MBANow: MBA VP Ken Markison Discusses PHH/CFPB Court Case

The Mortgage Bankers Association released a new MBANow video on YouTube in which MBA Vice President and Regulatory Counsel Ken Markison discusses ramifications of the complex PHH Mortgage v. CFPB court case and the landmark D.C. Circuit Court of Appeals decision to MBA members.  

The video can be accessed at https://www.youtube.com/watch?v=n013MEKxmjU&feature=em-uploademail.  

The DC Circuit Court of Appeals court recently ruled in favor of PHH against the Consumer Financial Protection Bureau. Markison said the essence of the case is whether or not certain arrangements between PHH’s insurance affiliate and a mortgage insurer or insurers violated Section 8 of the Real Estate Settlement Procedures Act. Markison noted that even though the captive insurance arrangements in this case are not prevalent today, the court’s ruling in favor of PHH is important to MBA members.  

“MBA consistently has been looking for clear, consistent guidance so that it can operate in a fair and competitive manner and serve consumers,” Markison said.   The court ruled on four key components:  

–The court found that the CFPB’s interpretation of Section 8 of RESPA departed from interpretation of the law and was “basically incorrect.” It said Section 8 prohibits kickbacks and referral fees, but Section 202 provides for payments for bona fide goods and services, reasonably valued between settlement service providers or others, are excepted from RESPA’s Section 8 interpretation. “So the court held that yes, there is an exception, as long as the services are reasonable and bona fide,” Markison said.

–The CFPB violated due process by failing to give notice of its new interpretation of RESPA. “It articulated the words of enforcement, but did not notify lenders of these changes,” Markison said.

–The CFPB took the position that there is not statute of limitations applicable to the RESPA violations. “That meant it could look back at past potential violations without regard to time; however, the court concluded that RESPA has a three-year statute of limitations,” Markison said.

–So far as the court was concerned, it found a constitutional problem with the structure of the CFPB. “The court concluded that the CFPB could continue operations, but suggested that the CFPB become an agency where the President can remove the CFPB Director at will,” Markison said.  

Markison added that MBA weighed in on the litigation and joined other trade associations as a friend of the court regarding this case. “If the decision were to stand, one clear point is that it changes or removes a cloud from MBA member business on interpretations,” he said. “It would return us to a world of rules that are relatively well settled and interpreted.”  

These and other videos in the MBANow series can be viewed at https://www.youtube.com/watch?v=Swk2VUJeZFI&feature=em-uploademail. The videos are also available on the MBA Insights landing page, https://www.mba.org/publications/insights/insights-publication##SubscriberID####RND##&PageID=21109.