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CFPB hopes to reverse court decision that handed Ocwen a win last year

The CFPB argues that a consent agreement from 2013 did not excuse the mortgage servicer from future violations

Nearly a year after a federal judge dismissed the Consumer Financial Protection Bureau‘s mortgage servicing misconduct suit against Ocwen Financial Corp., the watchdog agency is hoping to overturn the decision.

During oral arguments in Miami before the U.S. Court of Appeals for the Eleventh Circuit, Lawrence DeMille-Wagman, CFPB’s attorney, argued that a consent agreement from 2013 did not excuse the mortgage servicer from future violations and that Ocwen is on the hook for alleged wrongdoings.

Last March, U.S. District Judge Kenneth Marra, in Florida’s Southern District in West Palm Beach, ruled that most of the CFPB’s claims were blocked because of a 2013 settlement between Ocwen, the bureau, authorities in 49 states, and the District of Columbia.

The CFPB took issue with that ruling, and filed an appeal last October. In a hearing last week, DeMille-Wagman argued that the settlement agreement did not shield Ocwen from all future liability.

“If the regulated party in the post consent period violates the law in a way that also violates the injunctive provisions of the consent, the regulatory agency is free to either pursue a contempt action or to bring a new case alleging the law enforcement violations,” DeMille-Wagman argued.

“It may be now that Ocwen wishes it had negotiated a more thorough, more comprehensive release in [December] 2013, but it did not.”

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The attorney for Ocwen, William Jay, pointed to stipulations in the consent order that the mortgage servicer had a “right to cure” violations without facing penalties.

Jay argued that, in the consent order, the parties agreed to give Ocwen time to make its systems and practices compliant. The order established a system to make sure Ocwen complied with the standards, he said, and gave them time to fix any violations without a penalty.

Per the consent order, if Ocwen didn’t resolve violations, Jay argued, the penalty would be “swift.”

“It’s a $1 million dollar penalty at the drop of a hat,” Jay said. “That was the bargain. That’s what the bureau is attempting to unwind here.”

In 2017, the agency announced that it was suing Ocwen for “failing borrowers at every stage of the mortgage servicing process.”

The CFPB’s lawsuit alleged that Ocwen cost borrowers money, and in some cases, their homes, as a result of years of “widespread errors, shortcuts, and runarounds” dating back to January 2014.

Specifically, the bureau alleged that Ocwen botched “basic functions like sending accurate monthly statements, properly crediting payments and handling taxes and insurance.”

The CFPB declined to comment. Ocwen did not return a request for comment.

The current dispute stems from now-settled allegations by the CFPB that date to the early days of the watchdog agency.

In 2013, the CFPB accused Ocwen of “engaging in significant and systematic misconduct that occured at every stage of the mortgage servicing process.” The CFPB alleged that the mortgage servicer failed to timely and accurately apply payments made by borrowers, and that it charged borrowers authorized fees for default-related services. 

Those accusations were resolved with a consent order issued Dec. 17, 2013, shielding the servicer from future actions arising from the alleged practices up to that point. Ocwen also agreed to pay $2 billion in consumer relief as part of the settlement.

Ocwen, in a Jan. 2021 statement, said that the “CFPB’s claims regarding Ocwen’s past servicing practices are unsubstantiated.”

Ocwen, at the time, said it had set aside an additional $13.1 million as a result of efforts to resolve the matter with the CFPB through mediation, which eventually failed. According to the firm’s latest quarterly filing, it has now set aside $44.6 million as of the end of the third quarter of 2021, for legal bills and regulatory matters, including the dispute with the CFPB.

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