May 25, 2012
Big Realtor win in the Supreme Court
25 May 2012
Posted by Andrew Kantor
We scored a nice-sized victory with a Supreme Court decision about RESPA violations.
It’s like this: Three couples got their mortgages through Quicken Loans. Quicken charged them each some extra fees — a “loan processing fee”, a “loan discount fee” — but didn’t (the couples said) actually provide anything for that extra money.
That, they said, violates RESPA, which A) bans kickbacks for referrals for settlement services, and B) covers how two parties have to divide payments. Taken together, they said, A+B meant Quicken couldn’t charge fees for doing nothing.
But SCOTUS disagreed.
The point of those RESPA sections was to stop kickbacks — lenders paying someone else (say, for a referral) and then passing that charge onto consumers. RESPA wasn’t written to prevent a lender from charging random fees for nothing in general. In fact, NAR filed an amicus curiae brief arguing just that point.
Granted, maybe there oughta be a law that says lenders can’t charge fees for doing nothing. Maybe not. But at the moment RESPA ain’t that law.
Why do we care?
So why should Realtors care about a law that seems to be targeted at lenders? Because real estate brokerages have been sued under RESPA when they’ve charged a flat fee along with a percentage-based commission.
In one 2009 case (Busby v. JRHBW Realty, Inc. d/b/a Realty South), a court ruled that even though Realty South disclosed all its fees in advance, the company’s flat fee violated RESPA because it wasn’t for a specific purpose. It was just a fee.
If Realty South had charged a slightly higher percentage commission, that would have been OK, said the court. But a flat fee? Nope.
Can you follow the logic there? Me neither.
Luckily it’s moot now, thanks to the SCOTUS decision. Unless there’s a third-party getting that money (aka a kickback), flat fees don’t violate RESPA.
Read the details over at NAR’s Speaking of Real Estate Blog (warning: legalese).
The case is Freeman v. Quicken Loans, Inc., No. 10-1042 (U.S. May 24, 2012).