CBC Mortgage Agency

NMLS: 1186381
912 W. Baxter Drive, Suite 150
South Jordan, Utah 84095

Main: 866.563.3507
Servicing: 866.563.7572
Fax: 435.237.0022

Court Rules to Dismiss Litigation of Controversial Mortgagee Letter

September 6, 2019 By

CBC Mortgage Agency Lauds Court Acknowledgement of Agency Overreach

Salt Lake City, UT – On August 29, 2019, the ongoing legal dispute between the Cedar Band of Paiutes, Cedar Band Corporation, and CBC Mortgage Agency (collectively, CBCMA) and the Department of Housing and Urban Development (HUD) came to a conclusion, with the Court’s dismissal of CBCMA’s original complaint without prejudice. The dismissal came on the heels of CBCMA’s initial victory in the matter, and the Court’s award of a preliminary injunction preventing HUD from enforcing certain unlawful restrictions on the down payment assistance (DPA) programs that CBCMA provides to potential home buyers across the country. U.S. District Judge David Nuffer dismissed the litigation based on a declaration filed by HUD that (1) its current legal guidelines do not contain any type of geographical or jurisdictional limitation on where a government can provide down payment assistance, and (2) HUD’s withdrawal of Mortgagee Letter 2019-06, which imposed unlawful restrictions which previously decimated CBCMA’s business. Given the withdrawal of the original Mortgagee Letter, and the additional assurances made by HUD, CBCMA did not oppose HUD’s request to dismiss the lawsuit.

HUD’s controversial Mortgagee Letter attempted to impose unlawful jurisdictional limitations on governmental entities providing down payments to home buyers seeking Federal Housing Administration (FHA) loans. The Mortgagee Letter would have ended national assistance programs and harmed potential home buyers, particularly low-to-moderate income individuals, who rely heavily on down payment assistance to purchase a home. HUD claimed it was trying to protect taxpayers, but had no data to support its policy positions. In fact, CBCMA presented information to the effect that its client base actually demonstrates a lower rate of default than other HUD programs nationally.

“The Court’s dismissal of this case officially recognizes HUD’s misguided and unlawful approach of Mortgagee Letter 19-06,” said Richard Ferguson, CBCMA president. “Since April 18, we have fought on behalf of future homeowners across the country who would lose access to down payment assistance programs like CBCMA’s Chenoa Fund.”

However, the Cedar Band believes that the fight may not be over. HUD has indicated that it intends to engage in rulemaking, where it may again attempt to implement its flawed policies, reduce access to FHA loans, and ultimately do so in a manner that undermines the sovereignty of the Cedar Band and other Indian Tribes.

In a sworn declaration from HUD official Julie Shaffer, the agency acknowledged that “HUD does not have a basis to enforce jurisdictional limitations on governmental entities providing down payment assistance” and that it will not issue any further policies related to down payment assistance programs “other than through rulemaking.”

“We will not give up the fight against HUD to preserve our ability to provide down payment assistance to first-time homebuyers, and to continue to engage in meaningful economic development activities for the Band,” said Delice Tom, Chairwoman of the Cedar Band of Paiutes. “Should HUD proceed with rulemaking, we expect them to engage in a meaningful ‘collaborative’ process with the Cedar Band and other National Tribal organizations, consistent with both HUD’s own Tribal Consultation policy as well as the District Court’s Order” she added. The Chairwoman concluded by noting that “Cedar Band is grateful to those who have supported us throughout this process, including Congressman Ben McAdams (D-UT), Bishop Harry Jackson, and the countless Chenoa Fund borrowers, who have shared their stories.”

CBCMA believes that it should have the opportunity to demonstrate the success of its programs before HUD takes any sort of further action. Currently, HUD does not have data on individual government entities because it does not require the identification of the specific governmental entity providing DPA, even though it can and does require the identification of individual non-profits providing DPA and for every first-lien lender. As a result, HUD is unable to identify which government programs or practices might substantially increase the risk of loss to the Federal Government.

CBCMA has encouraged HUD to collect data on a more granular level, identifying which government entity provides the down payment to accurately track the performance and pricing of loans originated by each governmental entity. HUD can then require that each governmental entity manage their DPA programs to specified performance standards.

About CBC Mortgage Agency

CBCMA provides secondary financing to borrowers, who are receiving loans insured by the Federal Housing Administration (FHA). CBCMA takes great care to ensure that the FHA loans perform well, including providing education as well as 12 months of counseling to borrowers after the purchase of their home. In addition, CBCMA regularly reviews its credit standards to ensure that the borrowers it assists are credit worthy.

CBCMA is a wholly owned subsidiary of Cedar Band Corporation, a federally chartered tribal corporation wholly owned by the Cedar Band of Paiutes, a federally recognized American Indian band. For more information about CBCMA and its programs, visit chenoafund.org