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Court to CFPB: Freeze that $109.2M penalty for PHH Mortgage

PHH: CFPB ruling "arbitrary, capricious and an abuse of discretion"

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A D.C. Circuit Court has issued a stay against a $109.2 million fine levied against PHH Corp. (PHH) by the Consumer Financial Protection Bureau's director, Richard Cordray.

Cordray’s decision in June held that PHH violated the Real Estate Settlement Procedures Act every time it accepted a kickback payment on or before July 21, 2008 – going far beyond Administrative Law Judge Cameron Elliot’s ruling, which had limited PHH’s violations to kickbacks that were connected with loans that closed on or after July 21, 2008 — a mere $6.4 million penalty.

Cordray issued a final order in June that requires PHH to disgorge $109.2 million – all the reinsurance premiums it received on or before July 21, 2008.

In late June, PHH Corp. urged the D.C. Circuit Court to overturn the CFPB’s order.

In a five-page petition, PHH said the court should review the CFPB’s order because it is “arbitrary, capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act” and a violation of federal law, including the Real Estate Settlement Procedures Act and the Consumer Financial Protection Act of 2010.

In its brief order, the three-judge appeals panel said it reviewed PHH and the CFPB's arguments for and against the stay of penalties for violations of RESPA. PHH had argued that complying with the agency's order would violate its due process rights and harm business irreparably.

The CPFB, meanwhile, argued that the lender had not shown how it would be harmed. The appellate court sided with PHH.
Besides the enormous financial penalty, the CFPB would require PHH to make certain disclosures to the CFPB and keep out of the captive reinsurance business for 15 years.

“The balance of hardships and the public interest heavily favor a stay,” PHH told the court in its motion for stay. “There is no public interest in enforcing an order that violates the fundamental right to fair notice or injunctive provisions that are plainly unlawful."

In other legal news for the company, PHH reported Wednesday that the U.S. Attorney’s Offices for the Southern and Eastern Districts of New York have subpoenaed PHH Corp. for documents related to Fannie Mae, Freddie Mac and FHA loans, the company disclosed.

The government requested production of certain documents related to, among other things, foreclosure expenses.

"The subpoenas requested production of certain documents related to, among other things, foreclosure expenses that we incurred in connection with the foreclosure of loans insured or guaranteed by FHA, Fannie Mae or Freddie Mac and loans sold pursuant to programs sponsored by Fannie Mae, Freddie Mac or Ginnie Mae,” the company reported in its filing. “There can be no assurance that claims or litigation will not arise from this inquiry, or that fines, penalties or increased legal costs will not be incurred in connection with any of these matters.”

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