Consumer Financial Protection Bureau (CFPB) Director Richard Cordray announced his decision Thursday in the first-ever appeal of an administrative enforcement proceeding by the Bureau, according to a press release from the CFPB.
Cordray ruled that New Jersey-based mortgage lender PHH Corp. accepted kickbacks for illegally referring consumers to mortgage insurers. In addition to Cordray's ruling, a final order was issued that requires the lender to obey the law and to pay $109 million to the CFPB.
Administrative Law Judge Cameron Eliot stated in a Recommended Decision in November 2014 that PHH took kickbacks in the form of reinsurance premiums paid to a PHH subsidiary by mortgage insurers, a violation of the Real Estate Settlement Procedures Act (RESPA). The mortgage loans in question closed on or after July 21, 2008, according to CFPB. PHH is alleged to have begun accepting the kickback payments as early as 1995.
Whereas Eliot's decision stated that PHH's RESPA violations were connected to loans closing on or after July 21, 2008, Cordray went beyond that ruling by saying that PHH was in violation of RESPA for every kickback payment the company accepted after that date.
The Bureau first announced the administrative proceeding against PHH in January 2014 seeking a civil fine, a permanent injunction to prevent future violations, and victim restitution. The $109 million penalty handed down by Cordray on Thursday is the amount of reinsurance premiums PHH received on or after July 21, 2008, even if the loans closed prior to that date, according to the CFPB.
In addition to the fine, Cordray's final order prohibits PHH from violating the RESPA provision forbidding kickbacks and also prohibits the company from referring consumers to a real estate services provider if the provider has agreed to make any purchase from PHH as a result of that referral, the CFPB said.
Cordray denied the appeal filed by PHH and its affiliates and granted in part and denied in part an appeal filed by the Bureau's enforcement counsel, according to the CFPB.
In response to Cordray's announcement of the penalties, PHH issued the following statement: "We strongly disagree with the decision of the Director. We believe this decision is inconsistent with the facts and is not in accord with well-settled legal principles and interpretations. We continue to believe we complied with RESPA and other laws applicable to our mortgage reinsurance activities. The company did not provide reinsurance on loans originated after 2009. We intend to file an appeal to the United States Court of Appeals. While there can be no assurances as to the final outcome of any such appeal, we believe our appeal will be successful and, as a result, are not adjusting our previously issued earnings guidance."