MReport July 2017

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44 | TH E M R EP O RT SERVICING THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T SERVICING LOCAL EDITION CFPB Wins a Battle in Ocwen Case A JUDGE RULED TO DELAY OCWEN'S CHALLENGE TO THE CFPB'S CONSTITUTIONALITY, WHICH OCWEN FILED AFTER THE CFPB FILED SUIT AGAINST IT. GEORGIA // For the past few months, Atlanta-based Ocwen Financial Corporation, the country's largest bank mortgage loan servicer, and the Consumer Financial Protection Bureau (CFPB) were at odds. In late April, the CFPB sued Ocwen and its subsidiaries, claiming they had been "failing borrowers at every stage of the mortgage servic - ing process." Days later, Ocwen responded by filing three motions with the court in hopes of expe- diting the ruling on the consti- tutionality of the CFPB and its leadership structure, one of which invited the Department of Justice to participate in the case. In June, a federal judge has slowed down Ocwen's bid to test the constitu- tionality of the CFPB. In October 2016, in the case of PHH Corp. v. CFPB, a three- judge panel from the D.C. Circuit Court of Appeals judged the CFPB's structure unconsti- tutional. They vacated a $100 million fine against PHH and gave the President power to fire the Director of the CFPB at will. However, the case was set to be reheard May 24, 2017, by the entire D.C. Circuit Court of Appeals, allowing the CFPB to defend itself. In response to the allegations, Ocwen called the bureau "an unaccountable agency" and asked that the constitutionality ruling be expedited. The agency cited a number of errors in the CFPB's filing, including the bringing up of issues that had already been resolved. However, the CFPB told a Florida federal court in early May that the mortgage servicer should not be allowed special treatment in the case, being that it provided no legal authority or any other compelling reason. Judge Kenneth Marra of the U.S. District Court for the Southern District of Florida decided Ocwen will be delayed in testing the constitutionality of the CFPB. Marra declined Ocwen's request to seek U.S. Attorney General Jeff Sessions' views on the CFPB's constitutionality. In a separate June 2 order, Marra said it was "premature" to invite the Attorney General's views, but he can weigh the request again in the context of an Ocwen motion to dismiss. "Until a motion is filed setting forth the exact basis for the chal - lenge, the Attorney General will not have sufficient information to determine whether he should intervene," Marra said. "We have reviewed the order, which addresses how the court would like to have the con- stitutional attack presented to it," Ocwen representative John Lovallo said in an email to Bloomberg BNA. "We look for- ward to including that argument with all of the other reasons CFPB's suit is unjustified and should be dismissed." The U.S. Court of Appeals for the District of Columbia Circuit is currently processing the con- stitutional status of the CFPB in PHH Corp. v. CFPB, but according to Bloomberg BNA, many believe the court will rule for the CFPB, setting up the case for consider- ation by the U.S. Supreme Court. OneWest Settles Reverse Mortgage Litigation FINANCIAL FREEDOM, A DIVISION OF ONEWEST, AGREED TO PAY $89 MILLION TO RESOLVE ALLEGATIONS OF VIOLATING THE FALSE CLAIMS ACT. TEXAS // Financial Freedom, a division of OneWest Bank based in Texas, agreed to a settlement of over $89 million in mid-May, resolving allegations from the Department of Justice that ac - cuse the company of violating the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 in connection with its participation in a federally insured home-equity conversion mortgage or "reverse mortgage" program. "The Department of Justice is committed to ensuring that those who participate in federal mort - gage insurance programs comply with requirements essential to the success of its programs," said Acting Assistant Attorney General Chad A. Readler of the Justice Department's Civil Division. "Among these require - ments are the deadlines im- posed by the Federal Housing Administration on those who service government-insured mortgages. Those deadlines are designed to protect the govern - ment's collateral and stop the unnecessary loss of government funds and resources." Reverse mortgage loans allow homeowners aged 62 and older to borrow money against the equity they have in their homes. The Federal Housing Administration (FHA) protects lenders from loss from reverse mortgages by providing mortgage insurance, which means when the home is sold or vacant for over 12 months or upon the death of the home - owner a loan becomes due and the lender is repaid the amount of the loan. The United States alleged that Financial Freedom had not prop - erly disclosed on the insurance claims forms it filed with the FHA that the mortgagee was not eligible for such interest payments because it had failed to meet vari - ous deadlines relating to appraisal of the property, submission of claims to HUD, and pursuit of foreclosure proceedings. Despite this, Financial Freedom sought to obtain insurance payments from insurers. This led to the mortgagees serviced by Financial Freedom allegedly obtaining additional interest, which the Department of Justice states they were not entitled to receive. "Today's settlement agree - ment resolves allegations that this lender failed to comply with FHA servicing requirements and sought to receive financial gains that it was not legally entitled to," said HUD Inspector General David A. Montoya. "These ac - tions today demonstrate our continued commitment to address and halt business practices that pose a serious risk to the FHA program and the public's trust in HUD-administered programs." "The Department of Justice is committed to ensuring that those who participate in federal mortgage insurance programs comply with requirements essential to the success of its programs." —Chad A. Readler, Acting Assistant Attorney General of the Justice Department's Civil Division NSM_DiversityAd.indd

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