Buslaw Spring Consumer Updates Housing Respa

8/6/2019 Buslaw Spring Consumer Updates Housing Respa

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2011 Goodwin Procter LLP

RESPA LITIGATION TRENDS

David L. Permut

Goodwin Procter LLP

April 16, 2011


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Goodwin Procter LLP 2

Explosion of RESPA Litigation

Over 500 cases in federal courts in the last year

Largely in response to the foreclosure crisis

The rise of the RESPA counterclaim

Claims largely involve:

Failure to respond to Qualified Written Requests (QWRs)

Failure to provide disclosures prior to or at closing

Inaccuracies/Omissions in disclosures


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Explosion of RESPA Litigation (Cont.)

Basic Themes:

Courts are strictly enforcing limits on private rights of action

Courts are generally holding that equitable tolling of RESPAs statute oflimitations is available, BUT . . .

Courts are rarely permitting tolling, often dismissing time-barred claimson the pleadings

Courts are requiring claimants to plead actual damages to state a claimfor failure to respond to a QWR

Courts are holding that emotional distress qualifies as actual damages


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Will the Supreme Court weigh in on RESPA standing?Edwards v. The First American Corporation, et al., 610 F.3d 514 (9th Cir. 2010)

Does Section 8 require allegation of an overcharge?

Plaintiff paid the filed rate for title insurance

The Ninth Circuit held that plaintiff had standing to sue for a violation of 8 even though she was not overcharged

In doing so the Ninth Circuit joined an emerging Circuit Split

The Third Circuit (Alston) and the Sixth Circuit (Carter) have held thatan overcharge is not required for RESPA standing

The Seventh Circuit (Durr) disagrees

District Courts in other Circuits are also split on the issue

A Petition for Certiorari has been fully briefed The Supreme Court recently asked for the Solicitor Generals viewon whether to grant the Petition


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The Next Issue for the Court?

There is another Circuit Split regarding whether a 8(b) claimrequires more than one culpable party. Does 8(b) apply to mark-ups and/or unearned fees?

The Fourth (Boulware), Fifth (Freeman), Seventh (Krzalic) andEighth (Haug) Circuits require a split between two parties

The Second (Kruse), Third (Santiago) and Eleventh (Sosa) Circuits

hold that a single party can violate Section 8


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What is the meaning of and ?

Two cases decided one week apart illustrate the fundamentaldisagreement:

Freeman v. Quicken Loans, Inc., 626 F.3d 799, 803 (5th

Cir. 2010)(We hold that the language of RESPA 8(b) is unambiguous anddoes not cover undivided unearned fees.)

Augenstein v. Coldwell Banker Real Estate LLC, 2010 U.S. Dist.

LEXIS 118994 (S.D. Ohio Nov. 9 2010) (The Court finds that thetext of RESPA 8(b) clearly and unambiguously prohibits undividedunearned fees.)



Other Notable Cases

Wooten v. Quicken Loans, 626 F.3d 1187 (11th Cir. 2010)

Like Freeman, the case involved the allegation that the lender

charged a discount point without lowering the borrowers interestrate.

The 11th Circuit does not require two culpable parties to split a fee

Defendant nevertheless prevailed because the Court held that adiscount point is not a settlement service.

We cannot conceive of a circumstance in which the charging ofloan discount points would qualify under our definition of service.

Id. at 1194.



Other Notable Cases

The continuing saga of Carter v. Welles-Bowen Realty, Inc.

The Court originally dismissed the case for lack of standing, but was

reversed by the 6th

Circuit. 553 F.3d 979 (6th

Cir. 2009). The Courtsubsequently issued summary judgment for Defendants underRESPAs affiliated business exemption. 719 F. Supp. 2d 846 (N.D.Ohio 2010).

In issuing judgment for the Defendant, the Court held that HUDsPolicy Statement on Sham Affiliated Business Arrangements (PolicyStatement 1996-2) is unconstitutionally vague



Other Notable Cases

The $20 million RESPA verdict?

Brash v. PHH Mortgage Corporation, d/b/a Coldwell Banker

Mortgage(Case No. 4-09-cv-146 M.D. Ga. March 21, 2011)

Plaintiff alleged, among other things, that Defendant failed toproperly respond to QWRs and correct his credit reporting

The cause of action for which punitive damages were awarded isunclear from the verdict and judgment

Further proceedings are scheduled in the trial court

Stay tuned



What To Watch For In The Next Year

Continued Litigation

Will the Supreme Court resolve any Circuit Splits?

Will HUDs Sham Affiliated Business Arrangement Policy StatementSurvive?

Cases regarding the intersection of RESPA and the Bankruptcy

Code

What will the new regime bring?


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Questions?


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Legal Counsel to theFinancial ServicesIndustry

RESPA Legislative andRegulatory Update

April 16, 2011

John Kromer


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Topics

HUD Warehouse Lending Guidance

Dodd-Frank Act Impact on RESPA Interpretative and Enforcement Authority transfers to CFPB fromHUD on July 21, 2011

TILA/RESPA combined disclosure initiative

Various Changes to Statute


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On November 24, 2010, HUD asked for input onwhether to issue guidance under RESPA to addresschanges in warehouse lending and other financingmechanisms used to fund mortgage loans.

RESPA regulations exclude from coverage a bonafidetransfer of a mortgage loan in the secondarymarket.

In determining what constitutes a bona fidetransfer,HUD will consider the real source of funding and thereal interest of the funding lender.

HUD Warehouse Lending Solicitation


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At the request of the FDIC, HUD was asked to focusin particular on whether a warehouse lender whoprovides funds to the closing table under anagreement that uses sale language is a table-funding that renders the warehouse lender the

mortgage lender and renders the mortgage lendera mortgage broker.

The solicitation also focused on other questions,including warehouse lenders that use of captivewarehouse lines.


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On March 11, 2011, HUD wrote to the FDIC and

stated that HUD determined that a warehouselending arrangement that involves a repurchaseagreementis not materially different from otherforms of warehouse lending for purposes of analysisunder RESPA.


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Following up on questions raised by a number ofwarehouse lenders, BuckleySandler sought clarificationof what HUD considers a repurchase agreement.

BuckleySandler also asked HUD to clarify that awarehouse financing arrangement denominated as apurchase and sale agreement would qualify as a validrepurchase agreement exempt from RESPA.


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In response, HUD provided a significant clarification, as manyin the industry and the regulatory world were concerned that

the language of the first letter was meant to exclude anythingother than a repurchase agreement that meets the strictrequirements of the Bankruptcy Code.

However, given that HUD has now clarified the requirements,we expect that bank regulators, including the FDIC, will bechecking to assure that warehouse lending arrangementscomply in all respects with HUDs guidance.

In addition, because of the effect of the new loan originatorcompensation rules, warehouse borrowers should likewise beconcerned that they not be deemed a broker because of ashortcoming in their warehouse lending arrangements.


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Additional RESPA Developments

RESPA and the CFPB

Interpretative and enforcement authority for RESPA will betransferred to the BCFP in on July 21, 2011.

CFPB is required to implement a combined TILA/RESPA

disclosure within one year of that date (unless already done bythe HUD and the Fed); regulators are already meeting withinterested parties to draft the combined disclosure.

State attorneys general may bring a civil action in that state toenforce the provisions of RESPA/Regulation X.


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RESPA and the CFPB

The act requires the CFPB to prepare, at least once every 5years, the Home Buying information booklet under Section 5 ofRESPA. The booklet will include significantly more informationthan in the current version of the booklet.

The Dodd-Frank Act also requires, in connection with certainmortgage loans, the establishment of escrow accounts.


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RESPA and the CFPB

The Dodd-Frank Act provides that mortgage loan servicers mustnot charge fees for responding to valid qualified written requests(QWRs).

The Dodd-Frank Act also shortens the time periods servicershave to respond to QWRs. Servicers must acknowledge receiptof the QWR within 5 days (down from the current 20 days) andmust take action on the QWR within 30 days (down from 60).The 30-day period may be extended for not more than 15 days ifthe servicer notifies the consumer of the delay.


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RESPA and the CFPB

The Dodd-Frank Act also increases penalties under Section 6 ofRESPA, allowing for individual awards of up to $2,000 (up from$1,000) and class action awards of up to $1,000,000 (up from

$500,000).

The Dodd-Frank Act also amends RESPA to require theseparate disclosure on the HUD-1/1A Settlement Statement of

the fee paid directly to an individual appraiser by an appraisalmanagement company and the administration fee charged bythe appraisal management company.


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Thank you for joining us!

For more information, please contact:

John Kromer

(202) 349-8040

[email protected]
mailto:[email protected]:[email protected]

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Buslaw Spring Consumer Updates Housing Respa