Certified Forensic Loan Auditors, LLC

 
  Upcoming Classes

Search CFLA's Article Archive:

Court of Appeals Says CFPB Is Unconstitutional; Rejects Agency Effort to Apply New Interpretation of Law Retroactively

jdsupra.com | October 16, 2016

By Steven Bradbury, Robert H. Ledig, Ralph R. Mazzeo, Robert Rhatigan, Thomas P. Vartanian

The courts are now reacting to what some view as regulatory overreach flowing from U.S. laws enacted in the wake of the financial crisis. The most recent example is the October 11, 2016 decision of the U.S. Court of Appeals for the D.C. Circuit in PHH Corporation v. CFPB, which may have implications for the constitutionality of single-headed independent agencies that exceed their authorities and which may impact the determinations of other such agencies.

To put this decision in some perspective, in March 2016, U.S. District Court Judge Rosemary Collyer in Washington, D.C. invalidated the decision of the Financial Stability Oversight Council designating MetLife a “systemically important financial institution.”1 That ruling is now on appeal to the D.C. Circuit. That court is also deciding Perry Capital v. Lew, a challenge to the long-standing conservatorships of Fannie Mae and Freddie Mac.2 In the PHH case, the D.C. Circuit issued a striking defeat to the Consumer Financial Protection Bureau (CFPB), by finding that: (i) in creating the CFPB, Congress had not satisfied the constitutional requirements for an independent agency; and (ii) the CFPB exceeded and misused its enforcement authority. The decisions in MetLife and PHH are likely to further embolden financial services firms to challenge actions by regulators that such firms perceive to be unauthorized or overreaching.

The PHH case involves a mortgage lender’s challenge to a US$109 million disgorgement order issued by the CFPB, based on the agency’s finding that the lender’s captive reinsurance arrangement with mortgage insurers violated the Real Estate Settlement Procedures Act (RESPA). The court extensively analyzed the history of independent agencies – which it referred to as “a headless fourth branch of the U.S. Government” – noting that, in almost all instances, independent agencies are established as multi-member organizations so as to lessen constitutional concerns regarding the power given to such entities. Relying on Supreme Court separation of powers precedents, the court found that the CFPB was unconstitutionally structured because it is an independent agency headed by a single Director.3 The court, however, fashioned a narrow remedy, concluding that the provision of the Dodd-Frank Act that limited the President’s authority to remove the Director only for cause could be stricken, resulting in the Director’s serving at the will of the President. Significantly, the court relied in part on a severability clause preserving the remainder of the Dodd-Frank Act if any particular provision were to be held unconstitutional. Thus, the court decided that its ruling did not impact the CFPB’s ongoing operations, requiring the court to consider the legality of the CFPB’s actions against PHH.

With regard to the specific enforcement issues of the case, the court concluded that the CFPB applied a new, and unlawful, interpretation of RESPA to PHH. The CFPB had reversed a long-standing position taken by the Department of Housing and Urban Development (HUD), which had interpretive jurisdiction over RESPA prior to the transfer of that authority to the CFPB under the Dodd-Frank Act. The CFPB’s own RESPA regulation, transferred from HUD, continued to reflect HUD’s position. The court thus found the CFPB’s retroactive application of its new position to be a violation of PHH’s due process rights, stating that “[t]he Due Process Clause does not countenance the CFPB’s gamesmanship.” Finally, the court rejected the CFPB’s argument that while judicial actions for violations of RESPA were subject to a statute of limitations, no statute of limitations applies where the CFPB brought an administrative action for an alleged RESPA violation.4

The court remanded the case to the CFPB to allow the agency to consider whether PHH’s conduct was permissible under the court’s ruling regarding the applicable provisions of RESPA.

Footnotes

1) See Dechert OnPoint MetLife Opinion Turns the Tables on FSOC: Back to the Drawing Board (April 18, 2016).

2) Dechert LLP represents amici in each of those cases.

3) One member of the three judge panel took the position that it was not necessary for the court to reach the constitutional issue.

4) The court characterized as “absurd” the CFPB’s position at oral argument that it would be a matter of prosecutorial discretion as to whether the agency could bring an administrative action 100 years after the alleged violation. The court described the CFPB’s position as “especially alarming” because the agency could seek civil penalties in administrative actions.

 

 

 

Order Cutting-Edge Services Now   Quiet Title Packages from Licensed Attorneys
     
CFLA Sponsored Attorney Links   CFLA Training Academy

 

 

Back to October 2016 Archive

 

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

SEE BELOW- http://www.certifiedforensicloanauditors.com

Call us toll free at 888-758-2352

Bookmark and Share
spacer
Facebook Like us on Facebook
Twitter Follow us on Twitter
YouTube View our YouTube Videos
LinkedIn Connect to us on Linkedin
 
BBB Logo

 

spacer

Contact us or view our Sample Documents & Audits by completing the form below.

  • Reload
  • Should be Empty:



 

DVD Sets Only $99

 

FREE Mortgage Fraud Analysis

 

Order Cutting-Edge Services Now

 

Quiet Title Packages from Licensed Attorneys

 

Affiliate Services

 

CFLA Sponsored Attorney Links

 

Take-Home Education Package

 

ALB Law Firm

 

Advocate Legal

 

The True News Network

 

Rubenstein Business Law

 

Atighechi Law Group

 

Scunziano & Associates

 

Get Certified to Perform Mortgage Securitization Audits

 

CFLA Training Academy

 

Expert Witness Services

 

Cutting Edge Expert Securitization Reports

 

CFLA Credit Cards

 

Breaking News

 

Letters to the Editor

 

CFLA Weekly Newsletters

 

Code of Ethics

 

Testimonials

 

Instructional Videos

 

Job Opportunities

 

License Opportunities

 

MARS Rule

 

Product Samples

 

Resource Links

 

Servicer Information

 

Foreclosure Laws

 

REST Report

 

Quiet Title Packages from Licensed Attorneys

 

Advertise on CFLA

 

Advertising Space: Mortgage Securitization, Quiet Title

 

Certified Forensic Loan Auditors, LLC
13101 West Washington Blvd.
Suite 444
Los Angeles, CA 90066

Toll Free: 888-758-CFLA (2352)
Mobile Users: CLICK TO CALL
info@certifiedforensicloanauditors.com

   
 
CFLA IS NOT A LAW FIRM AND DOES NOT PROVIDE ANY LEGAL ADVICE. CFLA DOES NOT OFFER FORECLOSURE CONSULTING OR FORECLOSURE RELIEF
SERVICES. CFLA DOES NOT OFFER OR ASSIST WITH ANY LOAN MODIFICATION SERVICE. CFLA ALWAYS RECOMMENDS THAT CLIENTS RETAIN COMPETENT COUNSEL IN THEIR RESPECTIVE JURISDICTION. CFLA HAS A FREE PROGRAM TO REFER CFLA CLIENTS TO LAW FIRMS IN NEARLY EVERY STATE AND CFLA
DOES NOT CHARGE OR OBTAIN REFERRALS FEES FOR THESE SERVICES. SERVICES NOT OFFERED TO RESIDENTS OF THE STATE OF NEVADA.

 
Home About Us Privacy Policy Terms of Service Disclaimer SERVICES Careers Contact Us
 
COPYRIGHT © 2007-2016 Certified Forensic Loan Auditors ™ All rights reserved