RESPA Highlights: 4Q 2017

A. Cases

Over the past year, the cases have largely addressed two issues: (1) the sufficiency of the allegations asserting a RESPA violation and (2) whether a claim is barred by the statute of limitations. The fourth quarter of 2017 was no exception. As shown below, the cases from last quarter again consider these same two issues.

RESPA CASE FROM EARLIER EDITION

With respect to RESPA cases, we revisit the following case from earlier this year, in which the court determined that the relationship between a law firm and several LLCs providing title insurance fell within RESPA’s affiliated business relationship exception

Consumer Financial Protection Bureau v. Borders & Borders , PLC, No. 3:13-CV-01047 CRS-DW, 2017 WL 2989183 (W.D. Ky. July 13, 2017). Borders & Borders, a law firm that performed many real estate closings, created joint ventures (LLCs) with nine real estate services providers to provide title insurance. Under the arrangement between Borders & Borders and the LLCs, when Borders & Borders closed on a real estate transaction, the firm referred the title insurance underwriting to the LLC affiliated with the real estate representative involved in the transaction. This relationship was disclosed to the buyers. The Consumer Financial Protection Bureau argued that this relationship violated RESPA Section 8(a), which prohibits the giving and receiving of fees and kickbacks in connection with mortgages. Because Borders & Borders disclosed the relationship with the LLCs, the court found that the Title LLCs did not receive anything of value beyond their ownership interests, and the arrangement qualified as an “affiliated business relationship.” The court granted summary judgment for Borders & Borders.

1. Alexander v. Nationstar Mortgage, LLC, No. 16-CV-2607-LTS-JLC, 2017 WL 6568057 (S.D.N.Y. Dec. 22, 2017)

Borrower failed to allege RESPA violation based on table funding of mortgage.

Mortgage borrowers alleged that their loan was table funded and the lender failed to disclose the table funding in violation of RESPA. The court found that the claim was insufficiently pled.

To properly allege a claim for improper table funding, the borrower must state that the loan originator was not the real source of the funding and that the loan was not closed in the originator’s own name. The borrower failed to allege that the loan was contemporaneously funded by a third party. The court dismissed the RESPA claim.

2. Masoud v. J.P. Morgan Chase Bank, No. 15-CV-2523-L-JMA, 2017 WL 6270269 (S.D. Cal. Dec. 8, 2017)

Update!

Borrower failed to amend complaint regarding date of discovery of alleged RESPA violation.

 

A borrower alleged that the lender and mortgage servicers made payments between them that were misleading and designed to create a windfall in violation of RESPA’s anti-kickback provisions. The court found that the alleged facts regarding payments occurred at the time of refinancing, which took place in 2005. In a previous decision (discussed in the 4Q 2016 Legal Pulse), the court found that the claim was barred by the one-year statute of limitations and the court dismissed the claim.

The borrower amended her complaint. In this decision, the court considered the lender and mortgage servicers’ motion to dismiss the amended complaint. The court again found the claim was barred by the statute of limitations. The borrower did not discover the facts of the alleged RESPA violation until 2015, but she failed to amend her complaint regarding the date of discovery of the alleged violation. Claim dismissed.

3. Kerstoff v. PHH Mortgage Services Corp., No. 2:16-CV-00262-RWS-AJB, 2017 WL 3597499 (N.D. Ga. June 27, 2017)

Borrower’s allegations failed to state a RESPA violation.

A borrower alleged that the lender and mortgage servicer defendants earned “interest and income” in an amount “disproportionate to the situation” because Defendants failed to “disclose that they will gain a financial benefit while Plaintiff suffer[ed] financially as a result of the loan product sold to Plaintiff.” The borrower also argued that the lender and mortgage defendants made misleading payments in violation of RESPA. Because the complaint failed to state that payments were made in exchange for a referral and failed to explain how the borrower suffered damage, the magistrate judge found the complaint was insufficient to state a claim. The magistrate judge recommended that the court dismiss the RESPA claim.

B. Statutes and Regulations

No statutory or regulatory changes relating to RESPA were located.

C. Volume of Materials Retrieved

RESPA issues were identified 34 times in 26 cases (see Table 1). Consistent with last year, the cases overwhelmingly involved kickbacks, but also addressed disclosure of settlement costs and affiliated business arrangements (see Table 2). No statutes or regulations addressing RESPA issues were retrieved this year.

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ARELLO Archive

The NAR/ARELLO Archive is a compilation of new types of laws collected over the past few years. This resource is helpful to guide states that may want to adopt similar laws in their state.

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Read a summary of this quarter's additions to the ARELLO archive.