Have you been following the PHH v. CFPB case? No? Me either, but I did find the most recent ruling in the case very interesting… so we’re going to talk about it today. To give you some background PHH (a big player in the non-bank mortgage lender/loan servicing space) filed an appeal against the CFPB in 2014 after the agency slapped a $109 million fine against them for taking kickbacks for mortgage referrals. The case called into question the constitutionality of the government agency as PHH claimed that the CFPB’s leadership and funding structure were unconstitutional.
Well… after much review and 2 and half years the U.S. Court of Appeals for the D.C. Circuit upheld the constitutionality of the CFPB’s leadership structure stating that a single director, not a commission, is just fine. Most importantly the ruling says that the President can only fire a CFPB director for just cause and any appointee of our President (I’ll stay away from the English v. Mulvaney nonsense today) will survive into the next Adminstration even if the current President is not reelected. Thus… if the Dems win the 2020 election they will not be able to quickly replace the head of the agency and will have to play nice with a Republican appointed director… ughhh politics are exhausting.
But wait! There is more (hooray)! The agency wasn’t just let off the hook that easily. The appeals court did slap the hand of the CFPB. The ruling said that then, Director Robert Cordray, redlined the Real Estate Settlement Procedures Act to pursue PHH and that CFPB violated due process by failing to provide PHH with its new interpretation of RESPA. Wait… they made an update to the rule to pursue a company and then never provided the updated rule to the company they were pursuing? Yikes. That sounds like a good old-fashioned witch hunt, but what do I know. Finally, the court ruled that the CFPB must adhere to a 3-year statute of limitations in administrative cases (whatever that means).
If there is any take away in this… it’s that the mortgage industry took home a W and the ruling means that quite possibly the CFPB’s ability to blur the lines of certain acts to assess fines might finally be stunted (we can only hope). I think we’ll see some serious reform of the agency before we put a bow on 2018… however, it would be nice to have a full-time director appointed sometime before then.
As far as rates are concerned… they are up. They are going to stay up and we’re going to have to deal with it. Last week mortgage apps were down 2.6% and the 10-year treasury keeps heading north. I wish I had some words of wisdom in this moment, but I don’t. People still need homes. The economy is smoking hot right now so maybe consumers won’t worry to much about paying the 4.25%... does that help?
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.
Photo by Claire Anderson on Unsplash