The Consumer Financial Protection Bureau (CFPB), an agency of the United States government responsible for safeguarding consumers in the financial sector, has recently turned its focus towards scrutinizing potential violations of the Real Estate Settlement Procedures Act (RESPA). The bureau has issued a series of consent orders against several mortgage and real estate companies for practices linked to event tickets and Marketing Services Agreements (MSAs), which have raised concerns of unfair practices and potential conflicts of interest. Mortgage and real estate companies should take this opportunity to review and update their compliance protocols to avoid falling foul of the law. As the regulatory landscape continues to evolve, adherence to RESPA’s provisions will be critical in fostering a fair and transparent real estate market that serves the best interests of consumers. Today, we have Mitch Kider of Weiner, Brodsky Kider PC on what the mortgage industry should be aware of.
CFPB Issues RESPA Consent Orders over Event Tickets, MSAs, And Online Subscriptions with Mitch Kider of Weiner Brodsky Kider PC
Listeners. We have a special guest back with us on the podcast, Mitch Kider, and joining me is Alice Alvey. Mitch published on my birthday, August 24th a commentary on his website that really caught my attention about the recent consent orders that were issued in his article did not mention Freedom Mortgage, but that’s who it was, and then also a real estate firm, and we’ve invited Mitch to come and talk about what’s going on, is there a change, is there something that we as mortgage lenders need to be aware of? and so with that, Mitch Keiter, I’d like to welcome you to the microphone. Thank you so much.
Hey, thank you. It’s great to be here with you
And Alice is joining us as well.
Hello everyone! yes! I’m looking forward to hearing the update and getting some questions answered.
Yeah, I know, and listeners, Mitch and I both apologize for our voices. I had COVID over the weekend, so I’ve got a voice and hacking up all kinds of stuff. Mitch has got a cold, so we’re going to see how this goes between the two of us. We’ll see how the recording goes, but anyway, it’s all about the information. It’s not how we sound. All right. So, Mitch, if you could give us an overview, let’s start with an overview of this latest consent order, what led up to it, and give us some insights into it. That would be much appreciated.
This consent order came as somewhat of a surprise to the industry because there has not been a public RESPA consent order for years now, literally for years, and, after the PHH case was done, which was the case that I litigated, it seemed like CFPB really pulled back on RESPA enforcement. This is the case that came up in which Freedom Mortgage Corp. and a realty company known as Realty Connect. Both entered into consent orders with the CFPB. They denied any liability or any wrongdoing in the consent orders, but the CFPB alleged that they violated RESPA on the lending side, the violations they alleged was on the retail lending side, which is where things like this generally occur under Section 8 of RESPA. Section 8 of RESPA is obviously not new, it was enacted back in 1974. The 49-year-old statute in a 49 year old provision. What is new here is the CFPB is back in the enforcement business of RESPA.
That is so interesting. Yeah, it’s 49 years ago, which is interesting Mitch, I was one year into the industry when that was written, and I started in September of 1973 so, I’m 50 years into this industry and I remember that and I remember all the hoopla we were going through of what this meant to us, I was working for a bank up in Seattle back in that day so, I remember that well.
You’re dating yourself. It was an act, I have not been a lawyer for more than 42 years. But when rest was enacted, I was a senior in high school.
That does date me. Thanks for making me feel even that much older, Mitch. Anyway. And Alice You’re probably alive, but you’re still, you were just a kid at that day, but anyway,
I’m gonna go when I was two, I’m going with, I was two.
This gives us an overview of this, but a lot of MSAs, is there any insights that you have, and I don’t want to get into conjecture, but just any insights you might have as to what has caused their focusing back on RESPA, and then also the action they took, this is Cordray-ish in the way they went about this, because instead of publishing and doing a hearings or putting out what Alice reports on each week, opening up for dialogue, it seems like they landed on this. Like you said, as a bit of surprise.
Yeah. It’s a surprise to the industry because we haven’t seen anything like this. It is the somewhat Cordray-ish, but Chopra is a Cordray acolytes, and he works when Cordray headed up the CFPB. So, I’m not all that surprised about the way they went about this.I don’t know what triggered there. It appears, reading the documents. It appears that they were doing a review of the retail origination operations of Freedom for RESPA purposes, and they do these things, part of the origination exams that they perform on lenders ask them for all of their relationships, contractual and otherwise, with referral sources, with real estate agents, with real estate brokers, with home builders, with others along those lines. I don’t know if this came out of an examination, but it may well have in all honesty. So, the CFPB has been more active recently in reviewing lenders for RESPA compliance. You just haven’t seen any public enforcement actions as a result of those reviews, my guess is you’re going to see a lot more. Why would something like this come down? Why would the CFPB decide to do this now? There are a lot of different reasons for it. First of all, I am sure that in terms of complaints that are received by the CFPB, rest of the complaints are right up here near the top of the list. And it’s interesting because it’s usually competitors that complain about each other, right? But that’s what typically happens there. So, I’m sure they’ve been getting a lot of complaints in general about lenders, about realtors, about home builders, and others. And I guess they decided it’s time. Remember, we’re coming into an election year now and I’ve been telling everybody, you better dot your I’s and cross your T’s ecause headline news is the business that the CFPB is going to be in for the next year.
Yeah, exactly right. Alice, first of all, thank you so much for joining in on this interview. And I know you’re busy with what you’re doing there at Union Home. So, the fact that you could take some time to join us, you’re as interested as what this means to the industry as anybody. So, I’ll let you lead off with any questions that you have and some of the specifics of where you would like to get some insights.
Yeah, absolutely. Hi, Mitch. And I’m sorry, both of you aren’t 100% today you’re sounding good, Elise. That’s good. All right. I’ll try and fill in. Mitch, was there anything unique about this? Sometimes it’s not necessarily that it’s a straight up violation in the process. It’s just maybe they didn’t document things well and the paperwork wasn’t there or there really was something that you can gather from the information that’s available that might help other lenders make sure, oh, I better not do that. I got to watch out for that.
Sure. There are three different practices. That the FPB teams do focus on. The first practice is their allegation that Freedom was purchasing these subscriptions and some of these subscription services provided things like property reports, health comparable, and foreclosure data. And the allegation is that Freedom was purchasing these things, but it was giving that to real estate agents, brokers and others that were referring business on to them. Okay, I will tell you the CFPB has probably seen complaints in that arena. Not just the libertarians to Freedom. I don’t know if they got any complaints about Freedom or not, but others as well and I think they intentionally took in that one point right there, they intentionally took a practice that you see happening in the industry. And they said, I’m going to send a message to the industry. Okay. No one should have given, no one shall receive anything of value for the referral of settlement service business and the subscription services, they’re valuable and they cost money and, the allegation is that freedom paid the money and gave them to its federal partners that were sending business to it and so I think that’s a practice that CFPB wanted to put out there for the people. They remember a thing of value is not just cash. It could be other things as well, and you have to watch that. The other thing that they listed there, which I found really interesting, the second thing they went after, is they said Freedom hosted and subsidized events for real estate agents and brokers.
Yeah, including alcohol and different things that they talked about, they kicked in that. That’s real interesting.
Yeah, that was really interesting. But the truth of the matter is, when large realty organizations sometimes have their annual meetings, things of that sort, they will ask lenders, title companies, and others. To in fact sponsor, and there’s a fine line there because RESPA allows you to do things for promotional activities. Okay. If you want to go give a speech or something else, you can go give a speech and sponsor something, but RESPA doesn’t allow you to, just take people out to dinner and expensive restaurant. CFPB seems to be a little hung up on this issue of alcohol, quite frankly. But my guess is that there were dinners with wine at the table and things of that sort, and that’s viewed as a thing of value and in general, because of a lack of enforcement over the years, and because of a lack of guidance in this particular arena, it may well be that lenders have started going back to a practice of sometimes wining and dining, and the other thing that you need to recall when you put all of this in perspective, although this occurred prior to 2021. So what I’m about to say doesn’t necessarily apply there, but let’s look at where we already have in 2023. Your relationships with other settlement service providers and with potential referral sources are really important. There’s not a lot of out there and everyone’s trying to get the business that they can and lock relationships as they can. And I think that’s part of the reason why the CFPB puts us out right now, because they see that the economics of the industry today. Especially on the retail side dictates doing things with your partners with others to try to capture that business. And I think what the CFPB is saying is, hey, we’re watching this right now and so despite the fact that there’s not a lot of business out there, despite the fact that the rates are very high, that inventory is low, okay, don’t go out there and do crazy things with realtors and others, and that’s a message that they’re sending.
When you say crazy things, one thing is a crazy thing, but it seems like now you’re almost saying with the things you just said, reasonable things. Again, because of the draft,
You’re absolutely correct and I only say it in the CFPB’s words, don’t go out there and do crazy things because from the CFPB’s perspective, they’ve got a statute that’s been in existence for 49 years that says that you can’t give anyone’s anything of value anything of value in exchange for the referral of settlement service business. When HUD was enforcing RESPA, there were many enforcement actions. In the beginning of the Cordray administration, there were many enforcement actions. Lenders stopped taking realtors to the Super Bowl. They stopped taking him on boat trips to the Bahamas. They stopped those things. Whether or not some started that up again, I think the CFPB is probably wondering and saying, don’t do it, guys. I’m telling you, here’s a warning for you. I’m not at all suggesting that anything that Freedom did over here was crazy. Based on what they laid out over here, it doesn’t look like they went over the top but they didn’t spend a lot of time on the facts There is a third point I want to get to with you guys though, because the third thing they focused on Was MSA’s Marketing Services Agreement and I find this part really interesting, and in some ways, to me, it sends a better sign than not. Because during the Cordray administration what Cordray said literally was maybe an MSA can be legal, but I can’t see. How that could happen. He literally said that which is just crazy. This is your regulator. Yeah, maybe it’s legal, but I’ve never seen, how that could happen, and I’ve never seen one that’s legal and they posted a memorandum about that. The Kraninger administration, during the Trump administration, took that memo down and they said, No, MSAs could be legal, but follow the rules. Okay, follow the rules. Your marketing has to be marketing to the general public. Okay? The party that’s doing the marketing has to get paid the reasonable market value, fair market value for the services they’re providing, and not being paid for referrals. The CFPB in this particular case came back, and while they really go after the MSAs, and they really go after them. They don’t say that MSAs are illegal. They’re not taking the Cordray approach to this. What they’re saying, in fact, is that you can pay a real estate company the reasonable market value for advertisements. They’re putting out there that go to the general public, but it has to be that, it has to be reasonable market value. It has to be marketing that goes to the general public and what did CFPB alleged over here was number one. They said, there was no reasonable basis for the amounts of money that they were getting. They said there were no reasonable relationship between the money paid and the services that were provided. So they’re saying, okay, they’re laying out a test over here, pay reasonable market value for those particular services. They also say that they allege that what Freedom did in these particular instances was they provided most of the marketing itself, that they were otherwise paying the third party to market for, that’s their allegation. So a lot of people read the provisions on the MSAs and say here we go we’re back at it. MSAs are illegal. Okay. I actually read it as I’m actually laying out a roadmap as to how MSAs still can be done, which is the same roadmap that Kraninger laid out for everyone. And so, I view that as a positive. Quite frankly.
Yeah, that is good. Yeah.
If this were Cordray, he would have come right out and said, no, this is illegal and go figure out why.
Yeah. another thing that stood up in my mind is a $1.75 million lawsuit to someone like Freedom. That’s a significant amount of money, as it relates to the balance sheet that Freedom has, this is barely a slap on the wrist. It’s more of a statement. It’s, that’s what this came across to me is more of a statement. I don’t know how big the real estate company is, but a $200,000 adjustment again not a lot. It’s more of a, we’re going to put this out, this consent order, which is going to put some penalties to it, but this is more of, Hey, a heads up, everybody, the sheriff’s back. and we’re looking at this.
Absolutely right. I could not agree with you more. That’s absolutely right. Listen, I think Freedom is a great company. I think Stan Middleman did a great job building up that company. think 1. 7 million, it’s 1. 7 million. Freedom is okay. They’re walking away. Okay. I think it’s interesting that the case that they chose that they were able to get a consent order on and then publicize that deals with facts that occurred at a company’s, allegations that occurred at a company’s retail operation when that company no longer is in the retail business. Okay. That’s a great point. Freedom hasn’t been in the retail business since 2021. They sold their retail operations to Round Point and then Round Point got out of it in 2022. So, they’re not in it. So, is this harmful to Freedom? It’s a five-year consent order if they ever get back in it. There are things they’re going to have to do, but no, I think what the CFPB did, and they often do this. And it’s what concerns me because. They’re not going through notice and comments on new things, and they’re not going through the kind of guidance that the industry, would otherwise want. What they like to do now is publish a consent order and then write about it in supervisory highlights and basically say, okay, this is the law. Now, we’ve talked about this for years and years. I believe that a regulator has its job to do, but it’s not to make laws. It’s to enforce laws. Not to make those things up and there were a couple of really interesting things that I saw that no one else seems to have picked up on. I haven’t read anything about this, but it’s interesting when they talked about the marketing services, not a reasonable relationship to what was being paid, they talked about valuation as what the net market value of the services being provided. I got to tell you something, there’s nothing in RESPA that uses the word net. Net is an accounting standard, what exactly do they mean? Are they going to judge? Valuations of services on net valuations and net market value in the services. What does that mean? and I would suggest that they really shouldn’t unless they’re going to go through a notice and comment rulemaking because it changes the standard.
It’s regulatory standard creep. You’re introducing a new language that if allowed to exist, can come back, and change the whole perspective of what becomes a matter that you can be penalized on down the road.
And it’s really bothersome, and it’s intentional, the other thing that they did is, rest of the says. That you cannot pay, and you cannot receive a thing of value for the referral as long as it was pursuant to an agreement or understanding. Okay. CFPB says in their consent order is nothing about an agreement or understanding. What they say now is RESPA applies to the exchange of value. If you’re giving something to someone, something of value merely to strengthen the mortgage referral relationships. So, what does that mean? What RESPA says is that consumer got referred, don’t pay a kickback for it. Now what they’re saying is you can’t do anything to strengthen the relationships you have with other people.
Interesting. again, another little bit of a creep on where that goes. Alice, I got to get back to you because I know you came to aim so well prepared for this with any other questions, but this is just so fascinating the implications, what you’re just laying out here, Mitch, what this means from implication standpoint, which goes back to more of it being a Cordray kind of approach to things rather than a Kraninger. I’ve never been a fan of a CFPB or regulatory. Yes. I understand the need for regulation, but Kraninger seemed to take a more common-sense approach to it. Something that, Hey, okay. It existed. Here we go. But anyway, Alice, back to you.
Oh, no, I agree with you, Mitch, because the first two things that you mentioned are standard RESPA statements, standard RESPA. You can go. Yeah. Okay. Didn’t anybody tell you that 25, 30 years ago not to do that? and they feel like things that they found because they happen to be in there and digging through the MSA thing. It’s like going through somebody’s closet. Oh, I found this too. I’m going to put that in there just so people know we’re watching for it. But this net market value piece is really interesting to me because now I’m wondering if there was a third-party service in the middle there, and because some companies do use those types of third party services, is that playing into that aspect at all?
Maybe, you can’t tell what they’re referring to. It may be that what they’re referring to is they want to net out any value that Freedom might have brought to it. They allege in the context of MSA is that Freedom provided much of the marketing itself. So maybe they want to value what Freedom did and deduct that from what was paid as for marketing services, and the point is, don’t just take this in a consent order, put it in a supervisory highlight and then say to the industry, you’re on notice. What exactly are they in notice of? You and I can get them,
You can’t reverse engineer this, right? You run into a new set of pitfalls if you try and say, all right I’m going to have to try and back into don’t do this, but it doesn’t say what I think. Can do, or if I were to do the reverse of this, okay, be careful, calculate a net market value. That doesn’t all of a sudden put you into a compliance with something that doesn’t fit within the regulation in the first place.
Exactly right. I didn’t need to throw this stuff in there, but they’re clearly just putting it in there and you can see its just regulatory expansion. I know that director Schulte likes to say that they don’t do regulation by enforcement. And I think he sincerely believes that he’s not doing regulation by enforcement, but just those 2 little bits. That I just pointed out to you and sticking that in there what else can we call that? That’s not in the statute. That’s not in the regulations. And all of a sudden, you’re saying someone’s liable for not meeting those standards. And that’s a problem.
Boy, it’s so fascinating. It’s hard to define anything other than regulatory expansion, Alice? Anything else?
So, this concept in the second one that you brought up, Mitch, is fascinating to me because as you said, RESPA is pursuant to an agreement, which people have talked about, there’s been articles, famous older one was the second state steak dinner, right? If I had the first steak dinner, then I wasn’t in violation. But if there was a second steak dinner as a thank you for giving me business, okay, now was that A verbal unwritten agreement. There were just these crazy old interpretations and so that’s developing the relationship. But in the past, you had to tie it to business being offered. So are you saying from what it appears here? There was no business directly tied to it. It was just about building the relationship.
They say no, not necessarily because they do say that referrals resulted from these. All right. The language they use the standard that they use, they don’t say that these referrals resulted because we can imply an agreement here or there was an understanding there. That’s the way the law always was interpreted. Instead, they do a different standard. It’s very nuanced. It is that thing of value is given to strengthen the relationship with realtors. Okay. You know what? There’s nothing wrong with strengthening the relationship with realtors. And in fact, we’re all, in this dome of the housing industry, right? You want to strengthen your relationships. Yeah, and it works to the consumer’s benefit when you have a good relationship with the consumer. It just bothers me because you’ve got the statutory language, which is repeated in the regulation itself. and instead of saying, there’s where I alleged the violation. I’m saying I’m alleging you violated something over here because you were doing these things so that you would have a stronger relationship with your referral partners. That’s just not right. That’s not the standard.
No, because it’ll extend to then absolutely anything that even a loan officer might do to try and develop a relationship with a realtor if all these things can now be a thing of value.
Exactly right. The loan officer with the permission. Okay, with written consent to the consumer shares information with the realtor. Okay, are they going to come back at some point in time and say, No, you have to put them in separate silos and you can’t do that because that information is very valuable to that realtor? That’d be ridiculous. I just wish. I don’t know. I know the net language in evaluation has got to have been intentional, and I think the language that, paying a thing of value to strengthen your relationship is intentional as well. I just wish they would have thought that through more because none of that was necessary for what they did. They didn’t need to do it. And I really think that they’re just sending a message to the industry slowly. Hey, we’re going to, this is how we’re going to interpret it. And then, it’s going to happen. I’m going to go back to court one day and I’m going to get the Court of Appeals to reinterpret rest of the right way again. That’s what they ask for when they keep acting this way. That’s exactly what happened in the PHH lawsuit. They came up with these new interpretations. They didn’t go through notice and comment rulemaking. And ultimately, the Court of Appeals had to roll them back 40 years and say that’s not the way it is.
Something that the Mortgage Bankers Association should be all over this and is there anything that we can do as an industry or this is just so tied up in their chamber, we’re never going to get them to follow a process.
No. This is important. This is always important when things like this happen Okay. And so, it’s important should be, and I’m sure it is important for the MBA should be important for every lender out there for every realtor out there, for anyone else that anyone that’s subject to RESPA we should always be pointing this out when it occurs. We should always be insisting upon going through notice and comment rulemaking and not expanding on what the statute or other regulation says, we really should, but those two points that I just noted for you, you really haven’t read them anywhere. I haven’t seen anyone that’s really picked up on it. So we’ll see. I am speaking at an MBA regulatory conference.
That comes this weekend. Yeah. Kathy Thomas and our team is flying out there and speaking at it as well. Yeah. I think it’d be really good. One of the things we love about you, Mitch, you pick up on the things that so many people miss and it’s those nuances. It’s the details. Alice. Any other questions you have? I want to move on to one other thing, might have a broader issue.
I’m good with this one. Thanks Dave. Thanks so much, Mitch. Very helpful.
Yeah, very helpful, Mitch, and on this specific topic, and then I want to move into the broader topic of CFPB and what’s at the US Supreme court. Can I get some updated thoughts from you on that. But what are the takeaways that any lender mortgage lender that’s listening to it, loan officer, executive, should walk away from this and saying, obviously we are having some regulatory expansion, that’s one thing. There’s a certain amount of uncertainty about that creates nervousness, which has a tendency to pull in and sometimes too much or some whistle by the graveyard and get caught. What’s the takeaways we should have from this on this case?
You can’t really anticipate the regulatory expansion until you see it. I said that aside for a moment. You don’t know what they’re going to say next or, how or if they’re going to expand upon it. But you do know what RESPA said, okay? and you know that there’s an established body of law that dictates things. It says you cannot give someone something of value in exchange for a referral, and it says pursuant to an agreement or understanding, but it also said it can be an agreement or understanding can be implied. so you’ve got to be really careful. Okay. If you’re a loan officer, I’m sorry. You cannot give tickets to those sporting events to the realtors that in fact are referring business to you, you can’t do that, it’s as plain as simple as that, right? You have to treat things on an arm’s length basis with your referral sources, and that’s a good message. So, my message to hello to MLOs out there is really careful and make sure your compliance group knows what you’re doing. Okay. Because you’re going to get yourself in trouble. You’re going to get in trouble if you just willy nilly, enter it into arrangements along these particular lines, but there’s still a lot you can do, and I think I learned from this consent order that even this CFPB, which is more like the Cordray CFPB than the Kraminger CFPB, even they say yeah, I think an MSA could be fine as long as you do it correctly.
Yeah, I think the analogy I’m going to use is as a pilot, you’re flying in some very cloudy weather, and you need to talk to the tower on a regular basis and the tower that we check in is your law firm, Wiener, Brodsky, Kider. I kid you not, Mitch, you are the control tower. We all. Go dial in and say, what is the perspective we’re in lost in clouds? Where do we go? And you vector us into the right place. So how people can get ahold of you in just a minute, just a second, but I really do recommend it. Listeners get ahold of Mitch. Get his perspective. Do not be flying in this. What’s now a cloudy regulatory environment. It’s not crystal clear as it was. I don’t know if it’s ever crystal clear, but at least it was clearer before. Now it’s getting cloudy again, if not just some ugliness out there. So, get ahold of Mitch and absolutely. Run by him. It’s so worth the little bit of money you’re going to spend to save millions of dollars by talking to Mitch and getting his perspective and help him craft with your compliance, people, a policy that you can feel comfortable with on the business risk. So that’s my two cents that I unselfish promote for my good friend, Mitch Kider. Let’s get to another issue, which is the broader issue about the CFPB US Supreme Court hearing that’s coming up in the end of October.
I think it’s going to be a really interesting case and a really interesting argument. I think there are at least three justices on the Supreme Court who ideologically believe that this funding mechanism and funding mechanisms like this, are unconstitutional. I think you can look at Kavanaugh, I think you look at Gorsuch, and I think you can look at Thomas. I could be wrong. I’m just following them and things they have done and said prior to being on Supreme Court, their ideological beliefs lead me to believe that they’ve been waiting for a case along these particular lines, they don’t believe these are Federalists, and these are Federalists that don’t believe in independent agencies and that along with that goes the funding structure, the funding structures supposed to come through Congress. I don’t know that the rest of the court will all go along with that. I don’t know that they will throw out the funding structure of the CFPB, and I think the biggest fear and the biggest issue that the court is going to deal with for those that are inclined to do so is what are you going to do about all the things that the CFPB has done since 2011? and there are a lot of people, there are a lot of people in a lot of businesses and industry and trade associations as well. That’s a Wow. We can’t throw out everything that’s happened since 2011 because that will create chaos that’ll put us way back there and that will create a lot of chaos and while I understand that argument, and to a large extent, I probably even agree with that argument. The question is, how far do you take it? If in fact the funding is found to be unconstitutional. Okay. Does that not mean that what happened since 2011 was done unlawfully if they use those funds? That’s exactly what it means. That’s exactly what it means and so I’m very much torn about that. I say you have to draw a line so the next time something like this happens, people don’t say we do it, it’s better to ask forgiveness and ask permission. I don’t buy that. I’m not a person that says it’s forgiveness.
It’s the principle behind that thing either. When we start saying, okay, yeah, we messed up, but and then when we start doing that, it sets it a precedence, like we were talking about in this particular case that you just not sure you want to go down that path. I’d rather deal with the tougher, complicated issues of saying no, this is if, in fact, it was determined the funding mechanism is wrong, then we need to go back to 2011. Now, is there something we can do this reasonable that’s intelligent to you?
It’s almost impossible to do that because it would touch everything they did. It would touch the lawsuits that they brought. It would touch the regulations that they actually did publish. It would touch the guidance that they gave. It would touch all of their and as a result of that, you may well find a court that says, you know what we can live with this funding mechanism. You may well find a court.
Interesting. You mentioned when we were talking earlier, before we got on the mics about MBA filing a brief on this, talk about that.
So the MBA’s position on behalf of its lenders is in fact, look, do what you’re going to do with the funding mechanism, rule as you’re going to rule, but don’t throw out everything that’s happened before. Yeah. Concerns that will leave its lenders. Without guidance, and people aren’t going to know what to do when it’s going to be very hard to put those pieces back together. So the MBA actually on behalf of its members made a decision to come off, on that side of that particular issue.
We understand the reasons why, because as you said, if they were to totally have to, undo everything that was done since 2011, that’s a mess that I’m not sure exactly how you put that piece back together.
I don’t think they’re going to do it. And by the way, the funding issue itself is a closer issue as well, because while, those that believe that we shouldn’t have these independent agencies. And so that’s why the structure was found unconstitutional. The director now serves at the pleasure of the president, as they would an executive agency and that’s one reason why the court came down along those particular lines. But that’s, throwing out the funding mechanism is a little bit different because the CFPB’s funding comes as a request to the Federal Reserve Board. They can ask for up to 12% of the Federal Reserve Board’s budget and part of the Federal Reserve Board’s budget. It’s tied back to Treasury as well and Treasury is funded by Congress. So, I wouldn’t be surprised to see those nuanced arguments being made saying no, this is sufficient. Next is back to it. I don’t think there is actually, I think the funding is unconstitutional, but there’s an argument there. So, we’ll see.
We shall see. We shall see.
Isn’t there a ripple effect to other agencies that are funded in a similar way? Although there isn’t another agency that’s exactly like CFPB with both the funding structure and the independent leadership that reports the pleasure of the president, so to speak, there are other entities then could there be a ripple effect to other agencies with this ruling?
There could be. We haven’t seen a big ripple effect as a result of the ruling that this structure was unconstitutional. I thought we would see more come out of that, but we haven’t seen that yet. But yeah, of course, it can be very much of a big ripple effect, not only a ripple effect, but, also, going to impact how agencies are created it’s going to put us back to an originalist version interpretation of the Constitution that says there are only three branches and the agencies are all executive branches and you have to treat them that way and there’s executive branches to get their funding from Congress. This argument goes back to the beginning of time in the United States, argument and debate has been going back to the Federalist Papers. It’s been going back to the creation of the Federal Reserve Board, and this is the first time. That’s why I pointed out the 3 justices that I did. This is the 1st time that their ideology has found themselves in a position where they can actually rule on this issue.
It’s going to be so fascinating and seeing what we what comes of this and we’re going to be checking in with you much more regularly than we have recently. We’ve all been so focused on the drama that’s going on in the industry, the most significant drop in volume ever in historically by 50 years in the industry and certainly we’re going through unprecedented times. There’s so many factors that we’re keeping our eye on, but we certainly need to know. Keep our eye on some of these and we need to be back with you a lot more regularly. I want to behalf of the podcast, our listeners, and I want to say thank you, Mitch, for the warrior that you have been for this industry. I think you have a compass that is so about keeping people safe while still doing business reasonably and respectfully and in a manner of you just have such a good compass and I’m so grateful for you and your voice in our industry. I just hope you’d never retire. I’m 73 and I’m keeping on going. You’re a little younger than I am. So I hope you just keep on going, Mitch.
There’s no retirement here. Lawyers can work forever, and I will.
All right. I’m going to go find that Federalist paper, Mitch. I’m curious which one of the guys wrote it, right? Is it a Thomas Jefferson? We’re going to have to go check that one out.
Yeah, that’s all right. All right, as well.
Thank you.
Thank you so much, Mitch.
You bet.
Bye bye.
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About Mitch Kider
Mitchel H. Kider is the Chairman and Managing Partner of Weiner Brodsky Kider PC, a national law firm specializing in the representation of financial institutions, residential homebuilders, and real estate settlement service providers. Mitch is a fierce advocate for the mortgage banking industry and he is considered one of the foremost experts in legal and regulatory matters pertaining to this industry. He litigates on behalf of the industry in federal and state courts throughout the country. Mitch defends clients in investigations and enforcement actions before the Consumer Financial Protection Bureau, Department of Housing and Urban Development, Department of Justice, Department of Veterans Affairs, Federal Trade Commission, Fannie Mae, Freddie Mac, Ginnie Mae, and various state and local regulatory authorities and Attorneys General offices. Mitch is a Fellow of the American College of Consumer Financial Services Lawyers and a Faculty Fellow of the Mortgage Bankers Association. In addition, Mitch is the author of six books pertaining to residential mortgage finance.