The mortgage lending industry won a comprehensive and authoritative victory and a great deal of legal certainty from the Supreme Court on the issues of fee-splitting and markups under the Real Estate Settlement Procedures Act. Last week, in Freeman et al. v. Quicken Loans Inc., the nation’s highest court unanimously sided with the lender and ruled that a plaintiff has to show that a fee charged for a real estate settlement service was shared between two or more persons to prove a violation of Section 8(b) of RESPA has occurred. In this case, the plaintiffs were three couples, the Freemans, Bennetts...

The Supreme Court of the United States last week sided with Quicken Loans while unanimously rejecting 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...

Last week, the Federal Reserve Board put out action plans for Citigroup and HSBC Finance Corp. to correct deficiencies in their residential mortgage loan servicing and foreclosure processing. These enforcement actions require the mortgage servicing subsidiaries to provide appropriate remediation to borrowers who suffered financial injury as a result of errors by the servicers. The Fed also released the engagement letter between Ally Financial Inc. and its independent consultant to review foreclosures that were in the firm’s pipeline in 2009 and 2010...

Complying with all the requirements of the Real Estate Settlement Procedures Act under the new Consumer Financial Protection Bureau is going to be a much different ballgame than had been the case when the Department of Housing and Urban Development was calling the shots, a leading industry attorney indicated recently. “The bottom line on RESPA enforcement [at the Consumer Financial Protection Bureau] is that there are many enforcement powers and authorities at the bureau’s disposal,” Holly Spencer Bunting, a partner in the Washington, DC, office of K&L Gates LLP, told participants...

With his home state of Nevada leading the nation in foreclosures, Republican Sen. Dean Heller has introduced legislation that seeks to simplify and speed up the short-sale process via an amendment to the Truth in Lending Act. Heller has recently introduced SB 3177, the Stopping Ongoing Lender Delays Act (or SOLD Act). His legislation would require each servicer of a home mortgage to respond in writing within 30 calendar days to a mortgagor of a residential mortgage loan who has requested in writing a short sale of the dwelling or residential real property that is subject to the mortgage...

One of the trickiest challenges presented to the Consumer Financial Protection Bureau as part of its project to harmonize the mortgage disclosures consumers receive will be the settlement disclosure, a top official at the CFPB indicated recently. The settlement disclosure “is where we’re in a bit of a difficult situation, because Congress, al-though they directed us to combine the Truth in Lending Act and Real Estate Settlement Procedures Act disclosures, did not amend the underlying statutes,” said Benjamin Olson, managing counsel in the office of regulations at the CFPB, during a webinar sponsored last...

Even as the Federal Housing Finance Agency deliberates writedowns of Fannie Mae and Freddie Mac mortgages, the agency has agreed to allow the government-sponsored enterprises to participate in a California program that applies principal reduction in modifying distressed loans. The FHFA has confirmed Fannie and Freddie’s participation in the California Housing Finance Agency’s Keep Your Home California Program, a $2 billion foreclosure prevention effort established under the U.S. Treasury’s Hardest Hit Fund. Earlier this month, state officials announced they are dropping the requirement from the...

Three mortgage lending industry groups have challenged the position of the Consumer Financial Protection Bureau in a key Truth in Lending Act case by asserting that borrowers must file a lawsuit within three years of a mortgage loan’s signing in order to exercise their right of rescission. As far as the industry is concerned, the crux of the dispute in Rosenfield v. HSBC Bank, No. 10-1442, currently before the 10th District Court of Appeals, is whether borrowers who notify lenders of their intent to rescind must also sue their lenders within three years. TILA gives certain...

In Gilbert v. Residential Funding LLC, the U.S. Court of Appeals for the 4th Circuit became the first federal appellate court to rule that a borrower only needs to send notice of rescission within the three-year period to exercise a valid right to rescind. In this case, the borrowers are appealing a district court’s dismissal of their claim that Deutsche Bank Trust Company Americas, as trustee for Residential Accredit Loans, Inc., Residential Funding LLC and GMAC Mortgage LLC, violated various consumer protection laws in connection with a refinance mortgage the borrowers secured...

Mortgage bankers and brokers are making a fresh push to support H.R. 4323, the Consumer Mortgage Choice Act, legislation that would change the way points and fees are calculated under the Qualified Mortgage definition in the Dodd-Frank Act. Trade groups representing these segments of the industry have made new appeals to their members recently to reach out to their respective lawmakers and garner their support for the legislation. The Consumer Mortgage Choice Act would spell out that affiliate title fees, certain loan originator compensation, and escrow payments are not included...