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23 the tax deficiency. I understand that states are under [budget] pressure but government should not use citizens as a bank teller or an ATM machine." Meanwhile, on the West Coast, servicing law was further impacted in 2019 by the case Myles v. Pennymac Loan Services, LLC. e case resulted in the court determining that a loan in default can still be assigned. Myles had argued that his mortgage "was not legally transferred, conveyed, or assigned to Defendant [PennyMac]," claiming he had the power to invalidate mortgage assignments by deciding not to pay his mortgage. "Myles' legal argument is incorrect because he does not explain how the assignments of his mortgage are void as a matter of law," the court stated. "His complaint seems to suggest that a borrower, by refusing to pay, can prevent a lender from assigning the debt. Why? Myles does not give a logical basis for this strange suggestion. Neither does he support it with legal authority. e trial court properly sustained the demurrer." Foreclosure law and debt collection practices saw further change in 2019 following the case of Obduskey v. McCarthy & Holthus LLP, which found that businesses engaged in nonjudicial foreclosure proceedings are not considered "debt collectors" under the Fair Debt Collection Practices Act. Responding to the court's decision, Matthew Podmenik, Managing Partner, McCarthy & Holthus Law Firm said, "I think the biggest takeaway of this case is what can happen when an industry like ours has everyone pulled together and had a common goal. is was a case of great importance and an undecided question for many years. We had the Legal League and 8 other organizations who filed amicus briefs. A total of 19 different parties joined us and all of us came together and this is a real team victory. So, I think that's largely why this happened." THE CFPB EFFECT roughout the year, the Consumer Financial Protection Bureau faced a legal battle with California firm Seila Law. With the Bureau's constitutionality now in question, many are interested in seeing how the results of this case will impact financial services businesses, for better or for worse. In a scheduling order released by the Supreme Court, the Court announced that it will be hearing the case of Seila Law LLC v. Consumer Protection Bureau on March 3, 2020. e case will include arguments against the Bureau's leadership structure, as the law firm named in the case, Seila Law, alleges that the structure of the agency grants too much power to its director. According to court papers, Selia Law asserts that, given the CFPB's broad law enforcement powers, the fact that the president may only remove the director of the CFPB "for inefficiency, neglect of duty, or malfeasance in office" is unconstitutional. American Enterprise Institute Senior Fellow Peter J. Wallison argues that there is more at stake than just the constitutionality of the Bureau. On Real Clear Politics, Wallison argued that this CFPB case is an example of Congress enacting "broadly phrased laws, essentially delegating the key legislative choices to administrative agencies and violating the Framers' constitutional plan of separation." e Supreme Court's decision will also likely impact another case—the CFPB's enforcement action against Ocwen Financial Corporation. According to a Florida federal judge, the CFPB is indeed constitutionally structured, meaning an enforcement action against Ocwen will not end on those grounds, even after the CFPB itself has officially adopted the legal position that its structure is constitutionally flawed. CFPB Director, Kathleen Kraninger, reversed the Bureau's course and agreed that the "for-cause" removal provision, which states that the president can only remove CFPB's director for "inefficiency, neglect of duty, or malfeasance in office," does violate the U.S. Constitution's separation of powers, according to a brief filed earlier this year in the high court by U.S. Solicitor General Noel Francisco and in letters sent to Congress. Outside of Seila Law LLC V. Consumer Protection Bureau, 11 state attorneys general are joined in a complaint challenging the structure of the Consumer Financial Protection Bureau, according to a brief filed with the United States Supreme Court. e brief argues that the leadership structure of the CFPB is unconstitutional, stating that its structure encroaches on the states' own abilities to enforce its own consumer protection laws. Servicers, meanwhile, are keeping one eye on the case to see how the Court's ruling will impact financial services law. Garcia Gilbert told DS News that this case "should be interesting to watch, because of the seeming overreach the Bureau has had in financial services." "It is an interesting choice for the court to take this case on, and I am unsure at this time how the court may rule," Carman said. "It would be interesting to see if the free market would move differently if the CFPB was removed from the equation." REMAINING FLEXIBLE FOR 2020 With so much at play in 2019 and going into 2020, financial services will need to be flexible, able to adapt to various shifts in the market. For some of the larger players, this means scaling back while also remaining prepared to reverse course should the market demand it. Leaner default departments have the perfect opportunity to implement new strategies and be better prepared, and whether its fighting fraud or improving compliance, preparation starts now. "e solution is truly quite simple: education, participation, and implementation," Neil Sherman said. "We cannot wait until the last minute to invest in our default operations." "In a lower volume environment, it creates a tension where we don't have all the resources we need to prepare ourselves for when there is more." —Courtney Thompson, SVP, Director of Default Servicing Operations, Flagstar Bank

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