Ocwen fights U.S. consumer watchdog over mortgage allegations

By Lisa Lambert

WASHINGTON, April 26 (Reuters) - Ocwen Financial Corp is digging in for a legal battle with the U.S. consumer financial watchdog over allegations its mortgage servicing harmed thousands of borrowers, and has asked the Justice Department to join its fight.

Ocwen, one of the United States' largest nonbank mortgage servicers, filed a challenge to the Consumer Financial Protection Bureau in the U.S. District Court in West Palm Beach on Tuesday saying the agency was not legal under the U.S. constitution.

The move came after the CFPB brought a lawsuit against Ocwen last week, accusing the company of widespread misconduct in how it serviced borrowers' loans, from foreclosure abuses to a basic failure to send accurate monthly statements.

Ocwen also asked for Attorney General Jeff Sessions to present views on the agency's constitutionality.

Ocwen sought the help of Sessions, who heads the Department of Justice, after he, U.S. President Donald Trump and other Republicans said the CFPB's sole director had too much power.

Trump would like to rein in the watchdog created in the 2010 Dodd-Frank Wall Street reform law to protect individuals against fraud.

The Justice Department recently filed a brief opposing the CFPB in a case involving another mortgage company, PHH Corp.

The CFPB is currently appealing the decision in the PHH case that its single-director structure did not hew to the constitution. The agency can represent itself in court cases except those before the Supreme Court. That means Trump could direct the Justice Department to argue against the CFPB if the PHH case reaches the country's top court, and to submit briefs opposing the agency in cases such as Ocwen's challenge.

"CFPB’s own views are in direct conflict with those of the United States government, and for this court to hear both sides from the government entities can only aid the court’s decision-making process," Ocwen said in its filing.

The CFPB declined to comment on the Ocwen filings. The Justice Department did not immediately respond to a request for comment.

Civil rights and consumer advocates worry about the CFPB's fate in the PHH appeal. If the court agrees the agency is unconstitutional, then Trump is expected not to take the case to the Supreme Court. If the court reverses the ruling, then Trump's Justice Department could argue against the agency at the Supreme Court. (Reporting by Lisa Lambert; Editing by Andrew Hay)