On April 20, 2017, the CFPB sued one of the country’s largest non
bank mortgage loan servicers, Ocwen Financial Corporation (simply referred
to as “Ocwen”), and its subsidiaries for “failing borrowers at every stage of the
mortgage servicing process.”
See CFPB v. Ocwen, 17-cv-80495-KAM (S.D. Fl. 2017) at ECF 1. The Bureau alleges
that Ocwen’s years of widespread errors, shortcuts, and runarounds
cost some borrowers’ money and others their homes.
Id. Ocwen allegedly botched basic functions like sending accurate monthly
statements, properly crediting payments, and handling taxes and insurance.
Id. Ocwen was allegedly illegally foreclosing on struggling borrowers in
violation of federal law, ignoring customer complaints, and sold off the
servicing rights to loans without fully disclosing the mistakes it made
in borrowers’ records thereby furthering the errors without any
recourse to fix those problems.
The CFPB claims to have uncovered substantial evidence that Ocwen has engaged
in significant and systemic misconduct at nearly every stage of the mortgage
servicing process. The CFPB is charged with enforcing the Dodd-Frank Wall
Street Reform and Consumer Protection Act, which protects consumers from
unfair, deceptive, or abusive acts or practices, and other federal consumer
financial laws. In addition, the Bureau adopted common-sense rules for
the mortgage servicing market that first took effect in January 2014.
You may be sitting up a little straighter now if Ocwen happens to be your
servicer, but let’s talk about what Ocwen said in response to the
CFPB’s filed Complaint because that may impact servicing much more
First, Ocwen hasn’t actually responded to the CFPB’s Complaint
yet. Rather Ocwen has hired one of the most powerful law firms in the
Country, oh and they also managed to try and pull a move right of the
PHH handbook. I think that their approach is left wanting however, but
first let’s explain a bit about what the PHH “handbook”
is all about. So, the PHH corporation case began as a challenge to a 2015
penalty the CFPB levied against PHH, which was collected as part of what
the CFPB deemed – a “captive reinsurance arrangement.”
In fighting the penalty, PHH called into question the Bureau’s constitutionality
and in October 2016, a panel of the D.C. Circuit concluded both that the
CFPB misinterpreted RESPA, and also that its single-Director structure
violated the constitutional separation of powers. On February 16 of this
year, however, the D.C. Circuit granted the CFPB’s petition for
rehearing en banc of the October 2015 panel decision. In granting en banc
review, the court sought guidance from the parties on three specific questions:
- Is the Bureau’s structure unconstitutional because its Director may
be removed only for cause, and if so, is the appropriate remedy to sever
the for-cause removal provision from the Consumer Financial Protection Act?;
May the Court avoid addressing the constitutionality of the Bureau’s
structure if it adopts the panel’s holdings as to PHH’s liability
under RESPA (and should it adopt those holdings)?; and
- What is the appropriate disposition of this case if this Court concludes
that the SEC’s administrative law judges are “inferior officers”
under Lucia v. SEC?
Oral argument occurred on May 24. Oh and the Department of Justice (DOJ)
got in on the action too by having the Attorney General of United States
speak his mind on just what he thinks about the CFPB’s constitutionality.
Attorney General Jeff Sessions did not hide his opinion that CFPB is unconstitutional
as currently structured and provided his basis for the reasons why.
In the Southern District Court of Florida case which the CFPB filed against
Ocwen not only is Ocwen trying to get Attorney General Sessions to give
his two cents on the CFPB’s Constitutionality, but Ocwen also is
trying to get the District Court to enter an order for an early case management
conference for their case in order to expedite what Ocwen undoubtedly
hopes will be a quick dismissal of the CFPB’s Complaint against
them by virtue of the current holding in the PHH matter discussed above.
As the District Court summarized:
"Defendants seek to "discuss with the Court why it should address Rule
12 issues in two pieces, and thereby grant Ocwen relief from the requirements
of Rule 12(g)(2). (DE 9 at 1.) Further, Defendants note that "Ocwen
believes the parties should brief and the court should decide, on an expedited
basis, whether the suit must be dismissed because Plaintiff Consumer Financial
Protection Bureau ("CFPB"), is an unconstitutional agency..."
(Id.) Defendants additionally seek to address their Motion to Invite the
Views of the Attorney General of the United States (DE 10). (Id.) Finally,
Defendants note their "open[ness] to stay of the presentation of
those aspects of dismissal until after the constitutional questions are
resolved..." (DE 10 at 5)."
The Honorable Kenneth Marra for the Southern District of Florida also wrote
in his Order that:
Excusing Defendants from the requirements of Rule 12(g)(2) represents a
departure from the rules of procedure. Defendants sole basis for seeking
this relief is their anticipated challenge to the constitutionality of
the Consumer Financial Protection Bureau. There is, however, nothing unique
about bringing a constitutional attack alongside other legal challenges
potential undergirding a motion to dismiss. Moreover, if Defendant's
constitutional challenge proves unsuccessful, a matter on which this Court
expresses no opinion , it will cause additional unnecessary delay in moving
the case forward on its merits. Hence, the Court denies the request for
relief from Rule 12(g)(2) which underlies Defendant's Motion for Early
Case Management Conference. (DE 9.)
In view of the Court's unwillingness to grant relief from Rule 12(g)(2),
Defendants' request of a stay "until after the constitutional
questions are resolved" is rendered moot. Additionally, Defendants'
Motion to Invite the Views of the Attorney General of the United States
(DE 10) will be addressed by the Court in a separate order.
Interestingly enough however, here is what I think is a move the CFPB took
that distinguishes its actions against Ocwen away from that of PHH. In
PHH the CFPB levied a fine which quite frankly obviated the Article III
courts and can understandably ruffle a few feathers to say the least,
but in the Ocwen case the CFPB did exactly what they would be assumed
to have been endowed to accomplish, namely to bring forth powerful deterrents
in the form of robust litigation before an Article III Judge and let the
Courts of Law weigh both facts and law reach a conclusions of liability
and enforcement of codified regulations. In other words the CFPB did the
unexpected perhaps, they toed the line, the came in lock, stock and barrel
and ready to duke it out rather than wage war by exercising powers which
right now whether valid or not should stay under the radar. Yes, as many
critics point out this took way too long for the CFPB to bring forward
a case against Ocwen for its servicing blunders, but if there was ever
a point in time where the CFPB should have brought this action, it most
certainly should have been now, a time when use of the court system is
the out of the box theory, and the only way to protect the consumers these
days is by thinking out of the box all around. Stay tuned.
For more information about the FDCPA or RESPA please visit our website at:
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers
with their debt problems. Contact us to see how we may be able to help you.
*Please note while this article contains original content, some of the
information has been taken from:
 Ocwen, headquartered in West Palm Beach, Fla., is one of the nation’s
largest nonbank mortgage servicers. As of Dec. 31, 2016, Ocwen serviced
almost 1.4 million loans with an aggregate unpaid principal balance of
$209 billion. It services loans for borrowers in all 50 states and the
District of Columbia. A mortgage servicer collects payments from the mortgage
borrower and forwards those payments to the owner of the loan. It handles
customer service, collections, loan modifications, and foreclosures. Ocwen
specializes in servicing sub prime or delinquent loans.