U.S. Supreme Court Delivers a Brushback Pitch to Federal Regulators in Freeman v. Quicken Loans, Inc.


The United States Supreme Court delivered a major win to the residential mortgage loan industry when it unanimously ruled that the prohibition under the Real Estate Settlement Procedures Act ("R.E.S.P.A.") on splitting fees for settlement services requires at least two or more persons to satisfy the statutory requirement of Section 8(b), 12 U.S.C. § 2607(b). Its ruling in Freeman, v. Quicken Loans, Inc., No. 10-1042, May 24, 2012, also made it abundantly clear that Section 8(b) does not provide a cause of action for borrowers to challenge either the reasonableness of fees charged by lenders or whether such fees are even for services actually provided, both of which concepts were advocated by H.U.D. in its Statement of Policy 2001-1 and by the Federal government in its amicus brief filed in the case on the side of the plaintiffs.

The provision of R.E.S.P.A. at issue was Section 8(b), 12 U.S.C. 2607(b), that prohibits giving and accepting "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 Court was asked to consider whether, to establish a violation of Section 8(b), a plaintiff only had to demonstrate that a charge was unearned even if collected by a single settlement service provider (an undivided unearned fee) or whether the fee must be shared by a provider with one or more other persons who did nothing to earn that part.

This provision is enforceable through actions for damages brought by consumers of settlement services against any person or persons who violate the provisions of Section 8, with recovery set at an amount equal to three times the charge paid by the consumer for the settlement service at issue. 12 U.S.C. § 2607(d)(2).

The plaintiffs in the case were three married couples who argued that Quicken Loans charged them fees (specifically, loan discount, processing and loan origination fees) for which no services were provided.

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