Judge grants Ocwen Loan dismissal of one count in suit filed by Delmar Financial

By Takesha Thomas | May 17, 2019

ST. LOUIS – A federal court has dismissed a negligence claim against Ocwen Loan Servicing in a breach of contract suit.  

On May 10, Judge Audrey G. Fleissig of the U.S. District Court for the Eastern District of Missouri Eastern Division granted Ocwen's motion to dismiss one count for negligent misrepresentation filed against it by mortgage lender by Delmar Financial Co. but denied to dismiss the counts of fraudulent misrepresentation and fraudulent omission.

Fleissig noted the court previously dismissed Delmar's negligence claim "because professional loan servicers do not owe an independent duty of care to loan providers," the ruling states, and the negligent misrepresentation claim fails "for a similar reason."

Delmar alleges that Ocwen breached a 2014 subservicing agreement between the two companies by not performing timely foreclosures to which Ocwen was supposed to collect payments from borrowers and remit payments to secondary market investors. Delmar claims that the company lost money as a result.

Delmar filed the initial breach of contract suit in December 2017, amending it in October 2018, alleging that Ocwen knew prior to entering into an agreement that it would be unable to perform "due to massive systemic deficiencies and resultant regulatory sanctions," the ruling states.

Ocwen contends that it had "no duty to disclose its circumstances to Delmar before execution of the agreement" and that Delmar's claim is "barred by the doctrine of economic loss," the ruling states.

"Though Ocwen argues that these allegations are insufficient because they fail to identify specific dates, locations, or individual sources of the alleged misrepresentations and omissions, Rule 9(b) does not require such a granular level of specificity with respect to every question," the judge wrote.

Delmar argued that Ocwen was aware of deficiencies within its system that would have caused Delmar to be unable to collect on debtors. Delmar contends that just prior to signing the agreement with Ocwen, a compliance manager for the state of New York "reported that Ocwen’s technology systems and personnel were inadequate and ineffective, causing a backlog of over 400,000 loans," the ruling states.

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