Tuesday, June 5, 2012
The Supreme Court recently handed down a decision that could have a substantial effect on the fees that consumers pay during real estate transactions. The case, Freeman v. Quicken Loans, centered on a provision of the Real Estate Settlement Procedures Act (RESPA) that prohibits lender kickbacks and referral fees. The issue in Freeman was whether RESPA covers an "unearned" fee charged by the originator--these are fees for which lenders provide no service. SCOTUSblog reported that "the borrower Freeman argued that the plain language of the statute applies whenever a fee is “give[n]” for services that are not provided, even if the originator retains the whole fee. The lender Quicken argued that the statute applies only when the fee is shared between two parties (the classic “kickback” situation)."
Last week the court handed down a 9-0 opinion in favor of Quicken; "Unearned" fees do not violate federal law as long as they are not split with other party. The opinion declared that if Congress wants to control the level of the fees that a single actor can charge it would need to draft a more specific statutory provision.
The LA Times worries that the case opens the door to "controversial 'administrative' fees levied by real estate brokers, and could encourage the practice of 'marking up' fees by mortgage lenders, escrow officers and others that had been banned by federal regulators for the last decade."