Back against wall, Ocwen challenges CFPB's constitutionality
With its business under threat, Ocwen Financial asked a federal judge on Wednesday to throw out a lawsuit filed against it last week by the Consumer Financial Protection Bureau, claiming the agency is "unconstitutionally structured."
The West Palm Beach, Fla., subprime mortgage lender asked the U.S. District Court for the Southern District of Florida to expedite a review of the constitutionality of the CFPB, and invited the Justice Department to participate in the case.
"Ocwen believes that that 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 the Congress," Ocwen said in a press release. "Ocwen seeks to get this issue resolved early because it should be relieved of having to defend this unfair action from an unconstitutional agency."
The company cited an October decision by a three-judge panel that found the CFPB's single-director structure is unconstitutional. That ruling has been vacated by the D.C. Circuit Court of Appeals, which agreed to rehear the closely watched case, PHH Corp. v. CFPB, next month.
Ocwen said it notified the Justice Department because the Trump administration filed a brief in the PHH case in which it agreed that the CFPB is unconstitutional. Ocwen has hired Tom Hefferon, a partner at Goodwin Procter, who also represents PHH, the New Jersey mortgage lender and servicer that was the first to successfully challenge the CFPB's constitutionality.
The CFPB declined to comment, citing ongoing litigation.
The CFPB filed the lawsuit Friday against Ocwen, alleging that the subprime servicer botched basic mortgage servicing functions including sending inaccurate monthly statements to borrowers, improperly crediting mortgage payments and mishandling taxes and insurance in escrow accounts. The CFPB also claimed that Ocwen illegally foreclosed on at least 1,000 borrowers who applied for loan modifications.
Ocwen said it already addressed the CFPB's allegations through refunds, credits and other consumer remedies. The company said the bureau did not identify specific loan files to support allegations that some foreclosures were illegal.
"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 a press release. "Although Ocwen believes the lawsuit should be dismissed on constitutional grounds, it also is prepared to vigorously contest the inaccurate CFPB allegations."
Separately, the state of Florida filed a lawsuit against Ocwen last week, and 22 other states led, by North Carolina, filed cease-and-desist orders against the company for improper handling of consumer escrow accounts.
If the court rules against Ocwen, the consequences could be dramatic for the company, whose stock price plummeted to $2.37 a share as of midmorning Wednesday. On Tuesday, Ocwen filed emergency motions requesting injunctions and restraining orders in Illinois and Massachusetts.