HOUSINGNEWS REPORT
LEGAL BRIEFS
Fannie and Freddie Shareholders Want Billions
Consumer Watchdog Rebuffed
A Washington, D.C. Court of Appeals handed PHH Corporation a partial victory over the federal government on Oct. 11, ruling that the Consumer Financial Protection Bureau — governed by a single director appointed by the president — was unconstitutional, and vacating a $109 million fine against PHH. A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit agreed with an argument put forward by PHH, reversing an enforcement ruling by CFPB director Richard Cordray, claiming that PHH violated anti-kickback provisions in Section 8(a) of the Real Estate Settlement Procedures Act (RESPA). PHH had asked the judges to declare the entire agency unconstitutional and halt its operation. Instead, the court chose a narrower remedy: eliminate the CFPB director’s independence by making him a subordinate to the president. “Other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least in terms of unilateral power,” wrote vv for the 2-1 majority. “That is not an overstatement.” As a result of the decision, the court took away power from its director and tossed out a $109 million penalty against PHH. The CFPB now will operate as an executive agency, reporting to the President of the United States, who now has the power to supervise and direct the Director of the CFPB, and may remove the Director at will at any time. The case, PHH Corp. v. Consumer Financial Protection Bureau , is the first time a company has fought back against the bureau — and won.
Three shareholders have sued the Federal Housing Finance Agency and the Department of the Treasury, arguing that the federal government’s “net worth sweep” of $195 million profits from Fannie Mae and Freddie Mac in 2012 were illegally siphoned to the U.S. Treasury rather than shareholders.
Lead plaintiff J. Patrick Collins, a Freddie Mac shareholder, filed the suit on Oct. 20 in federal court in Houston, Texas.
“Plaintiffs bring this action to put a stop to the federal government’s naked, unauthorized, and ongoing expropriation of private property rights,” the complaint states. “Despite the companies’ relative financial health, the Department of the Treasury implemented a deliberate strategy to seize the companies and operate them for the exclusive benefit of the federal government.” Collins seeks declaratory judgment that the net worth sweep violates the Administrative Procedure Act’s prohibition against federal agencies taking action that exceeds their statutory authority. The case is J. Patrick Collins v. Federal Housing Finance Agency. Collins is represented by Chad Flores with Beck Redden in Houston.
SOURCE: J. Patrick Collins v. Federal Housing Finance Agency
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SOURCE: PHH Corp. v. Consumer Financial Protection Bureau
ATTOM Data Solutions • P24
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