Garris Horn LLP co-Managing Partner Richard Horn and Sterbcow Law Group Managing Attorney Marx Sterbcow provided a birds-eye view of the big issues facing the settlement service industry as we enter a new year in October Research’s “RESPA updates you need to know” webinar.
SoftPro’s Leslie Wyatt moderated the discussion as Sterbcow and Horn covered the government focus on closing costs, affiliated business arrangements, and upcoming challenges facing the Consumer Financial Protection Bureau (CFPB).
Horn kicked off the hour going over a U.S. Supreme Court opinion years in the making – whether the Consumer Financial Protection Bureau’s (CFPB) funding structure was constitutional.
“One of the things that you heard a lot about this case was that if the CFPB is found to be unconstitutional, it could affect other agencies,” Horn noted. “Luckily, that didn’t happen, because if the CFPB funding was found to be unconstitutional, it could have affected the other banking agencies that are also outside of appropriations, like the Fed [Federal Reserve] itself, FDIC [Federal Deposit Insurance Co.], and such. So luckily, for financial regulation in general, there wasn’t this nuclear bomb thrown on the financial regulatory system.”
But is this case settled? Horn said no, there is still an issue outstanding – some legal experts suggest the CFPB is still drawing funds improperly because the Fed has not been profitable the last few years, focusing on the Dodd-Frank Act’s use of the word “earnings” as part of the funding mechanism laid out for the bureau.
Horn highlighted a few cases reprising funding structure concerns, such as the case filed by Comerica this fall.
Horn then outlined the CFPB’s request for information regarding closing costs and what the bureau may do with the comments it received under the new administration, and the status of its digital mortgage comparison shopping advisory opinion released last year. He also touched on how the Supreme Court’s overturning of the Chevron doctrine may influence agency action and interpretations.
Sterbcow discussed the D.C. Office of the Attorney General’s (AG) settlements with different title insurance companies related to how their joint ventures (JVs) operated and the AG’s interpretation of insurance regulations, and what it means for affiliated business arrangements (AfBAs) and marketing service agreements.
“Some of the things you have to be careful on with these [JVs] is your operating agreements,” Sterbcow said. “The most important part is having an operating agreement that is RESPA compliant. If you have provisions in these things that even touch upon something that may be an incentive or create some quid pro quo, or create some capital thresholds that you have to meet if you want to be an investor, or you kick them out because they’re not sitting business, those things will put you at the top of the top of the [regulators’ list].”
The pair also answered questions from the audience related to the CFPB possibly switching its opinion on the itemization of closing costs and whether the National Association of Realtors’ settlement in the antitrust case against it will lead to an increase of AfBAs.
Access the full webinar here.