Embattled mortgage servicer Ocwen Financial faces up to $26 billion in damage claims by bondholders and a greater risk of being fired as a mortgage servicer on thousands of small, private-label trusts.

The Atlanta servicer said Friday that it had been terminated as a servicer on two deals, representing $264 million in unpaid principal. Ocwen described the termination as "immaterial" in a press release.

But analysts expect much more fallout ahead. Shares of Ocwen fell 15% Friday to $8.31 a share.

Wells Fargo, the trustee on the two deals, put a vote to investors in October on whether to terminate Ocwen as a servicer. The termination was triggered when Moody's Investors Service downgraded Ocwen's servicer ratings after New York's top banking regulator found the company had backdated foreclosure letters.

"We regret the decision made by this particular group of investors who have been critical of Ocwen's superior loan-modification results, but are pleased that in the majority of the affected securities, investors are keeping Ocwen as their servicer," Ron Faris, Ocwen's president and CEO, said in the release.

Kevin Barker, an analyst at Compass Point Research & Trading, said there is an increased risk that other trustees "looking to protect their self-interests" could potentially terminate Ocwen as a servicer.

On Tuesday the Houston law firm Gibbs & Bruns, which represents investors in private-label trusts, sent a letter to Wells Fargo accusing Ocwen of major servicing violations with claims of $26 billion in damages to investors, Barker wrote in a research note Friday.

The letter accused Ocwen of conflicts of interests in its use of affiliated vendors, imprudent modification practices and a failure to account for principal and interest payments to the trusts. Ocwen also failed to comply with applicable servicing laws and regulations and recouped servicing advances even while modifying loans in violation of trust agreements, the letter stated.

Bondholders have accused Ocwen of poor recordkeeping and trust performance, and of using trust assets to resolve investigations into Ocwen's servicing practices.

A Gibbs & Bruns study of more than 2,000 trusts issued from 2004 to 2008 found that those serviced by Ocwen performed significantly worse than trusts services by others, and that the Ocwen-serviced trusts returned roughly 1% less in cash every year to investors, Barker wrote in a research note Friday.

That 1% difference amounts to billions of dollars, and the law firm estimates that had the trusts been serviced by another servicer, investors would have received roughly $26 billion more than current returns, Barker said.

The potential for massive litigation and continued regulatory problems means "the outlook for [Ocwen] returning to an adequate servicing profit margin is grim," Barker wrote.

Gibbs & Bruns is the law firm that negotiated an $8.5 billion settlement in 2011 with Bank of America on behalf of a group of large investors.

Ocwen is a servicer on 4,000 private-label mortgage deals. Private-label securities are mortgage-backed securities or other bonds that are created and sold by companies other than government-sponsored entities like Fannie Mae and Freddie Mac.

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