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Judge rules that CFPB can investigate seller-financed home sales

Harbour Portfolio Advisors claimed agency did not have authority

Scales of justice with gavel

The Consumer Financial Protection Bureau earned a big victory in court Thursday when the Court of Appeals for the District of Columbia Circuit ruled in favor of the CFPB in its fight against PHH.

The ruling gives the agency the opportunity to defend the constitutionality of its leadership structure before the entire court, as a three-judge panel of the court previously declared the CFPB’s leadership structure unconstitutional in a 2-1 vote.

And that wasn’t the only positive result the CFPB got in a federal court this week.

As the New York Times reported Thursday, a federal judge ruled that the CFPB can pursue an investigation into seller-financed home sales and the operations of Harbour Portfolio Advisors.

The Times’ Matthew Goldstein and Alexandra Stevenson have the details:

Judge Nancy G. Edmunds of Federal District Court in Detroit has ruled that one of the nation’s largest providers of seller-financed homes must comply with a demand for documents and other information from the consumer agency.

The bureau has been looking into whether the terms of some of these sales violated federal truth-in-lending laws. In recent years, these kinds of deals have ballooned in poorer neighborhoods as lower-income Americans have found it harder to obtain mortgages and as private investment firms have stepped in to offer alternative financing since banks often will not lend to them.

The agency filed a lawsuit in November after one such provider, Harbour Portfolio Advisors of Dallas, refused to comply with an administrative subpoena.

As Goldstein and Stevenson note, Harbour Portfolio was previously the subject of a Times investigation into seller-financed home sales, also called contract for deed sales.

The sales typically target lower income borrowers and involve houses that were previously foreclosed on.

Harbour Portfolio claimed the CFPB’s authority to subpoena it about the seller-financed sales was “lacking,” a claim that Judge Edmunds disagreed with.

Again from the Times:

Judge Edmunds said in a 12-page ruling that the agency’s authority to issue the subpoena was “not ‘plainly lacking,’” borrowing language that Harbour had used in its challenge.

“There are plausible grounds to believe that respondents may have information related to a violation” of the federal Truth in Lending Act, the Consumer Financial Protection Act and the Equal Credit Opportunity Act, she noted.

For the full Times article, click here or below.

Source: New York Times
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