It’s over: CFPB abandons PHH case

Ends three-year battle

The three-year battle is now over.

The Consumer Financial Protection Bureau moved Thursday to dismiss its case against PHH, a remarkable turnaround that crystallizes the differences between former CFPB Director Richard Cordray and current Acting Director Mick Mulvaney.

The case all started back in 2015 when Cordray tacked a $103 million increase onto a $6 million fine initially levied against PHH for allegedly illegally referring consumers to mortgage insurers in exchange for kickbacks.

PHH fought the fine, arguing that Cordray did not have the authority to increase the fine. The case eventually made its way to the federal Court of Appeals, which ruled in 2016 that the CFPB’s leadership structure was unconstitutional and vacated the additional $103 million fine.

The CFPB, under Cordray, fought the ruling and asked the court to rehear the case en banc, meaning that it wanted the entire court to hear the case, which the court agreed to do back in February 2017.

But Cordray left the bureau before the case could be heard by the full Court of Appeals, leaving the post to Mulvaney, who brought a significantly different tact to the position than his predecessor.

Last year, the government began to indicate that it might be switching sides in the battle between the CFPB and PHH, signaling that the Trump administration had a different view of the CFPB than the Obama administration had.

And indeed that’s what happened, as the Department of Justice filed an amicus brief in March 2017, 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.

Earlier this year, the full Court of Appeals handed down its ruling, declaring the CFPB to be constitutionally structured and that the director is removable only for cause.

But, PHH won a significant portion of the case, with the Court of Appeals also vacating the $100+ million fine against it for the supposed violations of the Real Estate Settlement Procedures Act.

At the time, the Court of Appeals remanded the case back to the CFPB to determine the next steps, and it appears that the CFPB has chosen to dismiss the case.

In a statement released Thursday afternoon, PHH said that Mulvaney issued an order to dismiss the bureau’s administrative proceedings against the company.

“We are extremely gratified to have this matter fully resolved as a result of Acting Director Mulvaney’s decision to dismiss this case,” PHH said in a statement. “Today’s Order is consistent with our long-held view that we complied with RESPA and other laws applicable to our former mortgage reinsurance activities in all respects.”

One of the bureau’s most frequent bashers, House Financial Services Committee Chairman Jeb Hensarling, R-Texas, also released a statement welcoming Mulvaney’s move.

“Once again, Acting Director Mulvaney is doing what is needed to continue the agency’s transformation into one that follows the law as written,” Hensarling said in a statement.

“In the PHH case the facts show that former Director Cordray unilaterally reversed accepted law with regards to Section 8(c) of RESPA, and did so not with formal rulemaking, but with an ad hoc enforcement action instead,” Hensarling added. 

“Then, to make matters worse, former Director Cordray attempted to apply this new, rogue standard retroactively,” Hensarling concluded. “The D.C. Circuit Court rightfully ruled against him in both instances. This dismissal is the final nail in the coffin of what was a sad chapter in the Bureau’s short history.”

Earlier this year, PHH chose not to elevate its challenge to the CFPB’s structure to the Supreme Court, and with Mulvaney’s dismissal, the entire RESPA affair is now over.

The CFPB claimed the dismissal was simply a matter of housekeeping.

“This wasn’t so much a dismissal as a matter of housekeeping,” said John Czwartack, CFPB communications officer and spokesman in a statement to HousingWire. “Earlier this year the DC circuit court largely dismissed the legal arguments the bureau had been making in this case.”

“The court left open some issues that the bureau determined to resolve through dismissal rather than continued litigation,” Czwartacki said. “This dismissal just ends this embarrassing chapter that was premised on then-Director Cordray’s questionable legal theories, which never should have been pursued, and that the DC Circuit rightly rejected in January.”

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