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Monday Morning Cup of Coffee: Inside the battle brewing over Zillow’s “Instant Offers”

Plus, a judge shoots down Ocwen's challenge of CFPB constitutionality

Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on larger issues.

Ocwen Financial tried a novel tactic when it decided to fight back against the Consumer Financial Protection Bureau after the bureau recently sued the nonbank, accusing Ocwen of “failing borrowers at every stage of the mortgage servicing process.”

In addition to claiming that the CFPB’s lawsuit had political motivations, Ocwen also “pulled a PHH,” asking the United States District Court for the Southern District of Florida to declare the CFPB unconstitutional and toss out the bureau’s lawsuit against the company.

“Ocwen believes that the CFPB is unconstitutionally structured because it vests too much unfettered power in the hands of the CFPB’s Director and the Bureau itself, without any meaningful oversight by the President or Congress,” the company said a in a statement at the time.

But, according to a note from Seeking Alpha (citing a Bloomberg report), Ocwen’s challenge to the CFPB’s constitutionality was unsuccessful.

The Seeking Alpha report is light on details as to why the judge ruled against Ocwen’s constitutional question, simply stating that the judge said “doing so would be a departure from settled rules.”

The report noted that the judge did not rule on Ocwen’s legal tactic related to the CFPB, asking the Department of Justice to weigh in.

Recently, the DOJ filed an amicus brief in the PHH vs. CFPB case, asking the court to rule the CFPB’s leadership structure unconstitutional and grant President Donald Trump the authority to fire the CFPB director at will.

In its case, Ocwen asked for the DOJ be allowed to contribute to its case against the CFPB so the court can “consider fully the Attorney General’s conclusion that the CFPB is unconstitutionally structured.”

According to the Seeking Alpha note, the judge did not rule on that portion of Ocwen’s request…yet.

Earlier this year, rumors began to emerge that the Trump administration was considering George Conway to serve as the head of the DOJ’s Civil Division.

Conway is partner at the Wall Street law firm of Wachtell, Lipton, Rosen & Katz, and is married to Kellyanne Conway, Trump’s senior advisor.

As head of the Civil Division, the “largest litigating division” in the DOJ, Conway would lead the section of the DOJ that handle some significant mortgage-related cases.

The Civil Division was at the forefront of many of the massive settlements paid out by banks, credit rating agencies, and others for crisis-era mortgage practices.

The Civil Division also oversees the DOJ’s False Claims Act actions. The False Claims Act is designed to prosecute vendors the government feels fraudulently represented themselves while doing business with the nation, but in recent years, the False Claims Act became the DOJ’s weapon of choice against the mortgage industry.

Under President Barack Obama, the DOJ used the law to extract settlements from lenders for supposedly misrepresenting the quality of loans insured by the Federal Housing Administration.

So, as the head of the Civil Division, Conway would wield serious weight in the mortgage business, but it looks like Conway won’t be leading the Civil Division, after all.

According to Above The Law, Conway pulled his name from consideration last week, saying the timing was not right.

Per the report, Conway issued the following statement about his reasons for making the decision:

I am profoundly grateful to the President and to the Attorney General for selecting me to serve in the Department of Justice. I have reluctantly concluded, however, that, for me and my family, this is not the right time for me to leave the private sector and take on a new role in the federal government. Kellyanne and I continue to support the President and his Administration, and I look forward to doing so in whatever way I can from outside the government.

Conway’s statement also seems to indicate that he was beyond being considered for the position. Rather, it seems that the Trump administration offered him the position but he turned it down.

Now, it’s back to the drawing board for the Trump administration as it tries to fill one of the most important positions at the DOJ.

There appears to be a serious battle brewing over Zillow’s “Instant Offers,” a pilot program the online real estate giant is trying out in Las Vegas and Orlando.

Through the “Instant Offers” program, homeowners looking to sell their home can get all-cash offers for their home from selected investors. The seller will also receive a comparative market analysis from a local real estate agent, which would allow the homeowner to compare the investor offers to what their home might be worth on the open market.

From there, it’s up to the seller to decide what to do – either sell directly to an investor (like OfferPad, for example) or list their home on the open market.

And while Zillow says that “Instant Offers” will include real estate agents throughout the process, with the investors being required to use an agent, the homeowner is not required to use a real estate agent.

Zillow will offer to connect them with a local agent to represent them throughout the transaction, but they’re not required to use one.

And that’s a big problem for real estate agents, especially considering that real estate agents (and their advertising budgets) are one of Zillow’s biggest sources of revenue.

In fact, this is how Zillow CEO Spencer Rascoff described the company’s business model just two years ago: We sell ads, not houses.

Zillow makes money by selling ads to real estate agents, who pay for placement on the site and for the leads that the site sends to them.

“We sell ads, not houses,” Rascoff said on a call with investors back in 2015.

“We’re all about providing consumers with access to information and then connecting them with local professionals,” Rascoff continued. “And we do a great job of giving those local professional high-quality lead, they’ll covert those leads to at a high rate and then want more media impressions from us. So we’re not actually in the transaction, we’re in the media business.”

Except for that now, Zillow is potentially right in the middle of the transaction. And that has some real estate agents more than a little displeased.

And some of those displeased real estate agents, Realtors, and other real estate professionals are asking the National Association of Realtors to demand that Zillow shutter the “Instant Offers” program.

The unhappy agents are coming together online via a website called “,” which is collecting an online petition to send to NAR about the Zillow program.

At last count, the petition had nearly 12,000 signatures in just over five days.

“Zillow’s ‘Instant Offers’ encourages unknowledgeable home sellers to sell directly to profit-driven investors at below market value,” the website states.​

“This program mesmerizes home sellers into acting without consulting a Realtor, attorney or appraiser,” the website continues. “Instant Offers is a costly, misleading program for the public and a stab in the back to Realtors who fund Zillow​. It's a lose-lose program for everyone (except greedy investors). It ​reduces home seller equity while diminishing Realtor income.”

According to the site, “Instant Offers is a clear intrusion by Zillow into real estate brokerage” and a “move that needs to be stopped​ before it gains traction.”

To that end, the petition asks NAR to play some serious hardball with Zillow.

Specifically, the petition asks NAR to “demand that Zillow discontinue Instant Offers or risk losing the MLS IDX listing feeds and Realtor advertising.”

So, the petition basically asks NAR to tell Zillow to kill the program or risk losing listing data and Realtor advertising dollars.

As for NAR, the group recently took on the Zillow program in its own way with a post on its website that one might describe as passive-aggressive, to put it nicely.

The post, written in response to questions NAR received from state and local Realtor organizations, lays out what the groups “need to know” about Zillow’s program.

“As a publicly traded company that has yet to show a profit, Zillow will always be experimenting with ways to generate revenue as it must placate its shareholders” the NAR post states. “The company was not created to protect the interests of real estate professionals.”

The post reiterates NAR’s commitment to, which helps “ensure that at least one portal available to consumers would recognize and promote the true value that our members bring to the real estate transaction.”

Then NAR throws a bit of cold water on the crowd…or maybe there’s something to be read between the lines in this next passage:

NAR cannot sponsor or encourage a boycott of Zillow. It would be unlawful for NAR to discourage members from using any product or service provider. Those decisions are made independently by MLSs, brokers, and agents. Likewise, it would be unlawful for local or state Realtor associations to encourage members to withhold listings or business from any third party, such as Zillow, or adopt policies that would preclude members from doing so.

In the meantime, NAR says that it will continue to do what it has done in the face of a “long line of business models offered to consumers to sell their homes without the use of a Realtor,” which is continually reminding the public of the benefits of using a Realtor.

Whether the homeowners considering Zillow’s “Instant Offers” heed that advice or not is an entirely different question.

More on this later, in the meantime, have a great week everyone!

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