NAIHP v. FRB: David v. Goliath

by Jonathan Foxx

On March 7, 2011, the National Association of Independent Housing Professionals (NAIHP) filed suit against the Federal Reserve System (FRB). This lawsuit has been filed in United States District Court for DC. The complete filing, including exhibits, comes to 106 pages.

The NAIHP seeks a temporary restraining order and a motion for a preliminary injunction that would prevent the FRB from enforcing the loan originator compensation rule, scheduled for implementation on April 1, 2011.

If successful, the filing will prevent the FRB from enforcing the rule while the court considers the case. There are just a few days remaining for a rapid response.

Lawsuit Arguments - A Salient Selection

FRB Lacks Statutory Authority

FRB Improperly Uses TILA § 129 For Authority

Disadvantages Mortgage Brokers

SRP Advantages Banks and Creditors

FRB Erroneously Denies That Disclosures Are Remedial

Arbitrary and Capricious

The FRB's action is arbitrary and capricious because the FRB insists on implementation of the Rule on April 1, 2011, even though (1) it has admitted the Rule will have "significant economic impact on small entities," but no impact study has been done pursuant to RFA requirements; and (2) there is a requirement for an "impending congressionally mandated broad regulatory review of the conflicting requirements of RESPA and TILA in connection with the implementation of the Dodd-Frank Act," but no such review has been consummated; and (3) the FRB's insistence upon going forward with the Rule is being taken prematurely, especially in view of its recent decision to defer to the CFPB other provisions of TILA currently under consideration.

David versus Goliath

The NAIHP seeks declaratory judgment that the Rule is contrary to law, arbitrary and capricious, unenforceable, and otherwise unlawful and that the Court grant permanent injunctive relief enjoining FRB from enforcing the Rule. This is a well crafted suit, with statutory support coming from many laws. Citing the RFA and the SBA's wish to properly implement it brings interagency scrutiny to the forefront and compels interpretation.

Many other organizations have been involved in this dispute through negotiations with, and letters to, the FRB, as well as through meetings with politicians and their staff - but, up to the date of its filing, the NAIHP is the only organization to have actually taken up the challenge to resolve this matter in a judicial proceeding.

Our Library contains a copy of the lawsuit.

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Written by:

Jonathan Foxx

Lenders Compliance Group on:

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