The Immediate Impact of the PHH Ruling

The mortgage industry got astronomical news earlier this week when it was announced that the US Court of Appeals ruled in favor PHH in its appeal against the CFPB. The ruling vacated the $109.4 million fine levied against PHH and also declared the structure of the CFPB “unconstitutional”.

The inside baseball from the court case indicates that it was an indisputable and decisive win for PHH and their high-powered legal team, led by Ted Olson, he of Bush-Gore recount fame.

While it’s nearly certain that the CFPB will appeal, and that a final resolution of any sort as to their fate is at least a year away, what does this mean for our industry in the short term? Here’s some thoughts & predictions.

- In my opinion, the decision will clearly embolden more mortgage lenders to challenge CFPB fines and enforcement actions. This will (hopefully) cause the Bureau to put more guidance in writing, giving lenders more clear and consistent interpretations of the rules, which MBA has been arguing for on the industry’s behalf for some time.

- It could also cause CFPB to write new rules. With the recent Wells Fargo news, most oddsmakers giving Hillary Clinton a 80-90% chance to win the White House, and a potentially more CFPB sympathetic Supreme Court in the future - I wouldn’t expect the Bureau to sit on their hands, even if it is going to be tougher for them to affect behaviors by enforcement actions as opposed to clear rule-making.

- Marketing services agreements between real estate brokerages and settlement services providers like mortgage lenders will pick back up. Those that were in the process of pulling out of those agreements could reverse course, and with rates expected to rise, refinances expected to tail off, and volume likely to decrease this winter - we're likely to see others make MSA's a part of their marketing strategy once again.

- This could lead to Richard Cordray more publicly pursuing a run for Governor of the State of Ohio, which has been widely speculated for some time in the Buckeye State.​

- Could this news embolden PHH to shake things up with their company? They pulled out of correspondent/wholesale five months ago, but were the 7th largest lender in all of America in 2015. Could they look to use their new status as the industry’s “peoples champion” to unveil a new product or origination channel? Word is, they’ve known they were going to win this case for some time.