News Flash: On May 24, the Supreme Court decided in favor of NAR’s position on the Quicken case (discussed in this April 30 post). Here’s a link to the decision. Guidance from NAR will be forthcoming soon.
Earlier this month, the magazine hosted a webinar with two NAR attorneys—Ralph Holmen and Finley Maxson—in which we examined six cases (including one still pending) and their potential impact on your business. Some of you have said you’d like to see a written summary rather than listen to the 60-minute session. Fair enough! Because the cases are complex, however, I’ll cover one at a time.
Here’s a look at the first case, plus additional commentary and resources. The usual warning applies: Brokers and salespeople who have questions about how or whether these laws or cases apply to their situation should seek the counsel of a qualified attorney.
Issue: Does the RESPA prohibition on unearned fees apply to transaction fees?
The Law: One year before the Home Mortgage Disclosure Act, three years before the Community Reinvestment Act, and 38 years before the Consumer Financial Protection Bureau, there was RESPA. RESPA—the Real Estate Settlement Procedures Act—was passed in 1974 to prevent kickbacks in the provision of settlement services, and it has been a source of angst and debate among real estate, title, and mortgage professionals ever since. One contentious provision, Sec. 8(b), prohibits settlement service providers from imposing so called “unearned fees” on borrowers. Seems simple enough. Not really.
The Case: We looked at Freeman v. Quicken Loans, in which a group of Louisiana borrowers, led by Tammy Foret Freeman, charged Quicken with violating RESPA’s prohibition on unearned fees. Quicken argued that the fee in question, discount points paid to reduce the mortgage interest rate, was standard practice across the industry. Quicken prevailed in District Court and the Federal Circuit Court of Appeals, but the plaintiffs appealed to the U.S. Supreme Court.
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