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By Thomas Ressler

SCOTUS Rejects Feds’ View in RESPA Case

May 25, 2012

The Supreme Court of the United States this week unanimously rejected the legal arguments of two federal agencies in affirming a lower court’s determination that a plaintiff must prove a settlement fee was split by two or more persons in order to successfully stake a claim under the Real Estate Settlement Procedures Act.

The relevant portion of RESPA at issue in Freeman et al. v Quicken Loans Inc. is the provision that “[n]o person shall give and no person shall accept any portion, split or percentage of any charge made or received for the rendering of a real estate settlement service . . . other than for services actually performed. 12 U. S. C. §2607(b).”

Petitioners in this case, three couples who obtained mortgage loans from Quicken Loans, filed separate state-court actions, alleging that Quicken had violated this section of RESPA by charging them fees for which no services had been provided.

After the cases were removed to federal court and consolidated, Quicken requested summary judgment, arguing that the borrower claims were not valid because the fees at issue were not split with another party.

The District Court agreed, and because the borrowers had not alleged any splitting of fees, it granted respondent summary judgment.

In the run-up to consideration by the SCOTUS, three circuit courts ruled in favor of the plaintiffs by ruling that RESPA applies to any unearned fees, while four courts, including the Fifth Circuit, have ruled in Quicken’s favor by determining that RESPA applies only when fees are divided with a “culpable” third party.

The Department of Housing and Urban Development and the Consumer Financial Protection Bureau submitted separate amicus briefs to the high court in support of the plaintiffs’ position.

However, the high court roundly rejected the federal government’s arguments and affirmed the Fifth Circuit’s determination. “In order to establish a violation of §2607(b), a plaintiff must demonstrate that a charge for settlement services was divided between two or more persons,” Justice Anton Scalia wrote on behalf of the entire court.

“Section 2607(b) unambiguously covers only a settlement-service provider’s splitting of a fee with one or more other persons,” Justice Scalia added. “It cannot be understood to reach a single provider’s retention of an unearned fee.”

Further, “The normal usage of the terms ‘portion,’ ‘split’ and ‘percentage’ – which, when referring to a portion or percentage of a whole, usually mean less than 100 percent – reinforces the conclusion that §2607(b) does not apply where a settlement-service provider retains the entirety of a fee received from a consumer,” Justice Scalia wrote.


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With the recent dip in interest rates, how do you feel about loan volumes this year?

We see loan production ending 2015 flat compared to 2014.


We’re optimistic that our originations will rise by 10 to 20 percent year over year.


We’re really optimistic: We expect production to increase by 20 percent or better from last year.


We’re not so bullish. Originations for us may actually fall.


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