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Inside the CFPB

January 2, 2017

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PHH Says Panel Got it Right, No Need to Rehear En Banc

The long-running legal confrontation between PHH Corp. and the CFPB took another turn right before the holidays, with the nation’s eighth largest lender telling the District of Columbia Circuit Court of Appeals that its three-judge panel got it right in October when it ruled the CFPB’s leadership structure is unconstitutional. “The panel grounded its decision in existing Supreme Court precedent and other settled authority,” the company said. “It remedied a violation of the separation of powers by allowing the agency to continue to operate subject to basic constitutional constraints, without addressing the decision’s effect on past actions.” Further, “the panel interpreted the Real Estate Settlement Procedures Act according to its plain language and consistently with every other circuit to consider ... Read More

Key Constitutional Question Warrants Rehearing, DOJ Says

The important constitutional issue of separation of powers, and the perhaps somewhat unorthodox manner in which the three-judge panel of the District of Columbia Circuit Court of Appeals concluded that the CFPB’s leadership structure is unconstitutional, justify the court granting the bureau’s request for a rehearing en banc in its dispute with PHH Corp., the U.S. Justice Department told the court. “The conferral of broad policymaking and enforcement authority on a single person below the president, whom the president may not remove except for cause ... raises a significant constitutional question that the Supreme Court has not yet squarely confronted,” the DOJ said. To date, the nation’s highest court has sanctioned a limitation on the power to remove principal officers ... Read More

Trump Nominee Could Stymie CFPB Rulemaking, Pending the PHH Case

Depending on how the PHH Corp. v. CFPB case shakes out, the bureau’s rulemaking abilities will likely be severely challenged by the incoming administration of President-elect Donald Trump. In a recent client note, Barbara Mishkin, of counsel in the Philadelphia office of the Ballard Spahr law firm, pointed out how Trump’s selection of Rep. Mick Mulvaney, R-SC, as his nominee for director of the Office of Management and Budget (OMB) could become a major impediment for the bureau in its effort to crank out new regulations going forward. “Mr. Mulvaney has been described as a staunch deficit hawk and his nomination is viewed as sending a signal that federal regulations are likely to face tough scrutiny in a Trump administration,” ... Read More

New Prez Has the Power to Can Cordray Now, Professor Claims

Numerous experts, commenters and observers are under the assumption that President-elect Trump will have to let the courts reach a definitive legal decision on the PHH Corp. v. CFPB litigation before deciding whether to remove CFPB Director Richard Cordray without cause. However, that’s not the case, according to Aditya Bamzai, associate professor of law at the University of Virginia School of Law. In a recent online blog post, Bamzai said the (sometimes unstated) premise in various articles and reports is that the CFPB’s pending challenge to the panel decision somehow prevents any attempt to oust Cordray. “Such a premise appears to rest on two mistaken assumptions: that the president cannot exercise his removal authority absent an Article III judgment authorizing ... Read More

Industry Reps, Allies Set the Stage For Changes to CFPB, Dodd-Frank

As 2016 drew to a close, various industry officials were busy making the case for legislation that would alter the structure of the CFPB and clip its wings as part of a strategy to scale back the Dodd-Frank Act and provide lenders with significant regulatory relief. Industry officials are confident they will encounter a more sympathetic White House with Donald Trump as the occupant. Analysts with Compass Point Research & Trading believe a number of important issues will be addressed as part of the final legislative regulatory relief package, including governance changes shifting the CFPB, as well as the Federal Housing Finance Agency and the Office of the Comptroller of the Currency, into commission structures. They also expect to see ... Read More

Banks, CUs Urge Changing CFPB to a Commission Structure

A handful of industry groups representing banks and credit unions wrote to Senate leaders recently, making the case for switching the leadership structure of the CFPB from a single director to a multi-member commission, which was how the bureau was initially envisioned by early advocates such as Elizabeth Warren, then an adviser to President Obama. In a letter to Senate Majority Leader Mitch McConnell, R-KY, and Minority Leader-elect Chuck Schumer, D-NY, the Consumer Bankers Association, the Credit Union National Association, the Independent Community Bankers of America, and the National Association of Federal Credit Unions urged lawmakers to pass legislation to create a five-person, bipartisan board to govern the bureau. “The CFPB is an independent regulatory agency that provides the sole ... Read More

Nonbanks Pay Their LOs More Because of Greater Efficiency

Nonbank mortgage-banking profitability models have been much more aggressive than their mortgage bank competition when it comes to paying their loan originators. But many question how nonbanks can afford to pay 100 basis points more than banks. During a recent webinar sponsored by Inside Mortgage Finance, Paul Hindman, managing director of Grid Origination Services, suggested it has to do with “efficiency execution with every step of the mortgage origination.” And which companies are doing this? “Those companies that really can afford to offer this level of compensation and still be profitable,” he added. That being said, there are varying qualifiers that must be satisfied in order to justify paying a higher commission. Hindman spelled out the typical components of loan ... Read More

CFPB Fair Lending Priorities Include Redlining, Servicing

Mortgage-related issues will be a big component of the CFPB’s fair lending priorities for 2017, the bureau indicated in an online blog post late last year. Among the issues for the mortgage industry are redlining and servicing. “While the bureau has taken important strides in our efforts to protect consumers from credit discrimination and broaden access to credit, we continue to identify new and emerging fair lending risks and we will monitor institutions for compliance,” said Patrice Ficklin, associate director of the CFPB’s Office of Fair Lending. Going forward, then, the bureau is increasing its focus in three key areas, the first of which is redlining. “We will continue to evaluate whether lenders have intentionally avoided lending in minority neighborhoods,” ... Read More

Other News in Brief

CFPB Again Moves Against Finance Company. Late last month, the CFPB took its second legal action against Military Credit Services, LLC, a Norfolk, VA-based finance company, accusing the company of making loans with improper disclosures.... TransUnion Agrees to $19.4 Million Settlement. TransUnion, one of the largest credit reporting agencies in the U.S., has agreed to settle a dispute with the CFPB over the company’s practices related to the advertising, marketing and sale of consumer reports, credit scores or credit marketing products to consumers, the firm said in a recent Form 8-K filing with the Securities and Exchange Commission.... Read More

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