The U.S. Supreme Court ruled unanimously in favor of Quicken Loans, holding that the lender could charge loan discount fees under the Real Estate Settlement Procedures Act.
Mortgage refinancing typically lowers monthly payments. Such a service, of course, comes at a cost and how those are charged is dictated by a subsection of RESPA.
The ruling for Quicken Loans challenges the way the U.S. Department of Housing and Urban Development and the Consumer Financial Protection Bureau interpret provisions in Section 8(b) of RESPA.
The specific legal question posed to the court was whether a provision of RESPA Section 8(b) that bans service providers for charging fees for services they did not actually render applies only when the unearned fees are split between two or more parties.
Quicken argued the homeowners' claims could not survive under RESPA since the mortgage lender did not split the fees with another party, and the provision only applies when there is actual fee-splitting.
The Supreme Court agreed with Quicken, holding that "in order to establish a violation of section 2607(b) under RESPA, plaintiff must demonstrate that a charge for settlement services was divided between two or more persons."
Before reaching the Supreme Court, three lower courts held that the provision applies to all unearned fees whether they are retained by a single-entity or multiple parties. Quicken Loans said several other courts reached different holdings on the issue, which sparked appeals up to the Supreme Court.
The original plaintiffs, the Freeman, Bennett and Smith families, secured loans in Louisiana from Quicken Loans and soon found themselves facing "loan discount fees" at the closing of their mortgages, according to legal briefs filed in the case.
Not long after the dispute began, the families filed suit on behalf of all similarly situated plaintiffs, alleging Quicken Loans charged the loan discount fee, but did not reduce their interest rates.
The case led to subsequent appeals with the case narrowing down to the issue in front of the U.S. Supreme Court on how to apply RESPA rules related to unearned loan servicing fees when there is no actual fee-splitting involved.
Attorneys with Ballard Spahr analyzed the case, concluding that the ruling "represents a defeat for the Consumer Financial Protection Bureau." The law firm added, "At the Supreme Court’s invitation, the Solicitor General, joined by the CFPB, had filed an amicus brief that urged the Supreme Court to adopt the borrowers’ interpretation of Section 8(b)," Ballard Spahr said.