CFPB Director Cordray Issues First-Ever Agency Appellate Decision In RESPA Case

The Director of the Federal Consumer Financial Protection Bureau (CFPB), Richard Cordray, issued a decision yesterday in the first appeal of a Bureau administrative enforcement action.

Cordray's decision upholds in part, and reverses in part, a 2014 Administrative Law Judge (ALJ) decision which held that PHH Corp. (PHH) violated the Real Estate Settlement Procedures Act (RESPA) by accepting payments for the referral of a settlement service business pursuant to a captive reinsurance arrangement.

CFPB Enforcement counsel (Enforcement) had alleged that PHH participated in a "mortgage insurance kickback scheme" in violation of RESPA for over a decade. Enforcement claimed that PHH, a mortgage lender, referred borrowers to certain mortgage insurers, who in exchange for the referrals, agreed to purchase reinsurance from a PHH subsidiary at supposedly inflated rates, taking the reinsurance fees as kickbacks. Enforcement also alleged that PHH pressured the mortgage insurers