RESPA Highlights: 1Q 2015

A. Cases

This section examines a class-action settlement in a case involving a captive-reinsurance scheme (Moore), and a case involving RESPA regulations for good-faith estimates and state-law claims against a lender (Sarno).

1. Moore v. GMAC Mtge. (Federal Court for the Eastern District of Pennsylvania, Sept. 19, 2014) (reported during the first quarter of 2015)

  • GMAC Mortgage and other lenders agreed to pay $6.25 million in a class action settlement alleging kickbacks and fee splits from private mortgage insurers to whom defendants’ referred business in violation of RESPA § 8.

In a class action lawsuit, a group of borrowers alleged that GMAC Mortgage and two other lenders accepted kickbacks and fee splits from private mortgage insurers which received referrals from them.24 The court approved a $6.25 million class action settlement. The settlement fund permitted each plaintiff to recover about $51.25 The court acknowledged that this amount was lower than awards made in recent cases, but noted that the defendants were not in a comparably stable financial condition.26

2. Sarno v. Wells Fargo Bank N.A. (California Court of Appeals, Jan. 23, 2014)

  • Although a good-faith estimate must set forth the interest rate for a mortgage, RESPA regulations allow the lender to decide how long the offered rate will last and the lender may change the rate if the borrower does not “lock” it on time.

Sarno27 is a rare case involving a claim relating to a lender’s good-faith estimate (GFE). After Sarno applied for a mortgage loan, the lender provided him with a GFE quoting an interest rate of 4.25%. The GFE clearly set forth the deadline for locking that rate. It also stated, however, that the rate was “available through N/A.” Sarno did not lock in the rate by the deadline. His closing was postponed for several weeks, during which the interest rate rose to 4.625%. Sarno accepted the increased rate, closed the loan, and then tried to negotiate the rate back down to 4.25%. A year later, he brought a lawsuit asserting several state-law causes of action. Each cause of action was based on the theory that the GFE was a binding agreement to lend at 4.25% and that rate was available indefinitely (based on the “available through N/A” language in the GFE). According to the court, the RESPA regulations provide that the stated rate is available until the date set by the loan originator.28 The court rejected Sarno’s contention that the 4.25% rate was available indefinitely, because interpreting “available through N/A” would make “an extraordinary contract, and one with potentially harsh and inequitable consequences for both parties.”29 The appellate court affirmed an order dismissing the case.

B. Statutes and Regulations

No statutes or regulations addressing RESPA issues were retrieved.

C. Volume of Materials Retrieved

RESPA issues were identified in the case law seven times. (See Table 1.) The research focused on claims arising as a result of the settlement process, rather than claims arising in the context of foreclosure. Most cases addressed Kickback issues. (See Table 2.) No statutes or regulations addressing RESPA issues were retrieved.

24 Moore v. GMAC Mtge., No. 07-4296, 2014 U.S. Dist. LEXIS 181431 (E.D. Pa. Sept. 19, 2014).
25 Id., 2014 U.S. Dist. LEXIS 181431, at **13-14.
26 Id. (citing, inter alia, Liguori v. Wells Fargo & Co., No. 08-479, 2013 U.S. Dist. LEXIS 189337 (E.D. Pa. Feb. 7, 2013) (awarding $173 per class member)) (LEXIS citation is actually refers to Hoffman v. Wells Fargo & Co., No. 5:08-cv-00479-PD (E.D. Pa. Feb. 7, 2013)).
27 Sarno v. Wells Fargo Bank N.A., No. B246952, 2014 Cal. App. Unpub. LEXIS 454, 2014 WL 255708 (Jan. 23, 2014).
28 Id. at **7–11.
29 Id. at **16–17.

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State Law Based Changes

Read a summary of this quarter's additions to the State Law Based Changes.