CFPB Seeks Rehearing of D.C. Circuit Panel Ruling in PHH: What Now?

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (Bureau) Friday filed a petition in the closely-watched PHH case, seeking to undo a ruling by a panel of judges for the D.C. Circuit Court that was highly critical of the Bureau’s interpretation of the Real Estate Settlement Procedures Act (RESPA).  The Bureau also seeks to challenge a ruling in the case that the Bureau’s unusual structure is unconstitutional.

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Five Key Takeaways From the D.C. Circuit’s PHH Decision


The legal challenge by PHH Corp. (PHH) to a June 4, 2015, decision by the director of the Consumer Financial Protection Bureau (Bureau) in connection with the Bureau’s enforcement proceeding against PHH has captivated the real estate settlement services industry. The attention is justified. Director Cordray’s ruling against PHH, which was the first appeal from a Bureau administrative trial, was shocking. The director had increased PHH’s disgorgement penalty 17-fold (from a $6.4 million penalty initially awarded to a massive $109 million), and in doing so trampled established rules and precedents for interpreting Section 8 of the Real Estate Settlement Procedures Act (RESPA). The director also declared that the Bureau is not subject to any statute of limitations if it decides to prosecute claims in its own administrative forum.

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IRS Issues New Requirements for IVES Participants

On June 23rd, the IRS dropped a bombshell on the lending industry.  As of Midnight on July 1, 2016, many lenders will no longer be able to  verify directly borrower income except through snail mail. If the IRS sticks to its plan, domestic lending is about to slow to a snail’s pace.  Based on a June 24 call with the IRS, the agency may not have fully appreciated the unintended consequences of its mandate.

In a June 23 press release, the IRS announced changes to the procedures and requirements for all participants in the IRS’ Income Verification Express Service (IVES).  These participants use the program to confirm the income of a borrower during the processing of a loan application (commonly referred to as a 4506-T request). IVES participants are now required to conduct employee and client re-verifications and to certify their compliance with these new dictates by July 1, 2016.  The IRS will not deliver borrower income transcripts after Midnight on July 1, 2016 unless the certification is received.

In a June 24 call with the industry, the IRS confirmed this new policy applies to all lenders. The direct users of the IVES program must “re-verify,” the identities of all individuals submitting and retrieving IRS transcripts on its behalf. This reverification process requires the collection of the following:

  1. Name
  2. Date of birth
  3. Address
  4. Social security number
  5. Email address
  6. Phone number

Once re-verification is complete the lender must send a certification to the IRS that it has met the re-verification obligations to be able to continue to participate in the program.

There are other requirements regarding access management, transcript delivery, document retention, reporting of suspicious activity and security controls.

Resellers  must take even more steps. Resellers of borrower income transcripts must obtain from each client the following information:

  1. Name of the company President, CEO or other Officer acting on behalf of the client (this most likely will be the client’s relationship manager).
  2. Last four digits of the client’s social security number of the company President, CEO or other Officer acting on behalf of the client.
  3. The employee identification number of the client
  4. The company name
  5. The businesses primary physical address.

The resellers must also maintain a list of all authorized users submitting and receiving IRS transcripts on behalf of the client. Resellers also must verify the legitimacy of all current and future clients through known trusted public sources.  The IRS gives as an example, locating a phone number and address for the client on a public telephone listing and then contacting the number or address to verify that the party at the number is legitimately their client.

While the goal of security for personal tax information is admirable, the fire drill seems unnecessary. IVES participants are encouraged to contact their legislators to advise them of the IRS’s actions and to seek delay so that the IRS’s objectives can be met in a thoughtful way.



Increasing Legal Scrutiny of Website Accessibility in the Real Estate Industry


From fair housing laws to licensing requirements, the real estate industry is accustomed to navigating various legal constraints and requirements. However, as a result of current ambiguity in the law, class action lawsuits based upon website accessibility pose an emerging threat to real estate brokers, lenders, homebuilders, and ultimately, any company that has a web presence. Today almost all companies have a website, which is often used as the primary method to provide information and to market to current and future clients. But what about clients and prospects that have disabilities? Do they have equal access to your company website?

If your company has not addressed this issue, it not only may be missing potential clients, but it also may be a target for plaintiffs’ attorneys who are eager to capitalize on the current unsettled state of the law by bringing a class action lawsuit.

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PHH v. CFPB: "What is a Kickback?"


On April 12, 2016, a panel of the U.S. Court of Appeals for the D.C. Circuit heard oral argument in PHH Corporation’s (PHH) milestone legal battle with the Consumer Financial Protection Bureau (Bureau). During the argument, the Bureau had a lot to worry about: whether the agency’s unusual structure, headed by a single director who has great power and is removable only for cause, is constitutional; whether the Bureau can prosecute claims in its own administrative forum with no statute of limitations, especially when courts have held that doing so after years have passed would be “an abomination;” whether the Bureau gave PHH and other industry participants fair notice of the conduct that the Bureau now condemns based on a new interpretation of Section 8 of the Real Estate Settlement Procedures Act (RESPA); and whether the court must construe a statutory ambiguity in PHH’s favor because RESPA carries criminal, as well as civil, penalties.

But one basic question posed by the court during argument —“What is a kickback?”—highlights what may be the most anomalous and problematic Bureau RESPA interpretation of all.

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