Ocwen pulls a PHH: Asks court to declare CFPB unconstitutional, requests DOJ help

Asks court for expedited decision on CFPB constitutionality

Ocwen Financial is pulling a PHH.

Just as PHH did recently, Ocwen is playing the unconstitutional card in its fight against the Consumer Financial Protection Bureau, asking the United States District Court for the Southern District of Florida to declare the CFPB unconstitutional and toss out the CFPB’s lawsuit against the company.

The CFPB recently sued Ocwen, accusing the nonbank of “failing borrowers at every stage of the mortgage servicing process.”

In its lawsuit, the CFPB claims that Ocwen illegally foreclosed on borrowers, ignored customer complaints, mishandled borrowers’ money, and failed at the most basic of mortgage servicing actions.

Ocwen answered those charges and accused the CFPB of playing politics with its lawsuit, stating that the bureau is simply seeking to distract from the legislative battle over the agency taking place on Capitol Hill as we speak.

Now, Ocwen is joining PHH in challenging the CFPB’s existence and asking for some help from a fairly influential source – the Department of Justice.

The DOJ recently filed an amicus brief in the PHH vs. CFPB case, asking the court to rule the CFPB’s leadership structure unconstitutional and grant President Donald Trump the authority to fire the CFPB director at will.

The battle between PHH and the CFPB began with CFPB Director Richard Cordray tacking a $103 million increase onto a $6 million fine initially levied against PHH for allegedly illegally referring consumers to mortgage insurers for kickbacks.

PHH fought back, asking the court to declare the CFPB unconstitutional. And last year, that’s exactly what the Court of Appeals did, before agreeing to rehear the case.

That led to the DOJ flipping sides in the battle, and joining PHH in declaring that the CFPB’s structure is a violation of the separation of powers and should be ruled unconstitutional.

Now, Ocwen wants a court to declare the same thing and wants the DOJ to be allowed to help in the case.

In a series of court filings, Ocwen asked the lower court to render an expedited ruling on the CFPB’s constitutionality and asked that the DOJ be allowed to contribute to the case so the court can “consider fully the Attorney General’s conclusion that the CFPB is unconstitutionally structured.”

“Ocwen believes that the CFPB is unconstitutionally structured because it vests too much unfettered power in the hands of the CFPB’s Director and the Bureau itself, without any meaningful oversight by the President or Congress,” the company said a in a statement.

“In (the court) filings, Ocwen informed the Court and the DOJ that Ocwen intends to directly challenge the CFPB’s constitutionality at the earliest possible opportunity and to seek dismissal of the case on this ground and others,” Ocwen continued it its statement.

“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 continued. “Ocwen has also filed a separate motion specifically asking the Court to invite the Department of Justice to participate in the case so the Court can consider fully the Attorney General’s conclusion that the CFPB is unconstitutionally structured.”

In one of the filings, Ocwen lays out its case against the CFPB, adding why it feels the CFPB’s lawsuit it politically motivated:

CFPB’s overreaches are well-documented, and are doubtless the product of the fact it is an unconstitutional, unaccountable agency. For example, in just the last few months, federal courts have found CFPB’s and Director Cordray’s actions to violate the Due Process Clause, in one case, and, in another case, found CFPB’s and Director Cordray’s actions to violate the simple requirement that CFPB actually tell a summoned party what it is investigating.

Ocwen also has been subjected to CFPB’s overreach, which has been exacerbated by the political forces recently at play in Washington. As the Bureau seeks to survive, and the Director seeks to avoid dismissal, Ocwen has been one of several financial institutions singled out and sued, apparently to be ‘made an example of’ for political reasons.

The unaccountable nature of the CFPB and its Director renders them an unconstitutional body and officer, creating the environment where such misconduct can flourish without check. An expedited review of the constitutional issues will, if accepted by this Court, restore needed balance to the relations between the President, Congress and regulated parties like Ocwen.

In the filing, Ocwen also claims that the CFPB did not due its due diligence before accusing the company of illegally foreclosing on borrowers.

Again, from Ocwen’s filing:

While the 93-page (CFPB) Complaint is long on rhetoric, it fails to tell the whole story. For example, CFPB contends that on “numerous” occasions or “at least one thousand” times Ocwen has wrongfully started or completed foreclosures on consumers who were in the midst of applying for or performing a loan modification. But so far as Ocwen is aware—and the Complaint does not identify the loans—CFPB did not actually look at the individual servicing files for these consumers’ loans before making this allegation.

Further, while the Complaint alleges that Ocwen does not take seriously its obligation to remediate borrowers who are harmed by errors, the Complaint is riddled with allegations about conduct that, to the limited extent it recounts errors accurately, Ocwen already addressed—sometimes years ago—with refunds, credits or other remedies. These and other misleading aspects of the Complaint only underscore the constitutional infirmities of an agency too often bent on making a point rather than on doing justice.

Ocwen claims in its statement that the company has been in “regular communications” with the CFPB over the last two years, and states, again, that the bureau is pursuing the lawsuit for its own gain.

“Despite Ocwen’s cooperation and repeated offers to provide specific loan files for the CFPB’s review, the CFPB has proceeded by filing a lawsuit without factual or legal merit, apparently in an effort to bolster its own political agenda,” Ocwen said in its statement. “Although Ocwen believes the lawsuit should be dismissed on constitutional grounds, it also is prepared to vigorously contest the inaccurate CFPB allegations.”

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