Fitch Affirms & Removes Ocwen's Resi Servicer Ratings From Watch Negative

Business Wire, Dec 29, 2004

NEW YORK -- Fitch Ratings has affirmed and removed from Rating Watch Negative Ocwen Financial Corporation's (Ocwen) 'RPS2' residential primary servicer rating for subprime mortgages and its 'RSS2' residential special servicer rating. Fitch originally placed the ratings on Rating Watch Negative on Dec. 4, 2003.

These rating actions are the result of Fitch's completion of its on-site review of Ocwen's servicing facilities. During its review, Fitch determined that Ocwen had implemented the recommended changes to its servicing practices as detailed in the firm's April 2004 supervisory agreement with its regulator, the Office of Thrift Supervision (OTS). In order to comply with the agreement, Ocwen has taken specific steps to improve its mortgage servicing practices and its dealings with consumers by establishing its own servicing best practices, creating a consumer ombudsman position to represent borrower interests, enhancing the methods and frequency of disclosures to consumers, and eliminating many ancillary servicing fees. Fitch is pleased with the improvements Ocwen has made to its servicing operations and is encouraged that the OTS agreement did not cite any violation of applicable laws or regulations nor was a fine or penalty assessed in conjunction with the agreement. Fitch will continue to monitor the servicer's compliance with the supervisory agreement and any impact on its servicing platform or loan performance.

Over the past eighteen months, there have been numerous class action lawsuits filed against Ocwen by consumers, citing predatory and deceptive business practices. Ocwen is disputing these claims, asserting they are without merit, and is fighting these lawsuits vigorously. To date, Ocwen has been successful in resolving some of these lawsuits and continues to work to have the remaining lawsuits dismissed, consolidated or moved to more favorable venues. Fitch takes these charges very seriously and is concerned about the types of issues that have been alleged by consumers and, as a result, will continue to closely monitor the company's legal situation in order to evaluate any potential impact on Ocwen's loan servicing and operational capabilities. If at any time Fitch determines that Ocwen no longer meets the requirements of a servicer at its current rating level, Fitch will take immediate and definitive action with regard to Ocwen's servicer ratings.

As of June 30, 2004 Ocwen serviced 317,343 loans totaling $33.7 billion in outstanding principal balance, of which $29.9 billion represented subprime loans and $476.8 million represented subserviced and/or special serviced loans. Ocwen currently has four servicing sites located in West Palm Beach and Orlando, FL and Bangalore and Mumbai, India. In addition to performing an on-site review of Ocwen's Florida facilities, Fitch also conducted an on-site review of Ocwen's Bangalore and Mumbai operations and determined that all sites were operating in accordance with industry standards.

In November 2004, Ocwen Federal Bank FSB, the primary banking subsidiary of Ocwen, filed an application for voluntary dissolution with its principal regulator, the OTS. In electing to relinquish its bank charter, the benefits of federal pre-emption will no longer be applicable to Ocwen and the company will be required to comply with individual state licensing laws. Fitch will monitor the charter dissolution process, and any impact this may have on Ocwen's loan servicing operations.

Fitch will continue to monitor Ocwen's compliance with the OTS supervisory agreement, its ability to resolve the class action lawsuits, and its progress in relinquishing its bank charter. Fitch will also closely monitor Ocwen's servicing operations to ensure that there is no deterioration in the servicing platform or loan performance.

Fitch rates residential mortgage primary, master, and special servicers on a scale of 1 to 5, with 1 being the highest rating. Within each of these rating levels, Fitch further differentiates ratings by plus ( ) and minus (-) as well as the flat rating. For more information on the review and rating process for servicers, see Fitch Research on 'Residential Mortgage Servicer Ratings', dated Feb. 21, 2003 and available on the Fitch Ratings web site at 'www.fitchratings.com'.