NAMB v. FRB: David 2.0 v. Goliath

by Jonathan Foxx

Goliath has yet another David to contend with! On March 7, 2011, the National Association of Independent Housing Professionals (NAIHP) filed a lawsuit against the FRB, and two days later, on March 9, 2011, the National Association of Mortgage Brokers (NAMB) also brought suit against the FRB. Litigating against the FRB to get a court order staying the implementation of the TILA loan originator compensation requirements is a daunting undertaking. Better than one David fighting Goliath, it surely is significant that now two Davids are taking on this gargantuan agency!

Yesterday, I provided a brief synopsis of NAIHP's lawsuit.

Today, let's take a look at NAMB's arguments and strategy.

This article covers the following:

Plan of Attack

Loan Officers Leaving

Bone of Contention

Consumer Paid Model - An Economic Quagmire

Arbitrary and Capricious 2.0 - FRB Acts Without Rational Basis

Arbitrary and Capricious 2.0 - FRB Ignores the Regulatory Flexibility Act

Arbitrary and Capricious 2.0 - FRB Exceeds TILA Authority

David 2.0 versus Goliath

The NAMB seeks a temporary and preliminary injunction enjoining and restraining the FRB from enforcing the Challenged Section, until such time as the Court adjudicates the legality of the Rule; expeditious proceedings in this action in light of the Rule's April 1, 2011 effective date; judgment in NAMB's favor and against the FRB; declaration that the Challenged Section is unlawful and void; and, a permanent injunction prohibiting the FRB from implementing the Challenged Section.

The combined strength of the NAMB and NAIHP lawsuits should provide considerable support to efforts to rectify the unresolved issues created by the FRB's handling of the TILA loan originator compensation issues. Both organizations, as well as many other industry associations, have been working toward seeking a delay of the April 1, 2011 effective date or far more reliable and comprehensive guidance prior to that date.

It appears that NAMB and NAIHP have done everything they could to avoid litigation through numerous attempts at negotiating and lobbying. To no avail, leaving them no recourse but costly litigation. Perhaps the FRB will recognize that its actions have the potential to cause unintended consequences. But sometimes there are no unintended consequences, only quite likely consequences that we refuse or neglect to prevent!

Our Library contains a copy of the lawsuit and press release.

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Written by:

Jonathan Foxx

Lenders Compliance Group on:

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