RESPA Lawyer Blog

The Consumer Financial Protection Bureau "CFPB" ordered a Texas homebuilder, Paul Taylor, to pay $118,194.20 he received in kickbacks for referring mortgage origination business to Benchmark Bank and to Willow Bend Mortgage Company in violation of the real estate settlement procedures act "RESPA". The CFPB also prohibited Paul Taylor from engaging in future real estate settlement services, including mortgage origination.

The CFPB said Paul Taylor received illegal referral fees through partnerships with Benchmark Bank and Willow Bend Mortgage Company. Taylor and Benchmark Bank created and jointly owned Stratford Mortgage Services, LC, which claimed to be a mortgage originator. The CFPB stated that Taylor and Willow Bend were created and jointly owned a company called PTH Mortgage Company. The CFPB stated that both entities were shams designed to allow Taylor to receive the kickbacks. Pat Taylor's homebuilding company, Paul Taylor Homes, then referred mortgage origination business to the sham entities but the work was actually performed by Benchmark Bank and Willow Bend Mortgage Company. The Consumer Financial Protection Bureau said the kickbacks were passed through the sham entities back to Taylor through profit distributions and as a payment through a “service agreement.”

Of particular note is the CFPB's emphasis on payment via a "service agreement" in this settlement and of the language "employees in a position to refer customers or potential customers to settlement providers." This could be a hint at where the CFPB is headed next in their enforcement actions.

The Federal Deposit Insurance Corporation "FDIC" referred the incident to the CFPB. The FDIC separately fined Benchmark Bank for violating RESPA. The CFPB settlement can be viewed by clicking here.

Attorney Marx Sterbcowof the Sterbcow Law Group will lead a panel presentation along with Attorney Jeff Arouh of McLaughlin & Stern at the October Research Corporation's National Settlement Services Summit being held at the Marriott at Key Center in Cleveland, Ohio on June 11, 2013. The session titled "Strategic Alliances and the Future of Affiliated Businesses" will offer practical guidance on the issues surrounding affiliated businesses and their future under the Qualified Mortgage (QM) and Qualified Residential Mortgage proposals under the Dodd-Frank Act and we will examine who the winners and losers are in the affiilated business industry. The session also discusses why lending compliance under the new federal rules and regulations may be fueling growth in the creation of new affiliated businesses even with the 3% lender affiliated business arrangement annual percentage rate (APR) cap on points and fees restriction.

For more information and on-line registration, please go to: 2013 National Settlement Services Summit.

Marx Sterbcow, Managing Attorney at Sterbcow Law Group, and Charles Cain, Of Counsel to Sterbcow Law Group and Senior Vice President to WFG National Title Insurance Company, have been selected by RESPA News to co-present a webinar on the future of marketing agreements under the Consumer Financial Protection Bureau (CFPB). We discuss way to prepare for and deal with the latest issues surrounding the use of Marketing Agreements (also known as Preferred Provider Agreements, Marketing Services Agreements, Advertising Agreements, or Co-Branding Agreements) and whether an enforcement action or guidance bulletin by the CFPB involving the use of these agreements may be forthcoming.

The presentation, entitled "Reviewing your Marketing Agreement and the Interpretive Rule Webinar" will cover issues such as the what a typical Marketing Agreement is; how the HUD interpretive rule on home warranties impacts their use, how to minimize your risks by looking for red flag language, and the impact the Federal Financial Institutions Examination Council (FFIEC) third party social media compliance bulletin may have on your marketing agreement. The FFIEC's social media bulletin will have a significant impact on the use of these agreements so this is a webinar event you do not want to miss.

This event is from 2:00-3:00 PM EST on Wednesday, May 18, 2013.

To register for Part 3 of the RESPA News Webinar Series please click here.

The Consumer Financial Protection Bureau "CFPB" and the United States Department of Justice "DOJ" formally entered into an Memorandum of Understanding Agreement "MOU" pursuant to Section 1054(d)(2)(B) of the Dodd-Frank Wall Street Reform and Consumer Protection Act which mandated the two agencies to establish an agreement between themselves to help prevent enforcement conflicts and help streamline fair lending law litigation under Federal law. The MOU involves Federal fair lending laws such as the Equal Credit Opportunity Act, Home Mortgage Disclosure Act, and Truth In Lending Act.

The MOU outlined three key areas for this cooperative agreement:

1. Information sharing and confidentiality issues: the agencies will be sharing information in matters that the CFPB refers to the Justice Department, in joint investigations under the ECOA, and in order to coordinate fair lending enforcement. The MOU establishes strict confidentiality protections for this shared information.

2. Joint investigations and coordination: the MOU provides for collaboration in investigations as well as coordination in joint investigations involving the CFPB and DOJ. The agencies will also meet regularly to discuss pending fair lending investigations and opportunities for coordination.

3. Referrals and notifications: the CFPB will refer matters to the Justice Department when it has reason to believe that a creditor has engaged in a pattern or practice of lending discrimination. Because a referral to the Justice Department does not affect the CFPB’s authority to pursue its own supervisory or enforcement action, the CFPB and the Justice Department will coordinate their efforts to avoid unnecessarily duplicative actions. The agencies agreed to notify each other of their enforcement work, such as the opening of an investigation or the filing of a lawsuit.

On April 13, 2012 the Consumer Financial Protection Bureau (CFPB) issued Bulletin 2012-03 titled "Service Providers". The CFPB stated that it expects supervised banks and nonbanks to oversee their business relationships with their service providers in a manner that ensures compliance with Federal consumer financial law, which is designed to protect the interests of consumers and avoid consumer harm.

The term "Service Provider" is defined in Section 1002(26) of the Dodd-Frank Act as "Any person that provides a material service to a covered person in connection with the offering or provision by such covered person of a consumer financial product or service." (12 U.S.C. Section 5481(26)). A "Service Provider" may or may not be affiliated with the person to which it provides services."

The Consumer Financial Protection Bureau in its bulletin states that the CFPB "recognizes that the use of service providers is often an appropriate business decision for supervised banks and nonbanks. Supervised banks and nonbanks may outsource certain functions to service providers due to resource constraints, use service providers to develop and market additional products or services, or rely on expertise from service providers that would not otherwise be available without significant investment."

The CFPB's bulletin expresses concerns about the lack of liability by the lender to the consumer for third party behavior. "The mere fact that a supervised bank or nonbank enters into a business relationship with a service provider does not absolve the supervised bank or nonbank of responsibility of complying with Federal consumer financial law to avoid consumer harm. A "service provider" that is unfamiliar with the legal requirements applicable to the products or services being offered, or that does not make efforts to implement those requirements carefully and effectively, or that exhibits weak internal controls, can harm consumers and create potential liabilities for both the service provider and the entity with which it has a business relationship." The Consumer Financial Protection Bureau states that "depending on the circumstances, legal responsibility may lie with the supervised bank or nonbank as well as with the supervised service provider."

In short the CFPB now expects supervised banks and nonbanks to make sure the service providers comply with the law. The CFPB by issuance of this bulletin has effectively put the entire real estate industry on notice that if they want to do business in the future they had better make sure their internal controls are in place otherwise the supervised bank or nonbank will cease doing business with you.

Continue reading "CFPB: CONSUMER FINANCIAL PROTECTION BUREAU ISSUES BULLETIN ON SERVICE PROVIDER COMPLIANCE" »

The Heather Q. Bolinger, et al v. First Multiple Listing Service, Inc., et al (Case 2:10-cv-00211-RWS) which is being litigated in the United States District Court for the Northern District of Georgia Gainesville Division survived the Defendant's Motion to Dismiss the case on January 18, 2012.

The First Multiple Listing Service Inc. lawsuit contends the federal Real Estate Settlement Practices Act (“RESPA”) requires full disclosure of all fees and charges in real estate closings involving a federal mortgage loan. RESPA also prohibits unearned fees or kickbacks designed to encourage the referral of business by settlement service providers, such as First Multiple Listing Service ("FMLS") and its member real estate brokers. One of the principal purposes of these RESPA provisions is to lower the cost of real estate closings to consumers by eliminating secret, disguised, and inflated charges.

The Bolinger et al. class action lawsuit alleges that:

1. Members of FMLS, which include virtually every residential real estate broker and agent in North Georgia, are required to list with FMLS all properties for sale and to pay undisclosed, unearned transaction fees to FMLS after closing and all services are rendered. Consumers either pay these fees directly or through inflated commissions.

2. Real Estate Brokers receive a kickback of all or substantially all of those fees from FMLS, and share in transaction fees paid on other closings. The suit further contends that these unearned hidden settlement fees and kickbacks are funded by real estate commissions paid by consumers. The hidden transaction settlement fee is $1.20 per thousand dollars of the selling price (i.e., .0012% of the sales price), and is doubled if the listing and selling agents work for different real estate brokers.

For example, the sale of a house for $200,000 with different listing and selling real estate agents would result in an undisclosed hidden transaction settlement fee of $480. In most transactions, the hidden settlement fee is not disclosed to the buyer or seller, either in the voluminous documents executed at closing or otherwise, and the kickbacks are never disclosed.

3. In addition to violating RESPA, these practices violate the Sherman Act, which is the core federal antitrust law. Notably, the “MLS Antitrust Compliance Policy” of the National Association of REALTORS® expressly prohibits basing MLS fees on a percentage of the sales price rather than the value of the services rendered [download NAR policy here]. Yet investigation for the lawsuit found not only that, as alleged, FMLS charges a per-transaction fee based on the sales price, and pays a kickback to brokers for utilizing its services, but that FMLS may be the only MLS in the country to do so. Further, the fees associated with FMLS are alleged to be higher than those charged by MLS’s elsewhere in Georgia and around the country.

Taylor English Duma LLP, a law firm with offices in Atlanta and Savannah, Pope, McGlamry, Kilpatrick, Morrison & Norwood, LLP, a Georgia law firm with offices in Atlanta and Columbus, and the New Orleans based Sterbcow Law Group LLC have filed a lawsuit on behalf of buyers and sellers of residential real estate in metro Atlanta and North Georgia against First Multiple Listing Service, Inc. (“FMLS”), its member real estate brokers, the agents who handled the transactions of the named plaintiffs, and three boards of REALTORS®, alleging a longstanding practice of FMLS and its members in charging buyers and sellers unearned hidden transaction fees in connection with residential real estate closings in violation of federal and state law. FMLS is a multiple listing service (“MLS”) that provides an electronic database for listing residential real estate for sale. It is the largest MLS in metro Atlanta and North Georgia.

For more information please visit the FMLS CLASS ACTION WEBSITE.

Continue reading "RESPA CLASS ACTION SURVIVES MOTION TO DISMISS RESPA CLAIMS IN ATLANTA" »

H.R. 2446 known as the "RESPA Home Warranty Clarification Act of 2011" passed The Insurance, Housing, and Community Opportunity Subcommittee last week. US Congresswoman Judy Biggert sponsored the bill and is the Chairman of the subcommittee. The RESPA Home Warranty Clarification Act as currently written by Rep. Biggert seeks to clarify the scope of RESPA by exempting home warranty companies as settlement service providers and would require that consumers are given clear notice that their real estate agent could receive a referral fee for selling them a home warranty. According to Rep. Biggert, Home warranties should not be subjected to these RESPA regulations because the sale of home warranties is outside the scope of RESPA.

Rep. Biggert seeks to overturn the Department of Housing and Urban Development's Interpretive Rule which stated that a "homeowner's warranty is covered as a "settlement service" under HUD's RESPA regulations at 24 CFR 3500.2 it issued on June 25, 2010.

Continue reading "RESPA: H.R. 2446 RESPA HOME WARRANTY CLARIFICATION ACT OF 2011" »

The Consumer Financial Protection Bureau "CFPB" announced plans today to implement an early warning enforcement action plan ("the Early Warning Notice") which would allow those under investigation the ability to respond to the CFPB. The CFPB Bulletin 2011-04 (Enforcement) announced the first in a series of periodic bulletins the CFPB will release which are aimed at providing information about the policies and priorities of the CFBP's Bureau of Enforcement.

"Before the Office of Enforcement recommends that the Bureau commence enforcement proceedings, the Office of Enforcement may give the subject of such recommendation notice of the nature of the subject's potential violations and may offer the subject the opportunity to submit a written statement in response. The decision whether to give such notice is discretionary, and a notice may not be appropriate in some situations, such as in cases of ongoing fraud or when the Office of Enforcement needs to act quickly."

It is important to note that if the subject(s) of an investigation is asked to provide the Bureau of Enforcement a response statement and the subject prepares and submits the response statement under oath to the Bureau the response may be discoverable by third parties.

The Early Warning Notice also allows any person involved in an investigation to voluntarily submit a written statement at any point during an investigation.

Continue reading "CONSUMER FINANCIAL PROTECTION BUREAU: "THE EARLY WARNING NOTICE" PROCEDURE ANNOUNCED FOR ENFORCEMENT ACTION" »

Daniel Fisher of Forbes Magazine wrote an article today titled ""Sleeper" Case Asks Whether Plaintiffs Can Sue Without An Injury." Mr. Fisher's article highlights the Edwards v. First American case and discusses the positive impact a Supreme Court's ruling would have for corporations facing civil and class action lawsuits from consumers who might have a hard time showing actual injury in fact damages.

The Edwards case stems from a real estate settlement procedures act (RESPA) class action where the Edwards' were required to purchase a title insurance policy from First American. First American's actions allegedly violated Section 8(c)(2) of RESPA where the federal rules state that affiliated businesses can't require that borrowers use their affiliated businesses and the civil penalty for violating this rule is treble damages on all fees paid to First American plus attorney's fees.

The US Supreme Court is looking at standing to sue under Article 3 of the US Constitution in the Edwards case. "First American argues Edward suffered no harm and therefore has no standing to sue under Article III of the Constitution. Under Article III federal courts are limited to hearing “cases” or “controversies” and the Supreme Court has since decided that means somebody who has suffered actual harm or is in imminent danger of it."

Fisher's business article on Forbes.com explains how the future decision by the Supreme Court in the Edwards case would impact not only the financial services industry but the decision will have a major impact on the automobile industry among others. The ramifications of the Edwards decision by the US Supreme Court could certainly change the way businesses operate because the threat of civil litigation by consumers will be significantly curtailed. A ruling in favor of First American would also put more pressure on regulators to regulate compliance issues.

Reporter Avi Salzman with Barron's is reporting that Bank of America may file for bankruptcy protection for it's Countrywide subsidiary if litigation costs from Countrywide threaten Bank of America. Bank of America is the parent company of Countrywide but it is a separate legal entity. If Bank of America (NYSE: BAC) decides to declare bankruptcy it would only affect the Countrywide division not the entire company.

If Bank of America does file for bankruptcy protection for Countrywide it could have a material impact on on-going litigation involving RESPA, TILA, and other legal actions across the United States involving Countrywide. The purchase by Bank of America is widely viewed as one of the worst acquisition decisions in corporate American history.

The United States Department of Housing and Urban Development "HUD" announced a settlement with Fidelity National Financial (NYSE: FNF) in the amount of $4.5 million dollars for HUD's contention that Fidelity violated the Real Estate Settlement Procedures Act "RESPA" when it paid real estate brokers and other settlement service providers illegal kickbacks and improper referral fees for referring business through an "Application Service Provider Agreement." The Application Service Provider Agreement provided real estate brokers and other settlement service providers with access to Fidelity's TransactionPoint closing software. TransactionPoint allowed real estate brokers and others to select real estate settlement service providers for a particular real estate transaction. The real estate brokerages would then enter into Sub-License Agreements with subsidiaries of Fidelity to enable Fidelity's subsidiaries to be listed in TransactionPoint as a provider of settlement services.

The settlement said Fidelity's subsidiaries would then in turn compensate the real estate brokerages a fee for each referral of real estate. Re-insider.com was the first to break this story and has extensive coverage on the topic for those who wish to learn more. It is important to note that HUD's Settlement Agreement only applies to Fidelity and not to the real estate brokerages who recieved the kickbacks and illegal referrals fees so it is possible that more settlements will be announced as it pertains to those companies who recieved the kickbacks and improper referral fees.

The settlement can be viewed by clicking this link: FIDELITY SECTION 8 RESPA SETTLEMENT

The United States Supreme Court granted First American Financial Corporation's Writ of Certiorari it filed in the Denise P. Edwards et al. v. First American Financial Corporation, et al. RESPA class action lawsuit today (June 20, 2011). The Supreme Court will now decide whether a plaintiff has standing to sue, on behalf of a nationwide class, when a plaintiff asserts that a real estate company violated the Real Estate Settlement Procedures Act of 1974 (RESPA) without showing the RESPA violation affected the services rendered.

The Edwards lawsuit accuses First American and others of operating an illegal kickback scheme which violated Section 8 of RESPA. The Supreme Court decision will focus strictly on Question 2 presented in the Writ of Certiorari. The issue presented in Question 2 is whether the a privte purchaser of real estate has standing to sue under Article III, Sec. 2 of the United States Constitution.

The case is First American Financial v. Edwards, 10-708.

Continue reading "BREAKING RESPA NEWS: UNITED STATES SUPREME COURT GRANTS WRIT OF CERTIORARI IN EDWARDS VS. FIRST AMERICAN'S RESPA CLASS ACTION LAWSUIT" »

The 6th Circuit Court of Appeals in Cincinnati, Ohio approved a motion by the United States Attorney General allowing it to intervene on behalf of the plaintiffs in a RESPA class action lawsuit involving kickbacks. The Federal 6th Circuit Court of Appeal will hear the case in early Spring.

The United States Department of Treasury has hired Richard Cordray to lead the Enforcement Division of the Consumer Financial Protection Bureau (CFPB) which was created under the Dodd-Frank Bill. Richard Cordray was elected as the Ohio Attorney General in 2008. Cordray has filed numerous lawsuits during his tenure as the Ohio Attorney General, most notably against AIG, Marsh & McLennan, Bank of America, and Merrill Lynch which resulted in more than 2.5 billion dollars in settlements.

Given Cordray's history it appears that he will be focusing on federal preemption of nationally chartered banks and the problems state regulators have had with their inability to enforce laws. The doctrine of preemption was used by the Office of Comptroller of the Currency as a way to stop states from enforcing rules and regulations against nationally chartered banks. He has pledged to jointly work with state attorney generals while at the CFPB in his investigations which could significantly hamper nationally chartered banks argument of federal preemption against state laws. Cordray and The American Bankers Association have opposing stances on the bank preemption issue. The underlying premise is that nationally chartered banks who engage in abusive and fraudulent tactics better be prepared for an onslaught of litigation and penalties when the enforcement team starts working with the states.

Richard Cordray's reputation is that of a staunch advocate for consumer rights against financial services companies who break the law. Cordray is responsible for selecting the enforcement team and preparing for the exercise of enforcement powers. RESPA enforcement under Cordray appears to be a priority based on his past history and Section 6 of RESPA is a prime target for future regulatory enforcement action by the CFPB.

On November 23, 2010, the Office of General Counsel's Helen Kanovsky with the Department of Housing and Urban Development "HUD" responded to public comments HUD received on the "Home Warranty Companies' Payments to Real Estate Brokers and Agents" Interpretive Rule it published on June 25, 2010. HUD's response was very clear that the interpretive RESPA rule they issued in June did not need to be changed. However, HUD did provide some clarification to the public by providing additional guidance relating to matters covered in the interpretive rule and from the public's comments. HUD's answered seven questions as listed below:

Continue reading "REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA): HUD ISSUES RESPONSE TO PUBLIC COMMENTS ON HOME WARRANTY COMPANY PAYMENTS TO REAL ESTATE AGENTS AND BROKERS" »

The Consumer Financial Protection Bureau which will oversee the Real Estate Settlement Procedures Act (RESPA) now has a decision maker to help set up the CFPB. President Obama announced today the appointment of Harvard Professor Elizabeth Warren to implement policies and procedures to protect consumers from financial products. Ms. Warren who is widely known as the person who developed the idea for the CFPB will also be responsible for helping select a director to head up the CFPB.

Warren is considered a strong consumer advocate and her ideology has some in the financial services industry concerned. The concern reached a fevered pitch over the last two months with Republicans and the financial services industry pledged to hold up her confirmation in the Senate. Obama's move of not appointed her to the CFBP but rather giving Warren supervisory authority of the CFPB without going through a senate confirmation process stunned her critics.

It remains to be seen how Warren will tackle the enforcement of RESPA in the near future but I suspect that we will see a huge increase in both funding and manpower in the RESPA enforcement arena.

The Department of Housing and Urban Development (HUD) issued an interpretive rule on June 26, 2010 in the Federal Register on the issue of how home warranty companies can pay real estate agents and real estate brokers under the Real Estate Settlement Procedures Act (RESPA) without violating Section 8(a) and 8(b).

The interpretive rule was released in response to a Feb. 21, 2008 unofficial staff interpretation letter that Paul Ceja of HUD's Office of General Counsel issued that caused a great deal of confusion in the real estate industry. Since the letter was issued The National Association of Realtors (NAR), Real Estate Settlement Providers Council (RESPRO), National Home Service Contract Association (NHSC), and others pressed HUD to clarify the rule on the subject of home warranty compensation.

HUD's new clarification breaks down the issue into three distinct categories:

1. Unlawful Compensation for Referrals: RESPA does not prohibit a real estate broker or real estate agent from referring business to a home warranty company. But RESPA does prohibit a real estate broker or agent from receiving a fee for merely referring or "marketing" a buyer or seller to purchase an insurance policy from the home warranty company. A referral by itself is not a compensable service for which compensation can be given and would be a violation of Section 8(a) illegal kickback and Section 8(b) unearned fees under RESPA.

2. Bona Fide Compensation for Service Provided: HUD's RESPA guidance rule says that Section 8(c) allows payment of bona fide compensation for services actually performed. HUD said that depending on the facts of a particular case (based on a case-by-case determination), a home warranty company may compensate a real estate broker or agent for services when those services are actual, necessary, and distinct from the primary services provided by the real estate broker or agent and those additional services must not be nominal or duplicative. An example would be a real estate agent filling out all the information required to issue a home warranty policy and submitting the policy to the home warranty company.

3. Reasonableness of Compensation: Lastly, HUD said they want to assess whether the value of the payment by the home warranty company is reasonably related to the value of the services actually performed by the real estate agent or broker and not just compensation for the mere referral of business. The compensation from the Home Warranty Company to the real estate agent must be based on the fair market value of the services performed in the area where real estate agent operates. For example if the fair market value is $200 dollars in New York but in Missoula the fair market value is $60 to fill out the home warranty application, fill in the registration codes for various appliances, and do some other functions then the real estate agent in Missoula should recieve $60 dollars for that work not $200 if that is the going rate in New York. HUD appears to have taken the position that charging $200 in Des Moine when the fair market value is $60 is unreasonable compensation.

The RESPA interpretive rule raises a large legal question on the issue of whether this rule expands the definition of who a settlement service provider is. Lenders do not typically require a home warranty policy to be purchased by a buyer (or seller) as a condition in securing a federally related residential loan. The result has been that in many jurisdictions across the United States the home warranty policy is paid outside of closing and not listed on the HUD-1.

The question we need clarification on is whether RESPA believes that all home warranty policies issued on the purchase of a home where a federally related mortgage is involved be listed on the HUD-1. If that is not the case does this interpretive rule extend to companies that traditionally were not considered settlement service providers (pest inspection companies, home repair companies, privacy protection companies, etc.) under the original definition?

Continue reading "REAL ESTATE SETTLEMENT PROCEDURES ACT: RESPA ISSUES INTERPRETIVE RULE ON HOME WARRANTY MARKETING AGREEMENTS" »

The U.S. Housing and Urban Development (HUD) made a number of surprising management changes last month including the shuffling of Ivy Jackson, the Director of the Office of RESPA and Interstate Land Sales to the Office of Insured Health Care Facilities. Ivy Jackson's departure took the real estate industry by surprise and created uncertainty for state regulators who were relying on her to educate them the new RESPA regulations this year.

The Sterbcow Law Group would like to thank Ivy Jackson for her contributions over the years at RESPA. She will always be remembered as a federal regulator who was fair to the real estate industry and to consumer interests while at RESPA. Ms. Jackson's work ethic, honesty, and experience will be missed.

HUD promoted Teresa Baker Payne to the position of Assistant Deputy Assistant Secretary and Barton Shapiro was named Acting Director of RESPA and Interstate Land Sales. Ms. Payne and Mr. Shapiro both bring experience to their new positions. Ms.Payne and Mr. Shapiro both are excellent choices for their respective roles at HUD.

Continue reading "RESPA: DEPUTY DIRECTOR IVY JACKSON IS SHUFFLED OUT OF RESPA DIVISION" »

The United States District Court for the Northern District of Ohio denied certifying a Real Estate Settlement Procedures Act "RESPA" class action lawsuit on March 11, 2010. The Carter v. Welles-Bowen Realty, Inc., case No. 3:05 CV 7427, consolidated No. 3:09 CV 400, 2010 WL 908464 (Northern District of Ohio) is a case where the plaintiffs asserted that Welles-Bowen Realty, Inc was engaged in operating illegal affiliated business arrangements (aka sham AfBAs) which is a violation of RESPA Section 8(a) and 8(b) (12. U.S.C. 2607 (a) and (b)).

Judge Jack Zouhary's reasoning for his latest denial of class certification in this RESPA lawsuit is controversial because he believes that class actions are not a proper method of litigating RESPA civil suits. Judge Zouhary's partially based his decision to deny class certification because it was his opinion that state and federal regulators should prosecute RESPA claims not class action litigation. The controversy surrounds the opinion because the Real Estate Settlement Procedures Act does allow for civil class action lawsuits. State and federal regulators routinely rely on class action lawsuits to help them in their investigations the loss of this informational stream may have an adverse impact on the consumers some believe if this ruling is universally adopted across the United States.

It should be noted that the Court was overruled once before in this case by the U.S. Court of Appeals for the Sixth Circuit on the issue of whether a RESPA class action requires a concrete financial injury in fact. The question is whether the plaintiffs will appeal this ruling or will they find another way to continue on but avoid this particular Court.

Continue reading "RESPA CLASS ACTION LITIGATION: CLASS ACTION CERTIFICATION DENIED IN CARTER V. WELLES-BOWEN REALTY, INC" »

The United States Court of Appeals for the 9th Circuit ruled in favor of Wells Fargo Home Mortgage Inc., WFC Holdings Corporation, Wells Fargo & Company, and Wells Fargo Financial Services Inc. on the issue of whether overcharging a settlement service fee to the consumer violates the real estate settlement procedures act (RESPA). The RESPA fee at issue was an $800.00 dollar "underwriting fee" which was charged to the borrowers in Martinez v. Wells Fargo

Continue reading "RESPA CLASS ACTION LAWSUIT DISMISSED ON OVERCHARGING ISSUE" »

The Real Estate Settlement Procedures Act "RESPA" regulations set to take place on January 1, 2010 has purportedly been delayed by HUD for six months. We are now waiting for an official announcement to take place by HUD to officially confirm the six month delay which should make the new implementation date on or around July 1, 2010.

We don't know what precipitated this possible delay by HUD but the real estate industry has stepped up their criticisms on the new rule, including a recent letter sent to HUD by numerous trade organizations, issues with the new Truth In Lending Act form "TILA" integration, and other federal enforcement agencies concerns about the transparency of the new HUD-1 have forced HUD to re-evaluate parts of the new rule. Of course one of the other problems is that many in the real estate industry are still very much unaware or uneducated on the new RESPA Rule.

UPDATED at 10:39 PM:
Assistant Secretary of Housing David Stevens informed me that there will not be a delay in the implementation of the Jan. 1, 2010 RESPA rule. The information we received came from numerous credible sources in Washington, D.C. but it appears that the information regarding the delay according to HUD will not occur.

UPDATE #2 AT 11:53 ON THURSDAY:
Kelly McCarel atRESPA NEWS.COM is now confirming "that HUD has been holding private meetings about the possibility of a delay" according to their sources.

However, Assistant Secretary of Housing Dave Stevens stated to us in an email at 3:00AM this morning that "There have been all sorts of discussions on readiness but a delay on implementation has not been one of them. The industry needs to be prepared for January 1st."

Stay tuned.............

Latest Update November 13, 2009
HUD Announced a 120 day (4 month) delay in HUD Enforcement of the new rule or as HUD calls it a "Restraint in Enforcement."

U.S. Rep. Barney Frank officially introduced legislation to create the Consumer Financial Protection Agency (CFPA). The legislation, which is backed by the Obama Administration, would consolidate the consumer protection powers of the fifty various federal financial regulatory agencies by creating a single regulatory agency. The creation of this single regulatory agency is the single most important aspect of the proposed 229 page Consumer Financial Protection Agency proposal.

The current financial governing system encourages abuses in the industry to take place because of the loopholes created by an inefficient and ineffective regulatory structure. The loopholes are exploited even further by the mass infighting that many of the governmental regulatory bureaucracies regularly display. The consolidation of these various federal agencies into one rule-making and investigative federal division should provide more uniform rules for those in the real estate industry and for consumers of real estate products.

The CFPA will have sole authority to draft and interpret regulations under the existing consumer financial services and fair lending statutes. The recent Good Faith Estimate/HUD-1 Settlement Statement forms developed by HUD and the Truth In Lending Act form is a prime example of decisions being made by one federal agency without input from a completely different agency. The biggest benefit consolidation presents to the industry and to the consumer is that this will increase the number of enforcement investigators. The consolidation of regulatory investigators is crucial because quite often investigators in one agency stop investigating abuses that relate to other agencies due to a myriad of reasons.

Continue reading "THE CONSUMER FINANCIAL PROTECTION AGENCY (CFPA) PROPOSAL INCLUDES RESPA AND TILA REGULATORY GOVERNANCE" »

Reporter Kate Moran of the Times Picayune wrote a terrific article on a lawsuit the Sterbcow Law Group LLC and Melancon Rimes LLC filed on in behalf of their client and plaintiff Sarada LeBourgeois who was the victim of mortgage fraud.

"Lawsuit alleges that a loan originator stole money from a client" was published on May 12, 2009 and briefly describes the events surrounding the lawsuit. The federal case was recently remanded back to Civil District Court in New Orleans by U.S. District Judge Lance Africk.

Kelly McCarel with RESPA News also wrote an excellent article on the case on Feb. 12, 2009 entitled Louisiana case ties RESPA violations to alleged mortgage fraud"

The case was filed in the Orleans Parish, Civild District Court in Louisiana with the docket number 2008-2705 and is listed under the name Sarada LeBourgeois, et al. v. Allied Home Mortgage Capital Corporation, et al.