CFSL Bulletin The latest Consumer Financial Services Litigation news, developments, and legal thinking

Category Archives: Real Estate Settlement Procedures Act

Court Rules Semicolon in Statute Means Force-Placed Insurance Provision of RESPA is Not Yet Effective

Posted by Julie A. Angelini on Posted in Real Estate Settlement Procedures Act

In Williams v. Wells Fargo Bank, N.A., Judge Cecilia M. Altonaga of the United States District Court for the Southern District of Florida, ruled that a semicolon contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act means that force-placed insurance provisions contained in the amendments to the Real Estate Settlement Procedures Act (“RESPA”) are not yet in effect. Williams v. Wells Fargo Bank, N.A., S.D. Fla., No. 11-21233-CIV-ALTONAGA/Simonton, September 19, 2011.

The Plaintiffs in this case brought claims against Wells Fargo for violation the RESPA amendments, alleging that Wells Fargo unlawfully charged homeowners for force-placed insurance after the homeowners’ property-insurance policies lapsed. The Plaintiffs alleged that Wells Fargo violated the RESPA amendments by using the force-placed insurance to generate kickbacks from a third-party insurer. The Plaintiffs rely on the RESPA amendments that require charges on forced insurance payments to be “bona fide and reasonable,” alleging that these amendments took effect on June 2, 2010 (one day after the Dodd-Frank Act was signed into law).

Continue reading this entry

U.S. Supreme Court Grants Review Regarding RESPA Standing in the Absence of Economic Injury

Posted by Michael D. Leffel on Posted in Class Actions; Real Estate Settlement Procedures Act

On Monday, the U.S. Supreme Court granted certiorari in a proposed class action to determine the scope of a home-buyer’s standing to sue a title insurer company that allegedly violated the Real Estate Settlement Procedures Act of 1974 (RESPA). In First American Financial Corporation, et al. v. Edwards (10‑708), the question before the Court is whether a home-buyer has standing under Article III, § 2 of the United States Constitution to pursue a RESPA claim if the home-buyer cannot establish that the violation resulted in an increase in the amount the home-buyer paid for title insurance services.

Continue reading this entry

The Ninth Circuit Analyzes Procedure for Review of Arbitration Awards

Posted by Julie A. Angelini on Posted in Real Estate Settlement Procedures Act

In Johnson v. Wells Fargo Home Mortgage, Inc., the Ninth Circuit addressed issues regarding a district court’s review of an arbitration award, as well as the substantive merits of the plaintiff’s Real Estate Settlement Procedures Act (“RESPA”) claims. 2011 WL 505016 (9th Cir. Feb. 15, 2011). The plaintiff, Wes Johnson, brought suit against Wells Fargo Home Mortgage, Inc. (“Wells Fargo”) alleging, inter alia, claims for violation of RESPA for Wells Fargo’s improper reporting to credit reporting agencies of Johnson’s delinquencies on two mortgage loans, which he secured as part of his business of purchasing undervalued properties and then refurbishing, renting, and selling them. The parties stipulated to binding arbitration. The arbitrator found in favor of Johnson awarding him damages. Wells Fargo then moved the district court to vacate the award. The district court directed that the appeal of the award should be heard directly by the appellate court, and without reviewing the award, confirmed it.

Continue reading this entry

Any Reasonably Stated Written Request for Account Information can be “Qualified Written Request” Under RESPA

Posted by Jennifer M. Keas on Posted in Real Estate Settlement Procedures Act

In Catalan v. GMAC Mortg. Corp., a three-judge panel of the Seventh Circuit Court of Appeals has reversed a grant of summary judgment to defendant, GMAC Mortgage (“GMAC”) on the plaintiffs’ claims under the Real Estate Settlement Procedures Act (“RESPA”). The court held that GMAC failed to establish that, as a matter of law, it was entitled to RESPA’s safe harbor protection under 12 U.S.C. § 2605(f)(4). Construing the facts in the light most favorable to the plaintiff borrowers, the court reasoned that certain letters sent by the plaintiffs to GMAC constituted “qualified written requests,” triggering GMAC’s obligations under § 2605(e), but which GMAC had not shown to have fulfilled as required to invoke the protection. The court also rejected GMAC’s argument regarding damages. A copy of the decision is available here.

Continue reading this entry

Third Circuit Holds Mortgage Escrow Cushion Subject to Bankruptcy Process

Posted by Jennifer M. Keas on Posted in Real Estate Settlement Procedures Act

In In re Rodriguez, No. 09-2724 (3rd Cir. Dec 23, 2010), a three-judge panel for the Third Circuit considered whether an automatic stay under the Bankruptcy Code prevented a mortgage servicer from accounting for a pre-petition shortage on a mortgage escrow account in its post-petition calculation of the bankrupt debtors’ future monthly escrow payments. The majority held that the bankruptcy stay did prohibit such conduct by the loan servicer. A copy of the opinion is available here.

Continue reading this entry

Eleventh Circuit Holds That Charging Loan Discount Points is not a “Settlement Service” Within the Meaning of RESPA

Posted by Jennifer M. Keas on Posted in Real Estate Settlement Procedures Act

In Wooten v. Quicken Loans, Inc., the Eleventh Circuit Court of Appeals has affirmed the dismissal of a class action complaint that alleged improper fees under Section 8(b) of RESPA. At issue was whether charging loan discount fees — otherwise known as “points” or “discount points” — to provide a specific interest rate constitutes the “rendering of a real estate settlement service” within the meaning of Section 8(b). The Eleventh Circuit answered this question in the negative. Access the opinion here.

Continue reading this entry

HUD Solicits Comment on Possible Changes in Regulations Concerning Warehouse Loans and Other Finance Mechanisms

Posted by Jennifer M. Keas on Posted in Real Estate Settlement Procedures Act

On November 16, 2010, the U.S. Department of Housing and Urban Development (HUD) issued a notice announcing that it is considering changes in its regulations on warehouse lending and other finance mechanisms that are used to fund federally insured mortgages.

Continue reading this entry

Challenged Fee Must be Split with Third Party Under RESPA §8(b), Fifth Circuit Holds

Posted by Jennifer M. Keas on Posted in Real Estate Settlement Procedures Act

In Freeman et al. v. Quicken Loans, Inc. et al., the Fifth Circuit has ruled that that RESPA §8(b) is “exclusively an anti-kickback provision” which requires that the challenged fee be split with another party to be actionable. The Court noted the split of authority that exists among the federal courts concerning this issue. The Fifth Circuit’s Freeman decision joins similar rulings by the 4th, 7th and 8th Circuits, with contrary rulings issued in the 2nd, 3rd and 11th Circuits.

Continue reading this entry

Third Circuit Reverses Dismissal of RESPA 8(b) Markup Claim

Posted by Jennifer M. Keas on Posted in Real Estate Settlement Procedures Act

In Tubbs v. North American Title Agency, Inc., No. 09-2757, 2010 U.S. App. LEXIS 16342, 2010 WL 3044067 (3d Cir. Aug. 5, 2010), the Third Circuit held that a lower court erred in dismissing a RESPA Section 8(b) claim.

Plaintiffs’ allegations concerned North American Title Agency’s role as settlement agent for their refinancing of two mortgages held with Wachovia Bank. Among the Title Agency’s fees was a “Release Recording Fee” of $150 ($75 per mortgage), charged for recording the release of the prior mortgages with the county clerk. The complaint alleged that Wachovia provided a payoff statement that listed charges for the release of the mortgages by the county clerk. Plaintiffs contended that Title Agency performed “no services” to earn its $150 fee, and that this fee was a prohibited “markup” under Section 8(b) of RESPA.

Continue reading this entry

Ninth Circuit Affirms Dismissal of RESPA Claim for Overcharges

Posted by Thomas R. Mikrut on Posted in Preemption; Real Estate Settlement Procedures Act

The Ninth Circuit affirmed the dismissal of a purported class action under the Real Estate Settlement Procedures Act ("RESPA") because the plain language of RESPA does not apply to the practice of "overcharging," as well as the dismissal of three state law claims that are preempted under the National Bank Act. 

The Plaintiffs claimed that they refinanced their home mortgage loan through Wells Fargo, who charged the Plaintiffs an $800 underwriting fee.  Plaintiffs alleged that this fee was excessive and violated RESPA and California’s Unfair Competition Law because the fee was not reasonably related to the actual costs of underwriting.  The district court dismissed all the claims against the Defendants. 

Continue reading this entry

HUD Clarifies How Real Estate Broker Commission Fees Should Be Disclosed Under RESPA

Posted by Martin J. Bishop on Posted in Real Estate Settlement Procedures Act

On January 22, 2010, the Department of Housing and Urban Development’s (“HUD”) general counsel, Helen Kanovsky, provided “clarification of how real estate broker and real estate agent commission fees are to be disclosed.” The clarification came in the form of a letter responding to an inquiry by RESPA attorney Jay Varon of Foley & Lardner, LLP.

According to the letter, RESPA permits real estate brokers to charge a flat fee and/or a percentage fee so long as (a) the fee is disclosed in the listing or buyer’s broker agreement, (b) the fee charged on the HUD-1 is equal to what was disclosed, and (c) the fee disclosed on line 700 of the HUD-1 is disclosed as part of the commission. Kanovsky goes on to stay:

RESPA also does not prescribe how these commission fees would be distributed between the real estate brokers and real estate agents. Therefore, the division of the compensation for their services in listing and selling the home is appropriately a matter for negotiation and agreement between the real estate brokers and real estate agents.

Click here for a copy of Kanovsky’s letter. Click here for RESPRO’s treatment of the issue.

HUD’s New Settlement Cost Booklet

Posted by Martin J. Bishop on Posted in Real Estate Settlement Procedures Act

The Department of Housing and Urban Development has released a new Settlement Cost Booklet, much of which is dedicated to the new Good Faith Estimate and HUD-1 Settlement Statement (read more about the changes here). Pursuant to the new rules promulgated under RESPA, effective January 1, 2010, lenders and mortgage brokers must provide the Settlement Cost Booklet within three days of when a borrowers applies for a loan. Click here for the electronic version of HUD’s Settlement Cost Booklet.

HUD Offers Online Outreach Program To Assist With Implementation of New RESPA Rules

Posted by Martin J. Bishop on Posted in Real Estate Settlement Procedures Act

Effective January 1, 2010, the amended regulatory requirements of the Real Estate Settlement Procedures Act (“RESPA”) will require lenders and mortgage brokers to provide consumers with a standard Good Faith Estimate (“GFE”) designed to disclose key loan terms and closing costs. Read more on the new RESPA rules here. The Department of Housing and Urban Development (“HUD”) has announced a series of “plain english” interactive live online presentations to assist professionals with the implementation of the new rules. HUD’s press release, which includes the remaining program schedule, can be found here.

HUD Announces 120-Day Enforcement Delay On New RESPA Rule, Subject To Good Faith Efforts To Comply

Posted by Martin J. Bishop on Posted in Real Estate Settlement Procedures Act

HUD announced today that it will follow a resolution of its Mortgage Review Board to show restraint during the first 120 days of 2010 with respect to enforcement of the new RESPA rule scheduled to go into effect on January 1, 2010 — so long as good faith efforts are being made to comply with the new rule. In addition, in separate letters, HUD requested regulators of federal depository institutions and the FTC to show similar restraint in any enforcement activities relating to the new rule and made the same request of relevant state agencies.

Continue reading this entry

Third Circuit Holds Overcharges Not Required in RESPA Actions

Posted by Thomas R. Mikrut on Posted in Real Estate Settlement Procedures Act

The Third Circuit just issued an opinion, Alston v. Countrywide Financial Corp., holding that plaintiffs are not required to have suffered an overcharge to bring a cause of action under the Real Estate Settlement Procedures Act (“RESPA”).

Continue reading this entry