Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Mortgage servicer Ocwen Financial Corp. (NYSE:OCN) shares popped at the market open, rising by more than 10%. Prices have since given up some of their gains to trade higher by around 2%.
So what: Ocwen Financial has long been a "battleground" stock. It's owned and shorted by an impressive roster of institutions.
The company made headlines last year for errors in mortgage servicing. The company agreed to a $150 million settlement with New York State in December. Several more are expected; the company disclosed 21 regulatory examinations in as many as 15 states as of Dec. 31, 2014. Large daily moves have been frequent, as investors handicap the ultimate cost of the company's regulatory woes.
Taking center stage today is Ocwen's assertion that claims of default at an affiliate company, Home Loan Servicing Solutions (NASDAQ:HLSS), are unfounded. Hedge fund BlueMountain Capital Management asserts that the company was in default on a key funding source. BlueMountain Capital is currently short shares of Ocwen, and it owns a portion of the notes (debt securities) issued by the HSART Trust, which is at the center of contention.
Now what: Ocwen and Home Loan Servicing Solutions put out press releases on Wednesday stating that no other noteholders agree with BlueMountain's allegations of default.
In addition, the trustee, Duetsche Bank, has agreed not to start a judicial proceeding to get guidance on whether the HSART Trust is in default. In exchange, Home Loan Servicing Solutions agreed to withhold excess funds that would normally be distributed to the company from the trust.
Investors are likely calmed by the press release, which seems to suggest that Ocwen and Home Loan Servicing Solutions have an upper hand in at least one of its many ongoing legal battles.
Jordan Wathen has no position in any stocks mentioned. The Motley Fool recommends Ocwen Financial. The Motley Fool owns shares of Deutsche Bank AG (USA). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.