Back in 2007, Tammy and Larry Freeman got a mortgage through Quicken Loans. Quicken charged them a “loan discount fee” of $980, but — they claimed in court — Quicken didn’t lower their rate.
Seems a simple case that belongs in Small Claims Court, right? Except that, if the Freemans are right (and Quicken did admit to charging the fee), that could constitute an unearned fee. And that looks like a RESPA violation.
The Freemans and two other families sued, and the issue soon expanded.
According to RESPA (and this is a rough interpretation), Quicken can’t charge fees for doing nothing, which is what the Freemans say is exactly what it did.
Here’s the RESPA wording:
(a) Business referrals
No person shall give and no person shall accept any fee, kickback,
or thing of value pursuant to any agreement or understanding, oral or
otherwise, that business incident to or a part of a real estate
settlement service involving a federally related mortgage loan shall be
referred to any person.
(b) Splitting charges
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 in connection with a transaction involving a
federally related mortgage loan other than for services actually
The case moved through the courts, and eventually the 5th Circuit Court of Appeals ruled in Quicken’s favor, saying that because Quicken didn’t split that loan discount fee with a third party, there wasn’t a RESPA violation. In similar cases, other circuit courts agreed.
But three circuit courts ruled the opposite way, saying the law applies to any unearned fees, whether it’s split or not.
Hence, the Freeman’s case is on its way to the Supreme Court.
Granted, this is a quick and dirty summary of the situation; if you want to read more, click here for the Housing Wire stohttp://www.housingwire.com/2011/10/12/high-court-to-decide-case-over-respa-fees.
And if you really love the details, click here to head over to SCOTUSblog where you can read the nitty-gritty.