PHH Corp. is celebrating the Consumer Financial Protection Bureau’s dismissal of a closely watched case involving alleged violations of the Real Estate Settlement Procedures Act.
At issue are reinsurance payments collected by the Mount Laurel,
New Jersey-based company and four of its subsidiaries that allegedly violated RESPA.
In 2014, an administrative law judge
recommended that PHH disgorge more than $6 million as a result of its alleged activities even though the Department of Housing and Urban Development issued a letter in 1997 indicating that captive reinsurance arrangements are permissible as long as lenders provide services for the fees.
But then-CFPB director Richard Cordray saw the penalty as inadequate and issued an order requiring that PHH pay $109 million.
PHH responded by
appealing the constitutionality of the CFPB’s structure.
Last year, under the Donald Trump administration, the Department of Justice
issued a friend-of-the-court brief challenging the CFPB’s structure.
This past January,
the U.S. Court of Appeals for the District of Columbia Circuit issued a decision declaring the CFPB is constitutional. But the court said PHH could still challenge the $109 million fine.
On Thursday, CFPB Acting Director Mick Mulvaney filed a dismissal in the case.
Dorsey & Whitney LLP Partner Joseph Lynyak III noted that the dismissal brings an end to the episode.
“The en banc decision of the DC Court of Appeals validated the structure of the CFPB but did not address the merits of PHH legal position (which PHH had won in the earlier three-judge panel’s decision) that it had complied with decades old interpretations of Section 8(c) of RESPA,” Lynyak said in a written statement. “In light of these divergent results, dismissing the PHH enforcement action actually reflects the outcome of the PHH litigation.”
Lynyak added that the
reduction or emanation of the $109 million penalty will help facilitate Ocwen Financial Corp.’s planned acquisition of PHH.
For its part, PHH is ecstatic about the dismissal.
“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 news release issued late Thursday. “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.”
