Ocwen Financial Corp. recently filed two related motions that seek an early court ruling that the CFPB is unconstitutional, and therefore its enforcement action against the lender/servicer should be thrown out.Echoing an argument made earlier by PHH Corp. in its own dispute with the bureau, Ocwen told the U.S. District Court for the Southern District of Florida, West Palm Beach Division, that the CFPB is unconstitutionally structured because it vests “too much unfettered power” in the hands of the agency’s director and in the bureau itself. The company informed the court and the Department of Justice that it intends to directly challenge the CFPB’s constitutionality at the earliest possible opportunity and to seek dismissal of the case on this ...

Ocwen Financial Corp. is facing more trouble than just its struggle with the CFPB and a number of state regulators. The mortgage lender/servicer also faces the increasing likelihood of some ratings downgrades as well as pending class-action lawsuits. Fitch Ratings recently revised Ocwen’s U.S. residential mortgage-backed securities servicer ratings outlook to negative. “The revision of the rating outlook for the servicer ratings is based on uncertainty surrounding the financial and operational impact of new regulatory actions taken by the CFPB and the multi-state actions following the findings of the Multi-State Mortgage Committee,” Fitch said. The negative rating outlook also takes into consideration Ocwen’s financial condition. Fitch placed the company’s and its corporate parent’s long-term issuer default rating on “rating watch ...

SCOTUS Sides With City of Miami in Predatory Lending Case. The Supreme Court last week issued a narrow decision in favor of the City of Miami in a case stemming from losses the municipality claimed it suffered from predatory mortgages. Industry analysts are divided on what the ruling means for lenders... Goldman Sachs Continues Progress on Consumer-Relief Obligation Under Mortgage Settlements. Wall Street firm Goldman Sachs is more than one third of the way towards meeting its $1.8 billion consumer-relief obligation under the April 11, 2016, mortgage-related settlements it reached with the U.S. Department of Justice and the states of California, Illinois and New York, according to retired Boston University law professor Eric Green, the independent monitor of the consumer-relief portions of the agreements ...

State regulators filed a complaint last week seeking to prevent the Office of the Comptroller of the Currency from creating a national charter for nonbank financial technology companies. The charter would preempt state laws, eliminating a “patchwork” of compliance issues for marketplace lenders and other fintech companies. “If the OCC is allowed to proceed with the creation of a special-purpose nonbank charter, it will set a dangerous precedent that any federal agency can ...

The Supreme Court of the United States this week ruled in favor of Miami in a case involving losses the city claimed were related to “predatory mortgages.” The ultimate impact of the ruling remains unclear, as the lawsuits will proceed in a lower court, potentially fizzling out or leading to a plethora of similar claims. In Bank of America v. City of Miami, BofA and Wells Fargo challenged lawsuits brought under the Fair Housing Act. The city alleged that discriminatory conduct by the banks in their origination of predatory mortgages before the financial crisis led to a disproportionate number of foreclosures and vacancies in majority-minority neighborhoods. Miami said the loans and foreclosures impaired the city’s effort to assure racial integration, diminished its property-tax revenue and increased demand for police, fire and other municipal services. In a 5-3 ruling supported by the Supreme Court’s more liberal-leaning justices, the court determined...

Ocwen Financial’s travails continued to worsen this week after rating agencies announced adverse ratings actions amid the servicer’s mounting regulatory and legal problems. On April 24, Moody’s Investors Service placed Ocwen’s servicer assessment on review for a possible downgrade. On April 25, Fitch Ratings revised its previous rosy affirmation of the company’s primary servicer rating and stable outlook to negative. Both firms said the ratings actions were due to the increased regulatory scrutiny on Ocwen’s servicing operations, which could lead to hefty penalties that could pose a threat to the company’s financial stability. On April 20, a consortium of state mortgage regulators filed...

As of press time, Congress passed a one-week stopgap spending measure to keep the government open through May 5, averting a looming government shutdown. The House passed H.J. Res. 99 by a vote of 373 to 30. The continuing resolution has been sent to President Trump. The continuing resolution provides lawmakers sufficient time to negotiate an omnibus spending bill. The previous spending bill was scheduled to expire at midnight, April 28, which would have resulted in a government shutdown similar to the one that paralyzed the federal government in 2013. A shutdown can cause grief for sellers and homebuyers and severely delay processing of mortgage loans if lenders cannot verify a borrower’s tax data or Social Security number. This time, however, the FHA and VA are prepared for such an eventuality, said industry observers. A 16-day government shutdown in October 2013 sent millions of ...

Late last week, House Financial Services Committee Chairman Jeb Hensarling, R-TX, released a detailed discussion draft of a revised version of his Financial CHOICE Act that would eviscerate the Consumer Financial Protection Bureau and make a number of other changes to the Dodd-Frank Act and a host of its mortgage-related regulations. Title VII of the draft, recently dubbed CHOICE Act 2.0, would dismantle the parts of the CFPB that the lending industry and other critics have found to be most problematic: its rulemaking, supervisory and enforcement authority, including unfair, deceptive or abusive acts or practices. The previous version of the bill would have retained...

The CFPB last week filed a massive civil damage case against top-ranked mortgage servicer Ocwen Financial, accusing the nonbank and its subsidiaries, Ocwen Loan Servicing, LLC, and Ocwen Mortgage Servicing, Inc., of “failing borrowers at every stage of the mortgage servicing process.” The agency alleges that Ocwen’s “years of widespread errors, shortcuts and runarounds cost some borrowers money and others their homes.” Ocwen allegedly botched basic functions like sending accurate monthly statements, properly crediting payments, and handling taxes and insurance. The agency added that Ocwen also illegally foreclosed on struggling borrowers, ignored customer complaints, and sold off the servicing rights to loans without fully disclosing the mistakes it made in borrowers’ records. Among the CFPB’s major allegations was that the ...

The CFPB was not alone in its crackdown last week on Ocwen Financial over its alleged mortgage servicing failures and violations. The same day the bureau announced its action, Florida Attorney General Pam Bondi and Office of Financial Regulation Commissioner Drew Breakspear filed a federal civil consumer protection lawsuit against Ocwen and subsidiaries, Ocwen Loan Servicing, LLC, and Ocwen Mortgage Servicing, Inc., for what they called “mortgage servicing misconduct.” According to the complaint, Ocwen harmed citizens of the Sunshine State by filing illegal foreclosures, mishandling loan modifications, misapplying mortgage payments, failing to pay insurance premiums from escrow and collecting excessive fees. Ocwen services roughly 125,000 home mortgages in the state. The complaint, filed in federal court in West Palm Beach, ...