October 17, 2016
- UBS Securities LLC and other investment banks have urged the U.S. Supreme Court to review the Second Circuit’s split ruling that the Financial Institutions Reform, Recovery and Enforcement Act extended deadlines for the government to file mortgage-backed securities suits, saying it affects litigation involving $32 billion.
- A Pennsylvania federal judge on Tuesday declined to certify proposed classes in two civil actions accusing a defunct Morgan Stanley unit of breaching agreements by failing to modify homeowners’ mortgage payments or timely inform them of denial for relief, on an array of grounds.
- The U.S. Supreme Court on Tuesday declined to hear a petition by ratings agency Moody’s Corp. arguing that the First Circuit bent federal law when it revived a bank’s claims over $5.9 billion in unstable mortgage-backed securities.
- A federal appellate court on Tuesday ruled that the single-director structure atop the Consumer Financial Protection Bureau was unconstitutional, and gave the president the authority to fire the director at will in order to provide a check on the bureau’s expansive power.
- A Texas federal judge on Friday refused to dismiss additional claims against local real estate law firm Niemann & Heyer LLP in a proposed class action accusing the firm of engaging in an array of illegal activities while operating as a debt collector, finding the couple…
- New York City’s process of selling property tax liens gives landlords incentive to neglect buildings and harass tenants and should be revised to help preserve more affordable housing, according to a report from the city’s public advocate released Friday.
- The elderly community is expected to grow to 73 million by 2030. Many elderly people may suffer undue harms in their later age which may cause them to have difficulties obtaining housing. To ensure the elderly will have their housing needs met, the U.S. Government Accountability Office, completed an analysis of H.U.D.s elderly funding program.
- The Federal Housing Finance Agency released their new strategic plan for the 2017 fiscal year. This plan entails three specific strategies as well as their method of evaluation.
- The U.S. Department of Housing and Urban Development evaluated the Rental Assistance Demonstration (RAD). In this report the agency analyzes the benefits and successes of the program.
October 13, 2016
Law360 quoted me in CFPB Remains Strong Despite DC Circ. Single-Director Ruling (behind paywall). It reads, in part,
A blockbuster D.C. Circuit ruling Tuesday declaring the Consumer Financial Protection Bureau’s single-director leadership structure unconstitutional is unlikely to have a major effect on the bureau’s day-to-day operations and may make it easier for the agency to fend off critics who claim it lacks accountability, experts say.
The 110-page ruling from a split three-judge panel not only decried the leadership structure that Congress gave the CFPB in the 2010 Dodd-Frank Act, but made a change that allows the president to dismiss the bureau’s director at will, in a case that saw a $109 million judgment against PHH Corp. overturned. That move should provide the CFPB with more direct oversight, the D.C. Circuit said.
The change also does not touch the CFPB director’s power to issue rules and enforcement actions and oversee appeals of any administrative actions that the bureau brings. And because of that, the CFPB will not have to change much of what it does despite the harsh words in the opinion, said Frank Hirsch, the head of Alston & Bird’s financial services litigation team.
“I don’t think that the D.C. Circuit opinion was intended to create fundamental differences. I think the fact that the director can be dismissed at will now is the only substantive change,” he said.
Tuesday’s hotly anticipated ruling laid out in stark language many of the concerns that Republicans in Congress, the consumer financial services industry and other critics have long stated about the CFPB’s structure.
PHH was appealing the bureau’s $109 million disgorgement order over allegations the company referred consumers to mortgage insurers in exchange for reinsurance orders with its subsidiaries and reinsurance fees. The conduct, according to the CFPB, violated the Real Estate Settlement Procedures Act.
Included in PHH’s appeal was a constitutional challenge to the CFPB’s structure.
The opinion, written by U.S. Circuit Judge Brett Kavanaugh, laid out the potential dangers of giving one person the amount of authority that is vested in the CFPB director.
Judge Kavanaugh said that the bureau as constructed, with a single director that can only be fired for cause rather than the traditional multimember commission setup at independent regulatory agencies, vested too much power in one person to make decisions about new regulations, enforcement actions and appeals of those enforcement actions in administrative proceedings.
In its way, the CFPB director has authority rivaled only by the president, the decision said.
“Indeed, within his jurisdiction, the director of the CFPB can be considered even more powerful than the president. It is the director’s view of consumer protection law that prevails over all others. In essence, the director is the President of Consumer Finance,” Judge Kavanaugh wrote.
The judge also described at length why commissions were better for independent regulatory agencies than a single director, even though a single director can move more quickly on enforcement actions and rulemakings. Having a commission means that a director or chair will be constrained in their actions, potentially preventing abuses, the opinion said.
“Indeed, so as to avoid falling back into the kind of tyranny that they had declared independence from, the Framers often made trade-offs against efficiency in the interest of enhancing liberty,” Judge Kavanaugh wrote.
Those words were welcomed by the CFPB’s many critics.
“This is a good day for democracy, economic freedom, due process and the Constitution. The second-highest court in the land has vindicated what House Republicans have said all along, that the CFPB’s structure is unconstitutional,” Rep. Jeb Hensarling, the Texas Republican who chairs the House Financial Services Committee, said in a statement.
Hensarling and other Republicans in Congress have long pushed to put a commission atop the CFPB, and legislation Hensarling has introduced to replace Dodd-Frank includes that change.
Backers of the CFPB have long rejected the argument that the bureau is unaccountable, noting that it is subject to notice and comment for rulemaking, its rules are subject to judicial and other reviews, and the director makes regular appearances before Congress.
But instead of installing a commission or eliminating the CFPB altogether because of the constitutional issue, as had been requested by PHH and other, largely conservative activist groups who filed amici briefs, Judge Kavanaugh simply severed the portion of Dodd-Frank that said the bureau’s director could be fired only for cause.
The result is that now the CFPB director is subject to the same employment standard as a cabinet secretary, and can be fired at the president’s whim.
“The president is a check on and accountable for the actions of those executive agencies, and the president now will be a check on and accountable for the actions of the CFPB as well,” Judge Kavanaugh said, adding that all of the CFPB’s previous decisions taken by its current director, Richard Cordray, remained in place.
* * *
But even with that uncertainty hanging over the bureau, it is unlikely that the ruling will have much of an effect on the way the CFPB currently operates.
“The industry and consumer advocates can expect to see much of the same,” said David Reiss, a professor at Brooklyn Law School.
- The Harvard Joint Center for Housing Studies recently published a report studying housing trends in two of America’s most popular cities. The report determined that St. Louis and San Francisco recovered differently from the Great Depression.
- The National Low Income Housing Coalition completed a study surrounding Housing Choice Vouchers (HCVs). The coalition uncovered that individuals most in need of housing assistance experience longer than normal wait time in order to receive housing support.
October 12, 2016
The United States Court of Appeals for the District of Columbia issued a decision in PHH Corporation v. Consumer Financial Protection Bureau, No. 15-1177 (October 11, 2016), that found an important aspect of the structure of the CFPB to be unconstitutional: the insulation of the Director from Presidential supervision. While this decision will almost certainly be appealed, even if it is upheld, it will allow the the CFPB to continue functioning much as it has.
I was interviewed about the decision on NPR’s All Things Considered in a segment titled, Appeals Court Orders Restructuring Of Consumer Financial Protection Bureau (audio available). The transcript reads,
AUDIE CORNISH, HOST:
A federal appeals court has mandated big changes to the Consumer Financial Protection Bureau. The three-judge panel says the consumer watchdog agency is set up in a way that’s unconstitutional. In its ruling, the court says the agency will have to restructure. NPR’s Yuki Noguchi reports.
YUKI NOGUCHI, BYLINE: The suit was brought by a mortgage lender called PHH, which asked the court to invalidate a $109 million enforcement action against it and scrap the agency, too. The D.C. Court of Appeals sent the fine back to the bureau for review.
But it also ruled that the CFPB’s director has too much power to write and enforce rules without enough oversight from another branch of government. The remedy, the panel says, is that the CFPB should fall under the president’s control. And the president should be able to remove the director at will.
The CFPB’s opponents in the financial services industry declared victory. Bill Himpler is executive vice president for the American Financial Services Association.
BILL HIMPLER: Our issue is still with the authority given to a single director. That is, as the court pointed out, not subject to a lot of oversight.
NOGUCHI: Himpler instead supports a CFPB run by a bipartisan commission, similar to others like the Securities and Exchange Commission. David Reiss, a law professor at Brooklyn Law School, says the ruling is not an existential challenge to the CFPB or its past decisions.
DAVID REISS: The decision does not invalidate the CFPB’s actions. This is more about its structure going forward.
NOGUCHI: Reiss says an appeal to the Supreme Court is all but guaranteed. Indeed, the CFPB says it disagrees with the conclusion. In an emailed statement, a spokesperson says the ruling does not change its mission and that it is, quote, “considering options for seeking further review of the court’s decision.”
Dennis Kelleher is CEO of Better Markets, a group that advocates for stronger financial regulation. He says the bureau’s actions on banks have made the financial sector more determined to undercut the agency.
DENNIS KELLEHER: They do not want a consumer watchdog on the Wall Street beat. That’s what this fight is about.
NOGUCHI: The decision was not unanimous on all the issues. Judge Karen Henderson dissented in part, saying the panel overreached in calling the bureau’s structure unconstitutional. Yuki Noguchi, NPR News, Washington.
- Childhood Housing and Adult Earnings: A Between-Siblings Analysis of Housing Vouchers and Public Housing, Anderson, Haltiwanger, Kutzbach, Palloni, Pollakowski, & Weinberg
- Housing and Mortgage Dynamics: Evidence from Household Surveys, Jansen
- Mortgage Market, Housing Tenure Choice and Unemployment, Lisli
- The Time Value of Housing: Historical Evidence on Discount Rates, Bracke, Pinchbeck, & Wyatt