The Consumer Finance Protection Bureau (CFPB), along with some cohorts, published a flurry of four final rules last week that will give banking and mortgage attorneys plenty to read and absorb – and consider anew whether the CFPB can legitimately issue these rules. Adding a little fuel to the Noel Canning fire, a House of Representatives subcommittee held a hearing on the future of the National Labor Relations Board (NLRB). And Eight States sought to join the fray over the CFPB Director’s recess appointment. On a totally unrelated issue, the Department of Health and Human Services (HHS) published a long-awaited and rapidly reviewed medical loss ratio proposed rule.
CFPB Regulations: The CFPB added plenty of new regulations to the mortgage process by publishing four final rules:
- Loan Originator Compensation Requirements Under the Truth in Lending Act (Regulation Z);
- Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act [RESPA] (Regulation X) (and official interpretation of final rule);
- Mortgage Servicing Rules Under the Truth in Lending Act [TILA] (Regulation Z); and
- Appraisals for Higher-Priced Mortgage Loans (jointly with the Department of the Treasury, Federal Reserve System, National Credit Union Administration, and the Federal Housing Finance Agency.
Mortgage loan processing may be a big business, but these rules may have a significant impact on small entities.
♦One looming problem jumps out of the RESPA and TILA mortgage servicing proposals: they were posted on the CFPB website on August 10, 2012, but not published in the Federal Register until September 17, 2012, with comments due on October 9, 2012. CFPB points out that it undertook numerous outreach efforts, but that may not be enough. The CFPB does not explain its legal authority to attempt non-Federal Register constructive proposal notice (and a short-for-the-complexity Federal Register notice). An agency website is not the Federal Register; well-intentioned procedural failure could lead to litigation. This short period of time may not be enough.
Noel Canning: The House Education and the Workforce Committee, Subcommittee on Health, Employment, Labor and Pensions, held a hearing on the impact of the Noel Canning decision that President Obama violated the recess appointment clause in appointing NLRB members: The Future of the NLRB: What Noel Canning vs. NLRB Means for Workers, Employers, and Unions. This does not appear to signal movement on the part of Congress to fix the Noel Canning problem.
CFPB might meet Noel Canning Litigation: Barbara Mishkin reports that eight States seek to join a case that might answer the question of whether the CFPB has a legitimate chairman, and is operated legitimately after Noel Canning. Some CFPB authority is indigenous to the Dood-Frank Act, some is transferred and could have (and perhaps with a little legal fiction was) exercised by prior owners. Conning litigation through these murky waters will be a challenge because numerous statutory and doctrinal issues must be resolved, in the right order, and in the right way, to get to a conclusion on the constitutional recess appointments issue.
HHS Medical Loss Ratio: HHS released its Medicare Program; Medical Loss Ratio Requirements for the Medicare Advantage and the Medicare Prescription Drug Benefit Programs under the Patient Protection and Affordable Care Act on February 15; the Federal Register will publish the proposed rule on February 22. The Office of Management and Budget (OMB)’s review of this economically significant ($800 million) proposed rule was startlingly short or under the radar: the rule was submitted and review completed on February 14, “consistent with change.” Either OMB is very efficient or the process is defeating its vaunted transparency. In any event, it is only a proposed rule and comments are due in 60 days.