Home Loan Servicing unit has more defaults; interest increase delayed

By Caroline Salls

Pittsburgh, Feb. 20 – The HLSS Servicer Advance Receivables Trust (HSART Trust), administrated by Home Loan Servicing Solutions, Ltd. subsidiary HLSS Holdings, LLC, received notification of additional events of default from BlueMountain Capital Management, LLC, according to a news release.

BlueMountain is the investment manager of funds that holder series 2012-T2 and series 2013-T3 notes issued in connection with the trust.

BlueMountain said two events of default have occurred since it gave notice of defaults in January.

Specifically, the investment manager said recent downgrades of Ocwen Loan Servicing, LLC’s servicer rating by Moody’s Investors Service and Fitch Ratings automatically gave rise to defaults and termination events in agreements governing Ocwen’s mortgage servicing rights that collateralize the obligations of the HSART Trust to the noteholders.

BlueMountain said those defaults and termination events, in turn, resulted in events of default under the notes indenture, and the increased risk of loss stemming from those defaults provides additional grounds to implement a bargained-for contractual 3% interest rate increase.

In connection with previous events of default, BlueMountain said the increased interest rate was due on the next scheduled payment date of Feb. 17.

However, the trustee of the HSART trust said it needed more time to evaluate the merits of the defaults claimed in a Jan. 23 letter.

BlueMountain said it allowed the trustee to delay making a determination as to the merits of BlueMountain’s claims until after the Feb. 17 payment date and to reserve the higher interest payment due in connection with that payment.

According to the release, a significant number of designated servicing agreements have events of default or servicer termination events as a result of the Ocwen ratings downgrades.

The downgrades also triggered events of default under subservicer HLSS’ senior secured term loan facility, BlueMountain said. Ocwen is the borrower and a loan party under that facility.

Upon the occurrence of a termination event, BlueMountain said HLSS obtains the right to direct Ocwen to sell its mortgage servicing rights to pay amounts due to HLSS.

Home Loan Servicing is a George Town, Grand Cayman, owner of residential mortgage assets.

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