CFPB Requests Rehearing of Decision Threatening Agency’s Structure

Earlier today, the CFPB filed its much-anticipated response in PHH Corp. v. CFPB, requesting reconsideration by the full D.C. Circuit. As discussed in our special alert, on October 11, 2016, a three-judge panel of the D.C. Circuit vacated the CFPB’s $109 million penalty against PHH under the Real Estate Settlement Procedures Act (RESPA). In addition, a majority of the panel held that, to resolve a constitutional defect in the CFPB’s structure, the Director was removable by the President at will, meaning that President Trump could remove Director Cordray upon taking office. However, the panel’s decision is stayed until seven days after the court rules on the CFPB’s request.

Rather than proceeding directly to the Supreme Court, the CFPB proceeded as expected by requesting rehearing en banc by the full D.C. Circuit, which is generally disfavored and granted only for matters of “exceptional importance.” Perhaps most significantly, the Bureau’s petition does not request rehearing of the panel’s conclusion that RESPA’s three-year statute of limitations applied to administrative as well as judicial actions brought under that statute.  Read more…

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CFPB Director Cordray Delivers Remarks at MBA Conference

On October 25, CFPB Director Richard Cordray delivered remarks to the Mortgage Bankers Association (MBA). Cordray highlighted the CFPB’s role in helping the housing economy to recover, including regulatory actions from 2014 to the present. Director Cordray also advised industry participants that they should expect more regulation and oversight over the coming year, explaining that the cost of compliance, though burdensome, was “inevitable” in light of the “far-reaching” effects of the financial crisis that Congress was trying to fix.

Director Cordray revealed three priority areas for enforcement and supervision in the next year: (i) consumer complaints, explaining that the CFPB will now require underperforming servicers to document the technology and process changes used to implement the agency’s recently released servicing regulations, because, among other reasons, the Bureau considers monitoring and addressing the process through which complaints are handled part of “a basic component” of any compliance effort; (ii) redlining, noting that the Bureau has identified “redlining” as a target for its supervisory work in the coming year, and has teamed up with the DOJ to bring “major enforcement actions” against institutions found to be discriminatory in their lending practices; (iii) RESPA violations, announcing that the CFPB will continue to adhere to its 2015 bulletin regarding marketing servicing agreements despite the recent PHH ruling. He further noted that the PHH case “is not final at this point” and that the Bureau “respectfully disagrees” with the finding.

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POSTED IN: Consumer Finance, Federal Issues

ABA and CBA Lend Perspective on CFPB’s Proposed TRID Revisions

On October 18, the American Banking Association (ABA) and Consumer Bankers Association (CBA) submitted a joint comment letter responding to a recent proposal by the CFPB seeking to codify informal guidance and clarifications to the Know Before Your Owe TILA-RESPA Integrated Disclosure (TRID) rule. Of particular concern among lenders and investors was the lack of clarity about liability for unintentional mistakes and technical noncompliance with TRID. To help address these concerns, the Associations urged the CFPB to, among other things, (i) publish the specific statutory provisions it relied upon for each disclosure item or requirement identified in the recent proposal; (ii) grant a “safe harbor” for model forms issued by the bureau; (iii) grant an extension of the “good faith” compliance examination policy pending the CFPB’s proscribed deadlines for the proposed rules; and (iv) develop a formal process to address ongoing compliance and legal issues related to TRID.

The Associations also expressed appreciation for “the numerous amendments offered in th[e] proposal,” including those allowing corrected closing disclosures to reset applicable good faith tolerances for creditors. The Associations further explained that their “preliminary analysis reflects that this proposed rule will resolve multiple ambiguities that banks deem significant” and “urged that the bureau . . . allow for the correction of previous non-compliance caused by the interpretive ambiguity that the bureau is now fixing” (emphasis added).

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POSTED IN: Miscellany, Mortgages

CFPB Releases Updated TRID Compliance Guide

On October 12, the CFPB issued an updated version of its small entity compliance guide on the Know Before You Owe TILA-RESPA Integrated Disclosure (TRID) Rule. The updated TRID compliance guide incorporates guidance from CFPB webinars on various topics, including (i) record retention; (ii) Loan Estimate and Closing Disclosure requirements, including format and delivery; (iii) good faith standards and determinations; (iv) disclosures related to seller-paid costs; and (v) construction loans. The newly released TRID compliance guide replaces the CFPB’s July 2015 guide. The CFPB also issued a separate revised guide for completing the Loan Estimate and Disclosure forms.

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Special Alert: D.C. Circuit Panel Rejects CFPB’s RESPA Interpretation and Alters its Structure in PHH Corp. v. CFPB

On October 11, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit issued an opinion vacating a $109 million penalty imposed on PHH Corporation under the anti-kickback provisions of the Real Estate Settlement Procedures Act (RESPA), concluding that the CFPB misinterpreted the statute and violated due process by reversing the interpretation of the prior regulator and applying its own interpretation retroactively. Furthermore, the panel rejected the CFPB’s contention that no statute of limitations applied to its administrative actions and concluded that RESPA’s three-year statute of limitations applied to any actions brought under RESPA.

In addition, a majority of the panel held that the CFPB’s status as an independent agency headed by a single Director violates the separation of powers under Article II of the U.S. Constitution. However, rather than shutting down the CFPB and voiding all of its regulations and prior actions, the majority chose to remedy the defect by making the CFPB’s Director subject to removal at will by the President. In effect, this makes the CFPB an executive agency (like the Department of the Treasury) rather than, as envisioned by the Dodd-Frank Act, an independent agency (like the Federal Trade Commission). (One member of the panel, Judge Henderson, dissented from this portion of the opinion on the grounds that it was not necessary to reach the constitutional issue because the panel was already reversing the CFPB’s interpretation of RESPA.)

The panel remanded the case to the CFPB to determine whether, within the three-year statute of limitations, the payments to PHH’s affiliate exceeded the fair market value of the services provided in violation of RESPA. The CFPB is expected to petition for en banc reconsideration by the full D.C. Circuit or to seek direct review by the United States Supreme Court. Therefore, final resolution of this matter may be delayed by a year or more.

Click here to read the full Special Alert.

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Questions regarding the matters discussed in this Alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.

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