U.S. Objects to Ocwen Buy of ResCap Loans

The U.S. is worried Ocwen Financial Corp. (OCN) won’t abide by a home-lending industry overhaul that was “designed to protect homeowners from future occurrences of mortgage-related abuse and fraud” when it takes over Residential Capital LLC’s servicing platform as part of a $3 billion deal.

Papers filed in advance of a Nov. 19 bankruptcy court hearing at which Ocwen will seek a judge’s permission to seal the deal say talks are under way, but for now the government plans to object to Ocwen’s acquisition unless Ocwen agrees to honor reforms agreed by ResCap.

Ally Financial Inc. also filed papers saying it is concerned about Ocwen’s willingness to honor the industry settlement, as well as a 2011 consent order with banking regulators.

Earlier this year, ResCap was one of the parties to a historical mortgage servicing settlement agreement with the U.S. and 49 state attorneys general designed to quiet allegations of systemic fraud in the home lending and mortgage servicing industry. The fraud ranged from misrepresentations to consumers to false filings with courts in foreclosure proceedings.

“These are matters of great concern to the U.S.,” lawyers for the government wrote in a filing with the U.S. Bankruptcy Court in Manhattan, adding the reforms agreed to by ResCap and other major players are “critical to protecting homeowners.”

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