National Ass'n of Mortgage Brokers v. Board of Governors of the Federal Reserve System
773 F. Supp. 2d 151
D.D.C.2011Background
- NAIHP and NAMB challenge Board rule restricting loan originator compensation; motions for TRO and preliminary injunction denied; consolidated actions before DC District Court; Rule adopts (d)(1)-(e) prohibitions and safe harbors, effective April 1, 2011; Board asserted authority under TILA/HOEPA §1639(l)(2) to prohibit unfair/deceptive practices in mortgage loans; Board conducted hearings, testing, and issued Final Rule; record includes affidavits and expert declarations; Court deferential to agency under Chevron and FTC guidance; issues focus on standing, statutory authority, arbitrariness, RFA/SBREFA compliance, and irreparable harm; records show plaintiffs lack likelihood of success on merits while irreparable harm exists for some members
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NAIHP and NAMB have associational standing | NAIHP and NAMB have members with injury in fact tied to Rule | Court should analyze associational standing and conclude standing exists | Associational standing established |
| Whether Board had authority to promulgate Rule under TILA | Rule exceeds statutory authority under TILA/HOEPA | Board has broad authority to regulate unfair/deceptive practices under §1639(l)(2) | Board authority under TILA affirmed |
| Whether Rule is arbitrary and capricious under the APA | Rule lacks rational basis and misapplies FTC standards | Rule is rational, supported by data, and within agency expertise | Rule not arbitrary or capricious on the record before the court |
| Whether the Board complied with RFA/SBREFA requirements | FRFA failed to analyze impact on small entities | FRFA adequate and compliant with SBREFA/604(a) | RFA/SBREFA compliance not a basis to grant relief; FRFA found adequate |
| Whether plaintiffs demonstrate irreparable harm absent injunction | Rule will irreparably harm small brokers and industry structure | Any economic harm is not irreparable and balance of equities disfavors injunction | No irreparable harm sufficient to warrant injunction |
Key Cases Cited
- Marsh v. Oregon Natural Res. Council, 490 U.S. 360 (U.S. 1989) (arbitrary or capricious review; agency must consider relevant factors)
- Motor Vehicle Mfrs. Ass'n v. State Farm, 463 U.S. 29 (U.S. 1983) (requires rational connection between facts and choice; no substitution of judgment)
- Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (U.S. 1984) (deference to agency statutory interpretation when ambiguous)
- Milhollin v. Milhollin, 444 U.S. 555 (U.S. 1980) (agency deference in TILA interpretations; broad authority upheld)
- Winter v. Natural Res. Def. Council, 555 U.S. 7 (U.S. 2008) (injunction standard; likelihood of success, irreparable harm, balance, public interest)