Shares of PHH Corp. (PHH) were up over 2% Wednesday morning after the company said late Tuesday that a federal appeals court panel ruled that the structure of the Consumer Finance Protection Bureau (CFPB) is unconstitutional, and threw out an enforcement action against PHH Corp (PHH) to disgorge $109 million in reinsurance premiums.
The U.S. Court of Appeals ruled that the CFPB violated the Constitution’s separation of powers because the agency’s director isn’t sufficiently answerable to the U.S. President. The court sent the enforcement action against PHH back to the CFPB for review.
The ruling allowed the CFPB to continue operating as an agency, but ordered a restructuring of how it operates in the executive branch. The CFPB had ordered PHH Corp to return $109 million for allegedly violating the Real Estate Settlement Procedures Act by accepting kickbacks from mortgage insurers. The bureau said PHH engaged in an unlawful kickback scheme that boosted costs for home buyers who needed mortgage insurance.
The CFPB also said PHH referred borrowers to insurers with whom it had financial relationships, which weren’t necessarily the insurers with the lowest rates.
PHH issued a statement late Tuesday saying, “regarding the Court’s decision to remand the case to the CFPB to determine whether any mortgage insurers paid more than reasonable market value to the PHH-affiliated reinsurer, we will continue to present the facts and evidence to demonstrate that we complied with RESPA and other laws applicable to our former mortgage reinsurance activities in all respects.”
The company also said it does not expect the appeals court decision to impact its legal and regulatory reserves or estimates of possible losses in excess of such reserves.
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