Taking a page from the PHH Mortgage regulatory defense playbook, mortgage servicer Ocwen Financial Corp. is seeking to have a complaint from the Consumer Financial Protection Bureau (CFPB) tossed on the grounds that the CFPB’s leadership structure is unconstitutional.
Ocwen reports that it has filed two related motions in U.S. District Court, Southern District Of Florida, West Palm Beach Division, seeking an early court ruling that because the bureau’s leadership structure is unconstitutional, the complaint should be dismissed.
In a statement, Ocwen officials say they believe the CFPB is unconstitutionally structured because its director has “too much unfettered power” and has little to no oversight by the president and by Congress.
In the PHH Mortgage case, a panel of three judges on the D.C. Circuit Court of Appeals recently found that the CFPB is unconstitutionally structured – a decision that is now being reviewed by the entire D.C. Circuit Court of Appeals. In that case, the U.S. Department of Justice (DOJ) recently filed a brief that stated its agreement with the panel decision – that the CFPB is unconstitutional for this reason.
Ocwen officials say they have informed the circuit court and the DOJ that the company intends to directly challenge the CFPB’s constitutionality at the earliest possible opportunity.
Ocwen’s filings ask the court for a case management conference to discuss how the parties can get to that issue first, before any other proceedings in the case.
Ocwen has also filed a separate motion specifically asking the court to invite the DOJ to participate in the case so the court can consider fully the U.S. Attorney General’s conclusion that the CFPB is unconstitutionally structured.
Last week, the CFPB filed its complaint against Ocwen alleging the company and its subsidiaries failed borrowers “at every stage of the mortgage servicing process.” The bureau has not yet announced any fines because it is still trying to determine the scope of the alleged improprieties.
The bureau alleges that “years of widespread errors, shortcuts and runarounds” on behalf of the servicer “cost some borrowers money and others their homes.”
More specifically, the bureau alleges Ocwen “botched basic functions like sending accurate monthly statements, properly crediting payments, and handling taxes and insurance.” It also alleges the servicer “illegally foreclosed on struggling borrowers, ignored customer complaints and sold off the servicing rights to loans without fully disclosing the mistakes it made in borrowers’ records.”
In addition to the CFPB’s complaint, more than 20 states have filed their own individual suits against the mortgage servicer, which is one of the largest in the nation, most in connection with alleged errors with homeowners’ escrow accounts. Some of those states have temporarily restricted Ocwen’s activities, and some have even gone so far as to prevent the servicer from operating at all – at least until its alleged problems have been addressed.
Ocwen has vowed to fight the state regulators’ accusations, announcing on Tuesday that it has filed two emergency motions requesting immediate court action restraining the cease and desist orders brought by the Illinois Department of Financial and Professional Regulation, the Division of Banking and the Commissioner of Banks of the Massachusetts Division of Banks.
“As with the recent CFPB enforcement action, Ocwen strongly disputes the key allegations made in the state regulators’ cease and desist orders that Ocwen’s mortgage loan servicing practices have caused substantial consumer harm,” company officials say in a separate statement. “Ocwen will not sign unfair and unjust consent orders that make impractical demands that no other market participant could rationally accept, and which would harm consumers. Under these circumstances, Ocwen has a responsibility to its customers, shareholders and employees to vigorously defend the company against unfounded claims while continuing to work with state regulators to resolve any valid concerns.”