In a recent case, the Consumer Financial Protection Bureau told a Florida
federal court that Ocwen Loan Servicing failed “every stage of the
mortgage servicing process,” and that their request to fast-track
a challenge to the agency’s organizational structure should be denied.
The CFPB said that the Court should not afford the mortgage servicer special
accommodations since they have no legal basis to challenge the structure
of the Bureau.
Ocwen had told the Court that it “believes that the CFPB is unconstitutionally
structured because it vests unfettered power in the hands of the CFPB’s
Director and the Bureau itself, without any meaningful oversight by the
President or Congress.”
Ocwen’s concerns mirror that of some Republicans who claim that the
single-director structure of the CFPB provides unchecked powers that should
be overseen by Congress. In it's brief to the Court, Ocwen indicated
that it's chief issue is with the single-director structure, which
it claims violates the Constitution’s separation of powers clause.
The CFPB filed s suit against Ocwen in April, accusing the mortgage servicer
of initiating wrongful foreclosure proceedings against thousands of homeowners.
The company has come under fire lately, facing over 20 challenges from
states opposed to it acquiring further servicing contracts. Florida filed
a wrongful foreclosure suit against the company on the same day as the
CFPB filed their complaint.
In its response to the CFPB’s complaint, Ocwen stated that the bureau
is “an unaccountable agency” and offered erroneous information
provided by the agency as an example of what it considers spurious allegations.
Ocwen asserts that many of the claims made against it are outdated, and
based on unverified complaints.
“The Complaint is riddled with allegations about conduct that Ocwen
already addressed—sometimes years ago—with refunds, credits,
or other consumer remedies,” Ocwen stated. “Moreover, the
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—the CFPB did not actually look at the individual
servicing files for these consumers’ loans before making this allegation.”
The CFPB’s complaint stems from Ocwen’s proprietary servicing
program, known as “REALServicing.” The Bureau claims that
the system generated errors on thousands of files, and indicated that
a March 2016 report from Ocwen confirms that 90 percent of the loans it
verified contained incorrect data or missing information.
Ocwen struck back against the complaint by challenging the agency’s
structure, claiming the lack of congressional oversight provides the federal
watchdog group with too much leeway in prosecuting and unilaterally penalizing
The CFPB countered by pointing out that constitutional challenges are historically
not ruled on in cases that can be decided based on other grounds. In defending
its position, the Bureau said, “Defendants’ request would
result in exactly what the rule was intended to prevent: unnecessary delay
and piecemeal consideration of the case.”
In October 2016, the D.C. Circuit ruled the single-director structure of
the agency unconstitutional, but that ruling was vacated in February pending
an en banc appeal.