice.

The House and Senate should want to call Mr. Kosinsky to testify if he in fact had communications with the CFPB. This individual and others in the Gibbs and Bruns (RMBS EOD claim) could be at the heart of the CFPB gone wild crossing the line between the public and private sectors.

If it is found that the CFPB relied on data from Mr. Kosinsky of a 1bb hedge fund, who was also short the OCN equity or the equity, debt, or derivatives of any of the related companies, and working with a data expert in a two man firm, I think Trump would easily be able to ask for his resignation.

Maybe other Gibbs group members were misled by Mr. Kosinsky's possible ulterior motives. I think an investigation speaking with all of the parties involved will uncover the truth.

This EOD should be construed by any regulator to have such non-public information contained therein, that securities should have been on a restricted list as is common ahead of such actions to prevent trading on nonpublic information. As I mentioned earlier above, providing knowing false information to the public is fraud.

And putting out false public statements and trading on those false statements is securities fraud.

The House or Senate should be very interested to find out if Gary met with the CFPB and provided any information or data to the CFPB regarding Ocwen Financial or any of their affiliates and if in fact the CFPB relied on data that might have been represented to them as a "concerned RMBS bondholder" alleging this EOD of the bond trusts when he really might have had other profit motives such as being short the financial products of the related OCN companies.

A quick subpoena of his fund trading blotters and personal accounts will give the House and Senate the answers as to if he was conflicted by a short equity position in OCN. A subpoena of his emails and phone calls will show if there was collaboration with the CFPB.

I was so surprised by the comments he made during this exchange surrounding Ocwen that I took very detailed notes of his statements just minutes after the conclusion of the meeting. I can share these notes with any regulator that asks me for them.

2.) Kosinsky Part 2

Phone call (Months after the EOD notice) - As the Ocwen fight started to bubble over, Gary Kosinsky of Kore Advisors and I spoke on the telephone and told me, " We have Scott Gimpel, everyone will believe him and no one will believe you." Are his comments to me talking about "perception" and "influencing the media" or "influencing the share price" or "influencing the trustees to declare an EOD on the RMBS trusts?"

It's funny, but shortly after the EOD notice from the Gibbs Group came out, I called Scott Gimpel as the data examples in the EOD notice seemed very similar to his weekly research reports that he put out at RMBS Greenwich and asked Scott Gimpel on the telephone, "This Gibbs Report seems like you are involved, are you their expert? Scott Gimpel told me "not me." Why would he lie?

I found out that Scott Gimpel was the Gibbs data expert from Gary Kosinsky on this phone call arguing with me about how bad Ocwen was and how much money I was going to lose as an Ocwen shareholder.

h.) PIMCO

Pimco has been a trading counterparty of my broker dealer United Capital Markets going back to 1999 or 2000. I believe I was one of the first dealers to sell Pimco high risk low priced distressed structured finance bonds. Until now, because of their EOD notice to the 119 Bond trustees, I have always enjoyed a good relationship with Pimco and respected the members of the trading and research teams. There were times that I was asked to include dozens of Pimco team members on my daily excel offer list that commonly showed 100-300 unique bonds on my list framing up where these low priced bonds were actually "offered." The majority of my investing and principal inventory following the 2008 financial Crisis focused on investing in the riskiest pieces of subprime bonds.

The activity I have done with Pimco over the years wound encompassing over 50 unique accounts that Pimco manages according to out trading records. Starting in the summer of 2012, I sold Pimco into various accounts, a string of low priced subprime bonds at from $2 to $35 prices many/most of which were serviced by Ocwen. Without saying our total volume of trades we have done with Pimco it's a big number well over 200+mm.

The observation I would make now looking at all of this in hindsight, PIMCO was taking advantage of the same opportunist trades in lower prices subprime serviced Ocwen bonds in 2012, 2013, and 2014 just as I was doing.

This area likely provided some of the best returns I have ever seen in my 20 year career. Many of these trades were going up 50-150% per year from 2012 to 2015. Pimco was well known away from my firm to be a very big buyer of the riskiest tranches of the subprime deals and I would assert they made a bundle just like I did in those years. By the time, 2015 rolled around, and by no coincidence, around the same time that these mez and sub bonds hit their Peak trading levels in the 60's, 70's, 80's, and even 90's prices, Pimco turns around and pushes this "pro-foreclosure agenda."

You see, in 2015, these sharp gains on the mez/sub bonds had run its course and the senior bonds also stalled out in their price gains.

How do you now make more money when the senior bond and the mez/sub bonds price gains enjoyed every year from 2009 to 2015 finally stalled out? They should influence servicer behavior like what they successfully did with the settlement with bank of America.

Why not? Pimco and the rest of the group felt very powerful for successfully winning a mandate from the giant Bank of America to actually change their servicing practices in a way that Pimco and the others wanted. This was in addition to the 8.5bb that Bank of America agreed to pay for rep and warranty violations that were pretty clearly owed as spelled out in the RMBS bond indentures. This group got a giant bank to change their servicing practices to bend to an investor groups wishes.

The servicer should have the courage to interpret the Pooling and Servicing Agreements and interpret this contract themselves. I think this win against Bank of America gave the Gibbs Ocwen EOD group confidence and credibility that they could continue their collaborations to force servicers to either move servicing, change their servicing practices in their favor, and continue to collaborate with regulators. The 8.5bb settlement with BAC was closely watched by many regulators every step of the way as many parts of the government was also suing Bank America for similar or slightly different claims. For sure, this put Gibbs and these investors right in the middle of this opportunity to influence regulation.

Did Pimco or others that knew of the EOD Ocwen RMBS claim dump their Ocwen RMBS bonds prior to the release?

It's also possible, that Pimco knowing that it was possible that their EOD notice attempt against Ocwen would be successful, sold all of their Ocwen serviced MEZ/SUB risky bonds ahead of the EOD notice thinking that if Ocwen quit doing the mods that in fact were responsible for the giant aforementioned gains, that they would now have been smart to sell their Ocwen bonds back into the market before a movement to another servicer occurred that any industry expert would testify would greatly hurt the riskiest tranches Ocwen serviced bonds.

So, the question becomes, did Pimco and others in the Gibbs and Bruns Group sell off certain bonds of Ocwen knowing their damaging EOD notice could impact current pricing from "perception" as well as future fundamental value had they been successful in their EOD campaign to move Ocwen's servicing somewhere else?

Would trading in RMBS bonds ahead of the known EOD notice constitute insider trading?

Would this breach of their own compliance procedures for not trading on nonpublic information?

The Ocwen bonds I was holding did go down following the EOD claims from the Gibbs group. I know my large positive of Ocwen serviced risky bonds took a hit.

Did Pimco sell Ocwen equity, short Ocwen corporate bonds, or sell (shorting) credit default swaps on Ocwen corporate bonds, did they sell or short Ocwen bank debt sell or sell short any of the equity or debt of any of the related Ocwen public affiliates prior to this EOD release. Pimco has a very successful "go anywhere" hedge fund that has disclosed it trades credit derivatives and can go either long or short in equities and bonds.

I don't think that Republican Politicians will get a fair read on the possible interactions between the CFPB and these very powerful investors until some of the above is discovered.

Did PIMCO use its influence and credibility to push their pro-foreclosure agenda by picking on a small mortgage servicer with phony accusations that have now been proven to have no evidence?

g.) Fortress (NYSE:FIG)/New Residential (NYSE:NRZ)/Nationstar (NYSE:NSM)

I do not believe that NRZ wants to Hurt Ocwen. He paid a very large amount of money to buy HLSS for some 950mm. A servicing transfer would be disastrous to higher prepays, higher delinquencies (more interest expense paid on advances), and higher default rates. NRZ owns an IO. When you own a IO you want the unpaid principal balance to go down as slowly as possible. By far, ocwen has the best performance to this subprime IO far better than NSM who is refiing many more loans into FHA or GNMA.

NRZ needs diversity away from NSM.

I woudnt be suprised to see NRZ say that Ocwen has done a good job. Not saying this hurts the already successful partnership between OCN and NRZ.

Although i think that NRZ is and has been opportunistic in the past, there is not much more that NRZ can actually get out of Ocwen.

Back To Ocwen: Why recent blast from CFPB? Political?

Why is Ocwen attacked now? Does it make sense with the positive reports from the NY DFS?

It makes no sense that the NY DFS just graduated Ocwen from their monitoring program that for 2 years tested Ocwen and passed them on 170/170 specific metrics, at a cost of over 75-100mm to Ocwen. The anecdotal allegations in the CFBP and State AG cases discussing legacy issues from 2013 to 2015 and are not giving credit to the work NY DFS did.

How on earth did the NEW York Monitor not find these alleged wrong doing after all of this intense third party scrutiny? By far, New York is the most powerful State in the Union as a regulator of banking and mortgage servicing and origination.

The whole system is broken.

What should Ocwen equity and bond investors think about risks going forward? BUY/SELL/HOLD?

I've been working 18 hour days for over a week since this bomb went off and am determined to fight back with unrelenting energy protecting my own investment and that of others. This paper lays out what I think has gone wrong for the last two years and again recently. I wasn't sure if I should speak up, but after I realized how political and dirty this entire narrative has been - I want Republican lawmakers to all call me, contact me, and call me to testify. I am a top trader of subprime mortgage bonds and have been doing it longer than 90% of all participants out there.

I hope to help uncover the truth of the large money managers (unlimited deep pockets for civil litigation) creating this phony narrative to benefit their own profits at the expense of homeowners and OCN/ASPS investors. If their emails at some point are discovered, and show among other things other serious offenses like trading on non-public information, collusion, or knowingly putting out false information the tides could turn in OCN/ASPS favor big time. Could be billions.

My take is, I do not believe that the CFPB and the States are looking to put Ocwen out of business. They are looking to make sure that OCN cannot buy any new MSR's since New York's deadline was just weeks away to granting OCN ability to grow again in all 50 states. This is very political. Most of the states that signed on to block new MSR purchases are all Democratic States that are rallying behind the CFPB's director Cordray who was reportedly asked by both Trump and Gary Cohen (Trump's director of the National Economic Council) to step down. Jeb Hensarling, the Chairman of the House's Financial Services Committee recently blasted Cordray during his testimony to the house and listed reasons why Trump has basis to fire Cordray for Cause.

Another Mortgage Servicer, PHH recently had a CFPB fine of 109mm against them overturned and the DC Court of Appeals that stated that the CFPB structure is unconstitutional because the director does not answer to the House or Senate or even the President and therefore has unlimited power. This court ruled the President can fire the director of the CFPB for cause and continued to overturn the CFPB penalty against PHH. The CFPB is appealing.

It seems that OCN was willing to take their chances fighting the CFPB (based on the PHH case) and did not wish to settle for again after already paying the CFPB over 100mm in 2013.

Inside mortgage Finance just reported: "Ocwen, by the way, hinted in an earlier SEC filing that it was in talks with the CFPB and might be the subject of a regulatory action. Sources told IMFnews that the agency was seeking a settlement of about $50 million but Ocwen balked at the price tag."

I wish, in hindsight, after seeing all the carnage, that Ocwen just paid the 50mm ransom money preventing the recent coordinated onslaught where clearly the CFPB has now involved a new strategy of having the MMC (Multi-State Mortgage Coalition) enjoin the action against OCN with the cease and desist order mainly blocking OCN from buying MSR in their states among other things.

It's interesting to note, that Ocwen is now in the same place they were for the last three years. They cannot buy MSR's.

However the good news is that they are now no longer paying 100-120mm/year that they paid over the last two years to the NY DFS, California, and CFPB monitors.

The CFPB monitor I think was only about 5-10mm out of that number so OCN's saving in this expense will now be likely far far lower than responding to the CFPB and the states. The case fighting the CFPB complaint almost certainly would only come up in over a year when the director of the CFPB might be gone. He announced he is very likely to run for the Governor of Ohio and so he would need to voluntary step down before the end of his term in July 2018 but having Cordray removed beforehand by Trump is becoming more and more likely. The Chairman of the House Financial Services Committee, Jeb Hensarling is Cordray's worst enemy. He said and you can read more of the story on the below link:

"For conducting unlawful activities, abusing his authority and denying market participants due process, Richard Cordray should be dismissed by our President," Hensarling said.

And according to Hensarling, Cordray isn't the only problem; it's also the CFPB as currently structured.

"Not only must Mr. Cordray go, but this current CFPB must go as well," Hensarling said.

"Today, Mr. Cordray and his CFPB don't just act as a cop on the beat, they act as legislator, prosecutor, and judge and jury all rolled into one," Hensarling said. "The CFPB represents the summit of unelected, unaccountable and unconstitutional agency government. It represents a dagger aimed at the heart of our foundational principles, namely co-equal branches of government, checks and balances, due process and justice for all."

Hensarling closed his speech by again comparing the CFPB to a tyranny, a parallel he drew recently.

This Housing Wire article, "Hensarling to Cordray- You deserve to be fired immediately."

It does appear that OCN has been caught up as a pawn in a battle for power. Chairman Hensarling blasted Cordray in his appearance before the house, and then two weeks later Cordray sent out the most powerful and coordinated attack ever unleashed by the CFPB and unfortunately the recipient was Ocwen. I didn't see this coming.

The Democratic States and CFPB made a significant assault and I am hopeful and trusting that the Republicans like Hensarling and others will take up the fight on the other side. If you think the Republicans will fight back, buy OCN and ASP{S at these throw away levels.

I have been informed by those close to this situation that Hensarling is very interested in what has happened to Ocwen.

It's possible that the recent CFPB Cordray blast might actually be good for Ocwen in the end if some of the stuff I am writing about in this paper regarding "misrepresentations" or having bad behavior by others are pursued at some point in tort litigation by Ocwen or ASPS. It might be that Republican lawmakers get to the bottom of what really happened because of Cordray's "Giant FU"

An excellent white paper by law firm, Squire Patton Boggs, can be found on this link "Is The Future of the CFPB in Jeopardy". The paper starts out discussing the case against mortgage servicer PHH who also was the target of the CFPB's overreach:

Excerpt 1: Squire Patton Biggs white paper: "Is the future of the CFPB in jeopardy"

The underlying dispute first arose in 2015, which resulted in a CFPB administrative law judge's recommendation of a US$6.5 million fine against PHH for allegedly requiring unlawful kickbacks from mortgage insurers in violation of Section 8 of the Real Estate Settlement Procedures Act (RESPA). PHH appealed that decision to CFPB Director Richard Cordray, who rejected its arguments and then increased the fine to US$109 million.

On October 11, 2016, the DC Circuit vacated the US$109 million enforcement order by the CFPB, finding that not only was its interpretation of RESPA unreasonable, but that the CFPB's structure is too unaccountable to be constitutional and poses an opportunity for the Director to abuse his power. To remedy this potential for abuse of power, the Court ordered that the CFPB would no longer be an "independent" agency, but "now will operate as an executive agency" and that President Trump "now has the power to supervise and direct the Director of the CFPB, and may remove the Director at will at any time." This decision has been stayed pending the results of the rehearing.

Excerpt 2: Squire Patton Biggs white paper: "Is the future of the CFPB in jeopardy"

Legislative Developments

While the PHH case continues to progress toward the May rehearing, Congressional Republicans continue to introduce legislation seeking to curb the CFPB's regulatory authority or eliminate the Bureau entirely. Though the agency was created to protect consumers, there is a growing argument by many conservatives that the Bureau is an "unaccountable Leviathan" that often takes action that exceeds the scope of its authority. Although the CFPB faces obstacles in the PHH case on the structure of its governance, it is important to note the obstacles in Congress could affect its very existence, at least in its present form.

Reform Legislation Pending in Congress

Several measures to reform the Bureau are pending in the Senate and House of Representatives. These bills can generally be broken down into two categories: (1) those that would eliminate the CFPB entirely, either through defunding or repealing certain provisions of Dodd-Frank that gave life to the Bureau; and (2) the more modest reforms that would maintain the existence of the CFPB, but dramatically alter or restrict its authority.

What about Ocwen's balance sheet?? Are they in trouble like a coupe States asserted?

First, as mentioned above, Ocwen's projected expenses for this year even by the most negative analyst as far far below that of 2016 and 2015 as the monitor expense now is OVER. Most firms expect OCN to have a small loss for this entire year. This isn't a disaster responding to the states and the CFPB case. Hopefully, the CFPB just goes away and is neutered.

Ocwen reported having 257mm of cash 12/31/2016. I kind of wish they had just paid the extortion money with all the cash they have. Ocwen remains the least levered of any of the financial firms with one unit of debt and one unit of equity after taking out the "servicer advances" and "reverse mortgage asset and liability" that should not be included in the leverage calculation as these monies are owed by the RMBS trusts and are paid at the top of the RMBS waterfall and in the case of reverse they are just listing the government backed HECM bonds already sold as required by law for HECMS.

Any risks of insolvency are totally irrational based on all of this cash. They have 275mm of cash, expect to get about 150mm of free cash flow this year - against 330mm of bank debt and 350mm of 2nd lien corporate bonds. There is little risk of any failure of the company. If you think this is political than there is very strong value. Ocwen has $5.27 plus another $4.0/share of assets that are marked at zero in their balance sheet but have value (Click this link for Ocwen's 4th Quarter Company Presentation page 11 ) This is trading at $2.29/$9.29 or 24% of the "adjusted tangible book value." If you don't think the CFPB + these almost entirely democratic states are trying to put Ocwen out of business this trade makes tons of money from here. If the company is sold it makes quite a bit of money. If the assets are sold, equity shareholders make quite a bit of money. There seems to be very little downside from here unless you think that the CFPB and the States are trying to put Ocwen out of business.

On last Friday, Compass Point, who previously lowered their ranking from a "BUY" to a "neutral", recently recommended Ocwen as a "BUY" and listed a 12 month price target at $3.5 taking into account all of the political risks described above and discussing asset valuations and low leverage.

Short selling- OCN and ASPS Giant Flows Attack again - Its always 2/3 times a year.

The short selling attack on last Thursday (the big drop) reported on "shortstockvolume.com" was 10.1mm shares shorted on Thursday and 8.2mm shares shorted on Friday of last week, and then 3mm on Monday. The record number of all time on this website was 5.8mm in the last 3 years that occurred on the day that the Gibbs and Bruns EOD notice declaring a default on Ocwen's RMBS bonds and 3.7mm shares were shorted the day that NY DFS settlement was announced on 10/21/2014. These short flows by these unethical short sellers are out of control. These very large flows are what moved the price down very meaningfully on OCN to try and get holders to dump their shares at these prices.

I also believe the guys that were squeezed on the ASPS trade as they lost lending nailed the heck out of OCN as much as they could.

Generally, after many of these prior attacks, the shorts start to cover in the second week and the price starts to come back up as the shorts need to cash out to lock in their profits. Shorting on ASPS was 1.0mm shares on Thursday and .79mm on Friday of last week. The all-time record on ASPS is .55mm in one day. I can't understand how exactly shares got shorted as there are no shares available to borrow.

This would be "naked short selling" that is illegal and someone should file a whistleblower complaint to the SEC to investigate those flows.

The rate to borrow rate ASPS remained at 148% for Thursday's activity on shortside.com can be found on this link that is data provider selling data from a co-op of members in the stock loan market that I was told is about 70% of the stock loan market. Another data servicer called "S3 Blacknight" reported that as of the "open on Friday" ASPS borrow rate for their estimate of the entire universe of borrowers was 78.6% can be found on this link.

Either rate is unsustainably high for the ASPS shorts to continue to pay. It's possible that some holders that were alarmed by the price drop have sold their shares freeing up somewhat new shares for shorts to borrow but these rates are not suggestive that the imbalance between the "available shares to borrow" and the "outstanding short amount" has materially changed enough to fix the serious issue of a serious deficit. There should still be 1.5mm to 2.5mm of ASPS shares that still will not locate a loan and will have to be bought in.

I do not believe that the top four holders away from me have not sold any shares nor have they started lending their shares. Regulation SHO is still in place that says there are current "fails" in the market will be bought in on the 13th day of the fail required by the SEC law.

I would recommend that ASPS management looks into if there has been any illegal naked short selling. There was a very famous case where Overstock.com had a similar situation and prevailed suing a host of folks that were found to have committed illegal acts including the short sellers and dealers that broke rules in their handling of the stock loans.

On April 27th, Fairfax financial who has been battling a case against short sellers for 10 years just won a victory in New Jersey appellate court letting a 8bb case against Steve Cohen's firm to proceed. Steve Cohen's Point 21 firm reported in filings that they are short ASPS. Click this link for the recent Appellate court ruling with explosive allegations. Other market participants alleged to have participated in the scheme such as Third Point, Exis Capital, Morgan Keegan, Kynikos, and Rocker Partners seem to have got off as the New Jersey Venue did not have power to enforce racketeering (RICO ACT) and conspiracy claims and it seems that some statute of limitations prevented some defendants case to progress. The lawyer in this Fairfax case likely now has more experience in bring these types of cases than he had before after such a long battle. I recommend management or others reach out to this attorney. The allegations are pretty explosive: they allege created phony research, RICO claims of racketeering, market manipulation, insider trading ahead of material news and research, showing fake research to the SEC and FBI, sending phony research to rating agencies in an effort to downgrade the bonds, sending phony info to AM Best an important rating agency for the insurance business, conspiring together to create phony research through newly formed shell research firm that housed inside the office of one of the short sellers. Mr. Spyro Contogouris, the new researcher, even had office space inside the short seller Exis capital. Mr. Spyro Contogouris by the way was arrested by the FBI, charged, and indicted for fraud on another matter.

More on the relationship between indicted Mr. Contogouris and the short sellers in the Fairfax case can be found here:

More on the relationship between indicted Mr. Contogouris and the short sellers in the Fairfax case can be found here:

It seems very fishy that as ASPS interest rate went to a peak of 160% on the data service shortside.com - these actions from CFPB/the 20 States of the MMC (Multistate Mortgage Coalition - mainly very small democratic states in the union) come down the pipe. This might somewhat prove that their might have been cooperation and collusion between the short sellers and regulators. Maybe this is stretch but maybe not? The Fairfax case alleges that the short sellers were feeding phony info to the SEC and the FBI and the rating agencies.

ASPS recently reported earnings on 04/27 and beat the street analyst estimates of EPS by 12% and beat the estimate of revenue by 5%. ASPS announced 4 material new client wins adding to the 400+ clients they serve that are not Ocwen.

There owners.com retail real estate marketplace grew again exponentially increasing retail real estate closing in their new online retail real estate business by 91% over the fourth quarter closing 137 homes. They stated that they are currently working with 1,300 active clients now in April up from 900 clients in February a 44% jump in just 2 months pointing to another likely big jump in real estate closing for the 2nd quarter. This business as I have discussed previously could wind up being very valuable into the future if this exponential growth continues. They are charging just a 1.5% commission to represent home buyers with full service brokers using iPhone app's and various technology to create an Uber like displacement of the real estate marketplace. There were 89bb of real estate commissions earned last year in the US so if ASPS is successful in getting just a fraction of this business the revenues to them could be enormous.

RESI: As much as I love RESI and strongly recommend investors to buy RESI considering all of the SFR players trade at 1.23x NAV and RESI 's NAV is at $19.11, I sold all of my over 5% stake in RESI recently to raise some cash reacting to the recent volatility and turmoil found in OCN and ASPS. RESI seems to have very good liquidity in light of heavy selling. I would recommend buying RESI hand over fist as RESI in no way is mixed up in any of this OCN stuff and is deeply undervalued as compared to the SFR peers.

I've been hurt by these recent actions and intend to vigorously fight back as discussed above. I believe in both companies and their management and feel that although risks have increased with this regulatory action the recent prices now represent in my opinion very deep value for buyers.

I have spoken to the CEO's of both companies and they are resolved to make every effort to protect shareholder value and I hope they consider taking more aggressive actions in the future if they can determine that bad behavior by others might result in a tort claim.

Best case scenario? Hensarling starts asking a lot of questions about why the CFPB took such aggressive actions and hauls in some of the folks I am saying had serious bad behavior. This CFPB attack might have the unintended consequence of making bad behavior by others involved become uncovered and this would vary greatly help Ocwen with Civil litigation down the road.

John

Disclosure: I am/we are long OCN, ASPS.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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