Is the CFPB on Life Support?

Will Director Cordray be removed from his position? When will any changes take place?

Dear Members,

Is the CFPB on life support? Here are some of the words and phrases that have been used in the various blogs and articles that I have read since the election: "Gutted", "Shut Down", "Many Regulations Eliminated", "Dismantled", "Declared War on the CFPB".

These questions and concerns arise out of both the recent PHH Corporation vs. CFPB decision and the national election results.

Whether Director Cordray will be removed by President Trump based on the recent ruling in the PHH Corporation vs. CFPB case is a common query (ruling that the removal of the director “for cause only” provision violates Article II of the Constitution). It turns out that while the case is under appeal (CFPB filed its appeal on Friday November 18, 2016), Cordray cannot be removed except for “cause.” So, it appears that Director Cordray’s job is secure for now.

You might also be “musing” about whether the Trump presidency will have any effect on the TRID/KBYO regulations promulgated by CFPB that caused the lending, settlement and title insurance industries to undertake massive changes in their processes. The authors of the various articles I have read generally agree that some change is inevitable, but the extent to which Dodd-Frank will be amended, and the time frame for such changes, is not clear. I have not seen any articles that deal specifically with the TRID regulations.

Members also have questioned whether they should proceed with Best Practices compliance and related issues. Valid questions, indeed. I think if it were me, I would slow down a bit on any significant investments (such as third party certification) and wait to see what the new leadership brings in 2017. I don’t expect any significant change will happen immediately. I hope the lenders will take a similar approach and not implement any new requirements on you before they get a better idea of whether any changes will occur.

Lastly, will any of this change the way RESPA is interpreted by CFPB? The CFPB is not going away anytime in the near future. It will take the new congress some time to enact any changes to the law and you should expect at least 18 months for the PHH Corporation case to get through the next stage of court rulings. Certainly, the PHH ruling gave us some comfort that there is likely to be a return to relying on the plain language of Section 8, but make no mistake: Director Cordray does not see the October 11 ruling as a final one. And do not forget about UDAAP as an enforcement mechanism at CFPB’s disposal.

So, be sure any ABA with which you are involved meets the requirements of RESPA, Section 8(c) and hits every element of the 10 point HUD Sham Test that it can. If you are involved in any desk or conference room rentals from referrers of business – make sure that these are all above-board and that you keep detailed records of the use and rentals paid. Don’t pay referral fees to brokers or lenders.

If you must live life on the edge, please get your kicks out of hang gliding, jumping out of airplanes, riding your Harley without a helmet or eating that leftover turkey and dressing that’s been sitting out on the counter for several hours… all are better than pushing the limits on a RESPA violation.

Lastly, I wanted to bring your focus to our information security efforts. If you haven’t already, consider signing up for our Cyber Liability Insurance Town Hall Meeting on Tuesday, December 6 at noon. We’ll be discussing the protections cyber liability insurance can give to your law firm, the types of coverages offered, what happens after a hack occurs, and other items. The Town Hall meeting is free and you can register here.

I hope you find value in these emails. I always like to hear from Fund Members, so shoot me an email when you get a chance. And thank you for your support of The Fund!

Best Regards,

Melissa Jay Murphy
Senior Vice President and
General Counsel