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USA Real Estate Blog

Ocwen, Wells Fargo Suit Not Over Yet

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On Monday, a New York Federal Judge decided not to rule on the bids to toss out a proposed Employee Retirement Income Security Act (ERISA) class action suit, Law360 reports. The suit accused Ocwen Financial Corp and Wells Fargo of exploiting homeowners during the financial crisis.

“The [first amended complaint] also asserts that Ocwen ‘exercised sweeping, unchecked control of the management and disposition of securitized mortgages, and was a fiduciary under ERISA to the benefit plans that invested in those mortgages,'” the judge said. “Ocwen and Wells Fargo, however, have filed numerous exhibits in conjunction with their motions to dismiss, which cast considerable doubt on plaintiffs’ ability to support these allegations.”

In March 2018, trustees of the United Food & Commercial Workers Union & Employers Midwest Pension Fund alleged that Ocwen had pushed homeowners into foreclosure during the financial crisis in 2007 and 2008, in order to profit off of foreclosures, while Wells Fargo stoody by instead of supervised.

Ocwen, with control over the mortgages in the American Home Mortgage Investment Trusts, had an ERISA-imposed duty to make responsible decisions on behalf of trust investors like the fund, according to the trustees. According to U.S. District Judge Vernon S. Broderick, two conditions had to be satisfied in order to move forward with the trustees’ ERISA claims — the mortgages underlying the trusts had to be plan assets and Ocwen had to qualify as an ERISA fiduciary to the plan.

According to Law360, while the trustees have claimed that these conditions have been met, the judge stated that Ocwen and Wells Fargo had submitted evidence that suggested otherwise. Additionally, Judge Broderick tossed a number of the other dismissal arguments without prejudice to potentially be refiled after those motions were decided.

“In particular, the judge recognized that contractual clauses cannot extinguish ERISA breach of fiduciary duty claims,” said Justin S. Brooks, an attorney for the trustees. “We look forward to proceeding with the discovery ordered by the court and moving this important case forward.”

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