WE’RE HEARING there is nothing new about Republican lawmakers claiming everything that President Obama does is unconstitutional or un-American.
But when a federal judge rules that the president violated the Constitution in making recess appointments to a labor relations board, it does make you sit up and take notice.
Obama used a recess appointment last January to install Richard Cordray as the first director of the Consumer Financial Protection Bureau. And in the past few weeks, the CFPB has issued key mortgage reforms mandated by the Dodd-Frank Act.
Friday’s ruling does not specifically deal with Cordray’s recess appointment. That is being challenged in a separate case.
But it is bound to have ramifications and cast a pall over the new bureau and its regulatory and supervisory powers.
Just listen to Rep. Jeb Hensarling, R- Texas, the new chairman of the House Financial Services Committee.
"This ruling makes clear that the president’s alleged recess appointment of the CFPB director is unlawful or unconstitutional or both. It also clearly calls into question the legal validity of any and all actions undertaken by the CFPB since this appointment was made, adding even greater uncertainty to our still struggling economy,” Hensarling said.
This ruling couldn’t have happened at a worse time for Cordray and the CFPB. On Thursday, the president renominated Cordray to be the CFPB director and urged the Senate to finally allow a vote on his confirmation.
Once again GOP senators railed against the “unprecedented powers” that one CFPB director has to regulate financial services and the legality of Cordray’s appointment.
The “alleged recess appointment by the president is legally questionable,” said Sen. Mike Crapo, R-Idaho.
The ranking Republican on the Senate Banking Committee also made it clear that Republicans will continue to block Cordray’s confirmation until the Obama administration agrees to restructure CFPB so it is governed by a five-member board and Congress has control over the bureau’s budget.
Of course, the Obama administration will appeal the decision affecting the labor relations board recess appointments. And the U.S. Supreme Court will likely decide how to properly make a recess appointment in the 21st century.
The U.S. Constitution gives the president the power to make recess appointments when Congress is not in session for at least three days. But these days, Congress never officially adjourns. Pro forma sessions are staged where two members recite the Pledge of Allegiance and call it a day. This tactic is specifically designed to prevent recess appointments.
If the high court rules against the president, it would be akin to blocking out a sentence in the Constitution and diminishing the powers of the Executive Branch. At the same time, it would gut the CFPB and the lending and servicing reforms the bureau was meant to enforce.
A SERIOUS QUESTION: We are endlessly entertained by the posters at mortgagegrapevine.com. Talking politics and popular culture, dodging spammers, flaming each other, often it seems our posters can’t have time to actually work. But here’s where the Vine goes from entertainment vehicle to essential work aid. Trying to find someone who will buy an odd-sized loan you’ve made or settling a compliance question, this stuff is at the heart of the Grapevine. Here, Viners tackle “a serious question” about the Dodd-Frank Act.
MOST CONTROVERSIAL BLOG: Part two of Garth Graham’s consideration of gross versus net income for DTI ratios continued to generate positive and negative reaction. Here’s a sample:
NOSpin:JustTheFacts: Your concept is appropriate for financial planning, not consumer lending. You will walk into the hornet's nest of regulatory ECOA and disparate impact.
Amy Tierce: We are trying to educate consumers on how a lender looks at a borrower, calculating ratios, credit analysis, etc., but we are not educating the consumers on how to be savvy consumers, what questions to ask, how to compare lenders, how to look at real estate and what the true costs of homeownership are. I agree that the qualification conversation has to talk about net versus gross income and get a full expense picture in order to help the homebuyer fully understand all of the monthly costs.
Joe Smith: What utter industry BS. The cause of the mortgage problems was securitization, exotic loans and lending someone else's money. Yes the government push for homeownership contributed. But was far from the main cause. Reckless lending was the cause and as a loan servicer I watched it firsthand. As to net versus gross there is no question that net is a better picture, that is why servicers use it to determine if a loan qualifies for a modification by being able to generate a surplus budget.
Deborah Williams: After 15 years of mortgage lending to primarily first time homeowners (the underserved) I must agree that reckless lending and greed was the cause of the housing collapse. Gross vs. Net, most of the borrowers I worked with knew what they could afford regardless of what the lender said. I did thousands of loans, none were stated-income, no-money-down loans.
MOST READ: Brian’s content on mortgage lender fears of regulation was the most-read story of the week on the website. In addition to the QM, there was a servicing reg, loan officer comp rule and more Dodd-Frank implementations hitting all at once. But the mortgage regulation doomsday of Jan. 21 has come and passed and the relief is palpable. Check out the regulatory panic of 2013.
SHOUT OUT: We will get out of our sluggish recovery by the private sector creating new jobs. You’ll get a shout out here if you create more than ten net new jobs at once. This week’s shout out goes to Scottsdale, Ariz.-based Loan Resolution Corp., which will add more than 100 positions during the first quarter of 2013. The 100 full-time positions include sales, management, and quality assurance. The company hopes to fill the available positions by the end of February. When the new positions are filled, LRC will have more than 300 employees in its Scottsdale headquarters. Nice going, president Travis Hamel Olsen!