Mulvaney Terminates Proceeding that Sparked Debate on BCFP Constitutionality

Acting Director Mick Mulvaney dismissed the case against PHH Corp. following recommendations from its attorneys, BCFP attorneys and the bureau’s enforcement director.

6/7/2018 4:00 PM

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Mulvaney Terminates Proceeding that Sparked Debate on BCFP Constitutionality

The long-running case against mortgage lender PHH Corporation came to an end Thursday following a recommendation from attorneys on both sides seeking dismissal of the case that resulted in a landmark $109 million penalty under Richard Cordray, former Bureau of Consumer Financial Protection Director.

BCFP Acting Director Mick Mulvaney issued an Order Dismissing the Notice of Charges in the administrative proceeding originally filed by the bureau against PHH Corp. in 2014. Pursuant to the Order, Mulvaney directed the Notice of Charges against PHH Corp. to be dismissed and the matter terminated.

Mulvaney also said in the Order that “it is now the law of this case that PHH did not violate RESPA if it charged no more than the reasonable market value for the reinsurance it required the mortgage insurers to purchase, even if the reinsurance was a quid pro quo for referrals.”

Earlier this week, Kristen Donoghue, the bureau’s enforcement director, along with PHH attorneys filed a joint statement, pursuant to Mulvaney’s direction, recommending that he move forward with a dismissal.

In April, PHH Corp. ended its challenge against the BCFP following a ruling by the U.S. Court of Appeals for the D.C. Circuit that removed a $109 million penalty against the company. In the same decision, the court ruled that the bureau’s structure is constitutional, ACA International previously reported.

The mortgage servicer’s hefty fine was removed by the nation’s second highest court in January, when it also ruled the bureau is operating under a constitutional leadership structure. The company had until May 1 to appeal. Since PHH Corp. did not file a request asking the U.S. Supreme Court to hear the case, the D.C. Circuit Court’s ruling stands.

In May, Mulvaney issued a list of questions to both parties in the case, requesting recommendations on how to move forward.

The joint statement from the bureau and PHH Corp. said the questions from the acting director “are now moot.”

ACA International filed an amicus (friend of the court) brief March 10, 2017, in the PHH Corp. appellate case to share with the D.C. Circuit Court of Appeals its unique and direct perspective on why it believes the bureau’s powers must be reined in within constitutional bounds to ensure accountability and transparency. In its brief, ACA argued that “[t]he Bureau’s structure and function —wielding power over a broad swath of Americans’ lives, concentrating power in the hands of a single Director, insulated from democratic accountability—is ripe for the arbitrary and unrestrained exercise of power in disregard for due process, and for the constitutional rights of the objects upon whom that power is exercised.”

The dismissal of the bureau’s administrative proceeding against PHH Corp. is another step showing the BCFP’s commitment to evaluating its practices and procedures as well as existing regulations and enforcement actions under new leadership.

U.S. Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, commends Mulvaney for dismissing the case in a statement issued Thursday afternoon.

“Once again, Acting Director Mulvaney is doing what is needed to continue the agency’s transformation into one that follows the law as written. 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. Then, to make matters worse, former Director Cordray attempted to apply this new, rogue standard retroactively. 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.”

Related Content from ACA International:

D.C. Circuit Court of Appeals Rules in PHH v. CFPB

PHH Corp. Ends Challenge to Constitutionality of BCFP’s Leadership Structure


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