WASHINGTON (Legal Newsline) - The U.S. Supreme Court, in a ruling Thursday, sided with a mortgage lender in a lawsuit filed over its settlement services and fees.
Three married couples in Freeman v. Quicken Loans Inc. had obtained mortgage loans from Quicken. In 2008, they filed separate lawsuits in a Louisiana state court, alleging the company had violated a section of the Real Estate Settlement Procedures Act, or RESPA.
In particular, the Freemans and the Bennetts allege they were charged loan discount fees of $980 and $1,100, respectively, but that Quicken did not give them lower interest rates in return.
The Smiths' allegations focus on a $575 loan "processing fee" and a "loan origination" fee of more than $5,100.
Enacted in 1974, RESPA regulates the market for real estate "settlement services," a term defined by statute to include "any service provided in connection with a real estate settlement."
In addition, RESPA provides that "no 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."
The three couples each alleged Quicken violated section 2607(b) of the act by charging them fees for which no services were provided in return.
However, after the cases were removed to federal court and consolidated, Quicken sought summary judgment. The lender argued that the couples' claims were not cognizable under 2607(b) because the allegedly unearned fees were not split with another party.
A district court agreed; and because the couples had not alleged any splitting of fees, it granted Quicken summary judgment. A divided panel of the U.S. Court of Appeals for the Fifth Circuit affirmed.
The U.S. Supreme Court, in its 13-page ruling, said the dispute "boils down" to whether the provision prohibits collection of an unearned charge by a single settlement service provider, or whether it covers only transactions in which a provider shares a part of a settlement service charge with one or more other persons who did nothing to earn that part.
The Court said 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.
"Section 2607(b) unambiguously covers only a settlement service provider's splitting of a fee with one or more other persons; it cannot be understood to reach a single provider's retention of an unearned fee," Justice Antonin Scalia wrote in the Court's unanimous opinion.
The Court called the couples' arguments in favor of the contrary "unpersuasive."
"Because petitioners do not contend that respondent split the challenged charges with anyone else, summary judgment was properly granted in favor of respondent," Scalia concluded.
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