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36 CFPB FINES PROSPECT FOR KICKBACK SCHEME e Consumer Finance Protection Bureau (CFPB) announced on January 31 that it would levy almost $4 million in penalties in connection to an illegal kickback scheme involving a major mortgage lender, real estate brokers and a servicer. e CFPB said the Sherman Oaks, California-based Prospect Mortgage will pay $3.5 million in civil penalties, while the real estate brokers and servicer will pay a combined $495,000 in consumer relief, repayment of "ill-gotten gains" and penalties. "e action sends a clear message that it is illegal to make or accept payments for mortgage referrals," said CFPB Director Richard Cordray. "We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses." Prospect Mortgage is one of the largest independent retail mortgage lenders in the United States, with roughly 100 branches across the country. e CFPB's announcement named RGC Services (doing business as ReMax Gold Coast) and Willamette Legacy (doing business as Keller Williams Mid-Willamette as two of more than 100 real estate brokers with whom Prospect had "improper arrangements." e CFPB said Prospect paid for referrals through these arrangements, and paid brokers to require consumers-even those who had already prequalified with another lender-to prequalify with Prospect. "One particular method Prospect used to obtain referrals under their lead agreements was to have brokers engage in a practice of "writing in" Prospect into their real estate listings," the CFPB said in their statement. "'Writing in' meant that brokers and their agents required anyone seeking to purchase a listed property to obtain prequalification with Prospect, even consumers who had prequalified for a mortgage with another lender." e CFPB also said Prospect and Planet Home Lending had an agreement where Planet steered eligible consumers to refinance with Prospect for their Home Affordable Refinance Program (HARP) mortgages. SUPREME COURT BLOCKS FANNIE MAE'S PATH TO FEDERAL COURTS e U.S. Supreme Court ruled on January 18 that Fannie Mae cannot automatically bring state lawsuits to federal court, reversing an earlier decision by the Ninth Circuit Court. e Supreme Court's decision in the case of Lightfoot v. Cendant Mortgage Corp. ends a 15-year court battle between a mother-daughter duo and a mortgage lender, in which the plaintiffs claimed deficiencies in the process of refinancing their loan and the subsequent foreclosure and sale of their home. Fannie Mae had claimed that its charter, issued in 1954, gave the GSE the authority to automatically remand state suits to federal court. By statute, Fannie Mae has the power to "sue and be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal." In 2002, Beverly Hollis-Arrington and her daughter, Crystal Lightfoot, filed a suit against Cendant Mortgage Corp., Fannie Mae, and Attorneys Equity National Corporation in California state court alleging the defendants had engaged in a conspiracy in which Cendant was knowingly approving mortgage loans for unqualified buyers knowing that it could buy the properties once they were foreclosed on. Fannie Mae successfully remanded the case to federal court on the basis of the sue-and-be-sued clause, and the action was dismissed. e Ninth Circuit Court denied a petition from Hollis-Arrington and Lightfoot for a rehearing, using American Nat. Red Cross v. S. G., 505 U. S. 247 as a basis for its decision. e Ninth Circuit Court interpreted the decision in that case as precedent for giving the District Court jurisdiction under Fannie Mae's sue-or- be-sued clause. Following the Ninth Circuit Court's denial, Hollis-Arrington and Lightfoot filed a petition for writ of certiorari in February 2015. In June 2016, the Supreme Court granted certiorari. Justice Sonya Sotomayor wrote the opinion for the Supreme Court—which was unanimous—saying "Fannie Mae, preferring to be in federal court, raises several arguments against reading its sue-and-be-sued clause as merely capacity conferring. None are persuasive." Fannie Mae did not immediately respond to a request for comment about the high court's ruling. "In sum, none of the cases on which Fannie Mae relies suggest that Congress in 1954 would have surveyed the jurisprudential landscape and necessarily concluded that the courts had already settled the question whether a sue-and- be-sued clause containing the phrase 'court of competent jurisdiction' confers jurisdiction on the federal courts," Sotomayor wrote.

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