This special Mortgage e-Alert from the Thordsen Law Offices:
THE CONSUMER FINANCIAL PROTECTION BUREAU WAS CREATED ON JULY 21, 2011 – SOOOOO! IT GIVES IT THE ABILITY TO CHASE ALL MORTGAGEE BROKERS AND LENDERS FOR RESPA VIOLATIONS THAT OCCURRED FROM JULY 21, 2008!!!!!! READ WHAT FOLLOWS CAREFULLY AND CALL IF YOU HAVE QUESTIONS
IN ITS’ FIRST APPEAL FROM THE DECISION OF AN ADMINISTRATIVE LAW JUDGE, CONSUMER FINANCIAL PROTECTION BUREAU DIRECTOR RICHARD CORDRAY IMPOSED A $109 MILLION AWARD AGAINST PHH MORTGAGE, over one hundred times more than the $6.4 million awarded by the Administrative Law Judge.
Read this case carefully if you are a lender and thing about what you have been doing since July 2008 that might be considered a RESPA kickback commonly referred to as a Section 8 violation.
When the CFPB initiates administrative enforcement proceedings (as opposed to court proceedings) the AGENCY IS FREE TO APPLY THE STATUTE OF LIMITATIONS BACKWARD FROM JULY 21, 2011 — the date the CFPB was created as opposed to the date the agency takes the enforcement action.
In the case of PHH, INSTEAD OF THE LIABILITY STEMMING BACK 3 YEARS FROM THE INITIATION OF A COMPLAINT AGAINST PHH, CORDRAY RULED THAT THE STATUTE OF LIMITATIONS WOULD STRETCH ALL THE WAY BACK TO JULY, 2008.
Cordray also ruled that actions prior to July 21, 2008 would be subject to remedial civil action as long as payments to PHH were received after July 21, 2008. This means PHH could be held responsible for its actions before July, 2008 well beyond the three-year statute of limitations allowed by the Real Estate Settlement Procedures Act.
Cordray also decided that a violation could be found even when fair market value was paid for services actually provided. Regardless of whether fair market value was paid, RESPA IS VIOLATED IF THE ARRANGEMENT BETWEEN THE PARTIES DEPENDED IN PART ON THE AGREEMENT OR UNDERSTANDING THAT REFERRALS WOULD BE PROVIDED.
Any arrangement that EVEN IN PART involves an agreement to provide referrals violates RESPA, even if the relationship is otherwise completely legitimate.
However if referrals are involved in the provision of services, no violation occurs if the referral itself was not in part a reason for the compensation and/or relationship. But imagine the difficulty in proving this.
In issuing his decision and final order, Director Cordray denied the appeal filed by respondents PHH Corp., PHH Mortgage Corp., PHH Home Loans LLC, Atrium Insurance Corp., and Atrium Reinsurance Corp. He also granted in part, and denied in part, an appeal filed by the Bureau’s enforcement counsel.
Any of the respondents may file a petition for review of the Director’s final order in a United States Court of Appeals within 30 days of the service of the final order.
I would be utterly shocked if PHH did not appeal. In the interim read the decision.
A copy of the June 4, 2014 decision is available here: http://files.consumerfinance.gov/f/201506_cfpb_decision-by-director-cordray-redacted-226.pdf
A copy of the final order is available here: http://files.consumerfinance.gov/f/201506_cfpb_final_order_227.pdf
On June 18, 2015 PHH filed a motion to stay the order of Commissioner Cordray. And on June 24, 2015 the Commissioner denied the stay but gave 30 days before enforcement to see if the Court of Appeal would grant the stay where PHH has already filed a petition for review and will ask the Court of Appeal in Washington, D.C. to grant the stay. More to follow.
THE IMPORTANT POINT HERE IS PHH IS REPRESENTED BY ONE OF THE BEST IF NOT THE BEST LAW FIRM IN WASHINGTON AND MITCH KIDER FROM THAT FIRM IS ONE HECK OF A FIGHTER. BUT DO YOU WANT TO SPEND HUNDREDS OF THOUSANDS IN LEGAL FEES TO FIGHT OR IS IT LESS EXPENSIVE TO HAVE A PRE=AUDIT AND CHECK FOR COMPLIANCE IN ORDER TO MITIGATE PAST ALLEGED MISDEEDS?
YOU HAVE ASKED WHAT CFPB WILL AUDIT
WELL HERE ARE SOME OF THE ITEMS
The CFPB has begun reviewing companies for compliance with the January 2014 mortgage rules and found several areas of non-compliance and the current Regulation X, GFE and HUD-1 disclosure requirements. Companies failed to establish and maintain written policies and procedures pursuant to Regulation Z’s Loan Originator Rule and to comply with disclosure requirements concerning the RESPA list of homeownership counseling organizations. Does employee (I/C) Mortgage Loan Originator Agreement comply with 1026.36?
In addition, examiners cited failures to provide a GFE within three business days of receipt of a complete application, providing the consumer a timely revised GFE within three business days of receiving information to establish a changed circumstance, and including all fees on a GFE. Companies failed to ensure that the HUD-1 accurately reflected the actual settlement charges paid by the borrower.
Deceptive practices with disclosure of the terms of a payment plan where servicers are making representations about how deferments for a daily simple interest mortgage loan worked, incorrectly suggesting that deferred interest would be repayable at the end of the loan term when, in fact, it would be collected from the consumer immediately after the deferment ended.
THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. THE AUTHOR MAKES NO CLAIMS ABOUT ITS ACCURACY, COMPLETENESS, OR UP-TO-DATE CHARACTER. NO AUTHOR OR OWNER OF THIS DOCUMENT AND ITS WEBSITE IS ACTING AS YOUR ATTORNEY. LEGAL RULES AND TAX RULES CHANGE FREQUENTLY, THEREFORE, WE CANNOT GUARANTEE THAT ANY INFORMATION CONTAINED HEREIN OR ON A WEBSITE IS ACCURATE OR UP TO DATE. FOR LEGAL ADVICE PLEASE CONSULT AN ATTORNEY.
THORDSEN LAW OFFICES
Herman Thordsen, Esq. *
Jozef G. Magyar, Esq. *
Sean Thordsen, Esq. **
* Licensed in California State and Federal Courts
** Licensed in California and Nevada State and Federal Courts