RIP Gordon Lightfoot
Among the many great songs by Canadian[1]singer/songwriter Gordon Lightfoot, my favorite is his haunting ballad about the November 10,1975, Lake Superior wreck of the Great Lakes iron ore ship, the Edmund Fitzgerald, during a fierce autumn storm.[2] Coincidently, RESPA became effective in 1975; the same year as the Fitzgerald’s sinking. There’s really no other RESPA connection, but now that I have associated The Wreck of the Edmund Fitzgerald as the theme song for RESPA, I’m quite happy with the reference. As most of you know, Lightfoot passed away last week, so I am likely to throw out a few more song references in this Musing to pay homage.
Chevron Sinking
Meanwhile, the skies of November[3]have turned particularly gloomy for a certain former bedrock of the administrative state known as “Chevron deference”. I’ll get to what Chevron is and why it matters later, but its demise should come as no surprise to anyone who follows this stuff. SCOTUS has accepted a case for next fall’s term[4]where the precise question posed is whether the Chevron deference doctrine should sink or swim. Oh, yes, the circle is small to enable me to link Gordon Lightfoot’s Edmund Fitzgerald to RESPA and a challenge to Chevron deference brought by a group of fishing boat operators contesting a 2020 agency ruling by the National Marine Fisheries Service.[5]But, if you could read my mind[6], that’s the kind of seemingly unrelated threads that somehow can find connection in there.
What is Chevron deference?
Chevron deference has nothing to do with oil and gas, but rather, refers to the judicial principle established in a 1984 Supreme Court decision[7] whereby federal courts were expected to defer to an agency’s interpretation of a statute it adminsters if Congress’s intent was ambiguous and the agency’s interpretation isn’t totally crazy.[8]The Chevron doctrine of deferring to the agency interpretation of a statute severely limited the scope of judicial review over agency interpretations. Back in 1984, when Chevron was decided, many conservatives lauded the opinion[9]because it would enable the Reagan era administration to pursue its policies without so much interference from the “activist” liberal judges of that era they claimed were blocking their agenda.[10]
Chevron grows the Administrative State
By the time the Obama administration rolled around, however, conservatives weren’t so pleased with Chevron deference. Chevron deference (and a related case known as Auer[11]covering agency interpretation of their own rules) were highly useful in the expansion of the regulatory state: ceding government policy control to the executive branch over the other two branches. Congress seemed more or less content to let agencies do the hard work of gathering information and drafting and interpreting legislation without the need to compromise with other legislators, while federal agencies seemed more than willing to push policy objectives of the President through statutory and regulatory interpretation rather than undertake the heavy lifting of notice and comment rulemaking.
Chevron criticized
Judges, on the other hand, generally think they are ones who are supposed to be interpreting laws[12], not people who work for the President. Aside from DC turf battles, you don’t have to be a Federalist Society member[13]to see the separation of powers problems with federal agencies determining Congressional intent for themselves.
So, you began to see a steady march of criticism against Chevron from the rainy-day people[14]on SCOTUS. In fact, in 2015 when SCOTUS took up the Mortgage Banker Association’s lawsuit against Obama’s Labor Department for (again) changing its policy position on whether loan originators are an exempt position, Justice Scalia noted his frustration with the deference concept in general in a concurring opinion, saying, “The agency is free to interpret its own regulations with or without notice and comment; but courts will decide—with no deference to the agency—whether that interpretation is correct.” SCOTUS has steadfastly avoided Chevron in many of its recent opinions and people have referred to it as “Zombie precedent”[15]
Current SCOTUS Justice Neil Gorsuch was even more direct than Scalia using his own haunting imagery criticizing a decision not to take a different Chevron case last November,
“At this late hour, the whole project [Chevron] deserves a tombstone no one can miss. We should acknowledge forthrightly that Chevron did not undo, and could not have undone, the judicial duty to provide an independent judgment of the law’s meaning in the cases that come before the Nation’s courts. Someday soon I hope we might.”
With a recent quote like that (another November gale, mind you) you can imagine how Justice Gorsuch plans to rule in the Raimondo case next fall when he gets his wish. Likewise “tea leaf” reading of SCOTUS does not hold much hope either for anything but an epitaph to be written for Chevron deference (and, perhaps by extension, Auer and progeny). I have to admit, however, I am somewhat disappointed that the case that will finally kill the Chevron zombie isn’t about RESPA[16]. I really thought we’d find RESPA creeping round the back stairs of SCOTUS. Exactly how SCOTUS will remake the landscape for regulatory interpretation after Chevron’s Sundown remains to be seen.
Impact to Mortgage Industry
Meanwhile, aggressive regulatory interpretation features prominently in CFPB interactions with the mortgage industry, so a tombstone for Chevron could have important implications for the industry. Expansive CFPB interpretative efforts often arise under the “regulation by enforcement” rubric, but more recently also with express policy statements, advisory opinions and even exam manuals. Chevron also featured prominently in the recent Townstone decision. There, the court determined there was no ambiguity in ECOA permitting CFPB to find a non-discrimination obligation with respect to prospective applicants, so it didn’t need to address the second part of the Chevron analysis to ask whether the interpretation was reasonable.
The sinking of Chevron, however, shouldn’t make anyone in the mortgage industry feel like they are now on the Carefree Highway. Simply put, CFPB is still demonstrating a lack of agency humility[17]in how it interprets and enforces laws. Even if Chevron is sent to the bottom of Lake Superior, CFPB still will be able to aggressively interpret and enforce its laws, but at least if you end up in court, you will be able to ask for a second opinion.
[1] I hesitate to make a “too soon” joke here, but back in the late 1980s MTV ran a show called Remote Control with a game show called “Dead or Canadian?” Lightfoot is now a trick question.
[2]Great Lakes mariners were known to refer to these autumn maelstroms as “Witches”. Hence the line, “T’was the witch of November come stealin’.
[3]This reference would have been perfect if The Fitzgerald’s storm had occurred in October, because that’s when the new SCOTUS term begins.
[4] Loper Bright Enterprises v. Raimondo
[5] To my knowledge, the case does not involve the sinking of any fishermen’s boat. Rather it involves a rule that the fishing boats must pay for the government inspectors that that are required to be on the boats to ensure compliance.
[6]These Musings are nothing if not the written expression of what goes on in my mind.
[7] Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. 467 U.S. 837 (1984).
[8]This isn’t the actual legal standard. I am paraphrasing.
[9] Even Justice Antonin Scalia spoke favorably about Chevron in 1989.
[10]For the same reason Stephen Breyer thought it wasn’t so great around the same time.
[11] Auer v. Robbins, 519 U.S. 452 (1997)
[12]See Marbury v. Madison.
[13]I’m looking at you, Elena Kagen.
[14]Rainy-day people is an antonym to “fair weather friends” in Lightfoot’s lyrics. I am using it here to refer to process oriented judges rather than those who tend to be more outcome oriented.
[15]On the Advisory Opinions podcast, host Sarah Isgur contended that Chevron has been “increasingly zombified” in recent years—not formally overruled, but applied so infrequently that it’s something of a dead letter
[16] See last paragraph of https://mortgagemusings.com/f/ed-58-stuck-in-neutral-cfpb-misinterprets-respa-again
[17]One would hope that the recent news of a massive consumer data breach (or theft) by a (former) CFPB employee would be an opportunity for an agency charged with protecting consumers to demonstrate some humility, but perhaps I should give them more time.