After receiving written briefs and listen to oral arguments in the lawsuit against the Loan Originator Compensation rule, Judge Beryl Howell denied the plaintiffs motion seeking a temporary restraining order and preliminary injunction against the implementation of the rule.
In denying the motion in a 46 page ruling, Judge Howell noted that granting the preliminary injunction requires the plaintiff to establish a high likelihood of success in their lawsuit, stating that they failed to show that the Rule was issued without authority or is arbitrary or capricious. It is important to note that this ruling is not a determination of the merits of the case as a whole, but only determines if the initial information provided in the suit warrants an injunction while it is litigated through the court.
However, in ruling on the challenge to the Federal Reserve Board's (Board) authority to promulgate such a rule, the Judge ruled that the plaintiffs arguments are likely to be unavailing. The ruling states, "the Court holds that TILA grants the Board broad authority to regulate unfair and deceptive practices in connection with consumer mortgage loans, and this authority includes the power to issue regulations pertaining to loan originator compensation practices that it perceives to be unfair."
Judge Howell acknowledge that the Rule "may have a substantial adverse effect on the mortgage broker industry, but the record before the Court does not indicate that the Rule is illogical or unsupported." The ruling determined that this potential harm does not rise to the standard of irreparable harm that would substantiate the need for the injunctive release. The established standard, Judge Howell wrote, must extend beyond a merely economic harm and cause extreme hardship or threaten the very existence of the business.
Ruling that the Board sufficiently supported their conclusion that the public policy interests supported by the Rule outweighed the threat of harm to the plaintiffs, the court determined that there was insufficient evidence to support the temporary injunction.
NAMB has vowed to file an immediate appeal, requesting an expedited hearing in appellate court. Although the case will continued to be litigated, the lack of an injunction means the Board will be able to proceed with the implementation of the rule as scheduled on April 1st.