Judge delays ruling on CFPB's reversal of Townstone judgment

The curious case of Townstone Financial will continue, as a federal judge mulls the Trump administration's move to vacate the mortgage lender and broker's redlining judgment. 

U.S. District Judge Franklin Valderrama said Tuesday he wasn't prepared to rule on the Consumer Financial Protection Bureau and Townstone's joint motion to vacate the $105,000 judgment they reached last year. The plaintiff and defendant accuse feds of misconduct in prosecuting the Chicago-area broker in a yearslong case. 

The National Fair Housing Alliance and 13 other fair housing groups filed an amicus brief last week objecting to that motion. A reversal, the groups argue, would set a dangerous precedent for new administrations to unwind final judgments in cases they didn't agree with. 

Valderrama, in a telephonic court hearing, told attorneys for the CFPB and Townstone they would have seven days to file a response to the NFHA's brief. He didn't schedule a subsequent hearing, suggesting upcoming briefings could satisfy a decision. 

The redlining investigation was opened in 2020 during Trump's first term by CFPB director Kathy Kraninger. Feds weighed Townstone's limited business with Black home loan applicants in the Chicago area compared to its peers, alongside alleged discriminatory comments Townstone CEO Barry Sturner made during several radio broadcasts.

The CFPB last month argued that prosecutors inappropriately targeted Sturner for "constitutionally protected speech," and are seeking a vacatur under a federal court rule. The NFHA in a 13-page brief last Friday slammed the government's maneuver, and argued the case did not warrant the "extraordinary remedy."

"This administration is signaling in every way that it will not protect Black people and other people of color from discriminatory conduct," said Lisa Rice, president and CEO of NFHA, in a press release last week. 

An attorney who wrote the amicus brief deferred comment to the NFHA and the Public Citizen Litigation Group, which didn't immediately respond to inquiries after the hearing. 

Sturner declined to comment Tuesday afternoon. The mortgage professional at the center of the case is lending today with Town Team Mortgage powered by LeaderOne Financial Corp., and has also revived his podcast that was the earlier focus of federal investigators. 

A reversal would represent a significant development in the Trump administration's deregulatory push. The CFPB under acting director Russell Vought has dismissed numerous enforcement actions against financial institutions including mortgage lenders, but is still performing limited enforcement work.