In the latest development in PHH Corp. v. Consumer Financial Protection Bureau (CFPB), PHH and the Bureau have both filed letters addressed to the D.C. Circuit arguing over the impact of a recent Supreme Court decision on the case. At issue is whether the Supreme Court’s decision in Encino Motorcars, LLC v. Navarro, No. 15-415 (U.S. June 20, 2016) eliminates the usual deference courts would give to the CFPB’s interpretation of the Real Estate Settlement Procedures Act (RESPA), under which the Bureau penalized PHH to the tune of $109 million.
As we previously reported, PHH is appealing the penalty imposed on it by the Bureau under Director Richard Cordray’s June 4, 2015 decision for alleged violations of RESPA related to mortgage reinsurance. Among the issues on appeal in PHH is Cordray’s decision not to follow the Housing and Urban Development’s (HUD) previous interpretation of RESPA as it relates to mortgage reinsurance arrangements. HUD was the agency responsible for enforcing RESPA before the CFPB assumed responsibility for enforcement in 2011. In a 1997 letter, HUD opined that captive reinsurance arrangements are permissible under RESPA so long as the payments are for services actually performed, and are bona fide compensation that does not exceed the value of the services. In making this determination, HUD read Section 8(c)(2) of RESPA to provide an exemption to Section 8(a), which generally prohibits the exchange of any fee or thing of value pursuant to an agreement to refer settlement service business.
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