Mortgage Fees Litigated

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MORTGAGE EXPERT
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Mortgage lenders and servicers are being challenged in court on fees they charge, when the fees are applied and who is subject to the fees. One mortgage fee case will be heard by the U.S. Supreme Court.

On Tuesday, the Supreme Court agreed to hear a lawsuit against Quicken Loans Inc. The case addresses whether Section 8(b) of the Real Estate Settlement Procedures Act applies when no third parties are compensated.

RESPA says that “No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed,” a filing with the court states. 

The Fifth Circuit ruled that unearned fees are prohibited only when the fees are divided with a culpable third party, as in a kickback arrangement. While the Fourth, Seventh and Eighth Circuits have ruled similarly, the Second, Third and Eleventh Circuits, along with the Department of Housing and Urban Development, have taken a contrary view that the provision also applies to unearned fees retained by a single defendant.

The Supreme Court earlier this year asked the Office of the Solicitor General to weigh in on whether the Quicken case should be reviewed.

The question presented to the Supreme Court is whether the RESPA requirement prohibits a real estate settlement services provider from charging an unearned fee only if the fee is divided between two or more parties.

The Court of Appeals of North Carolina upheld a summary judgment against Community Bank of Northern Virginia over alleged loan discount fees charged when the interest rate wasn’t discounted. But the summary judgment on the claim where there were genuine issues of material fact as to whether loan closing fees were excessive was reversed, and the trial court can consider class certification upon remand.

Plaintiffs in the case, Travis T. Bumpers and Troy Elliott, each closed second mortgages with the defendant in 1999. Bumpers paid $4,828 in fees — including a loan origination fee of $2,063 and a “loan discount” fee of $1,280 — for a $28,450 loan at 16.99 percent. Elliott paid $5,650 in fees — including a loan origination fee of $2,800 and a “loan discount” fee of $1,400 — on a $35,000 loan at 12.99 percent.

Missouri residents Jerry W. and Golda M. Washington closed on a $23,000 second mortgage with Countrywide Home Loans Inc. in 2005. The 15-year mortgage had an interest rate of 12 percent. Five days after the loan closed, an internal audit revealed that a $690 loan discount fee and a $100 settlement closing fee should not have been charged. So Countrywide refunded the $790, while the title company amended the HUD 1 Settlement Statement — though it didn’t advise the borrowers of the revision.

Still, the borrowers filed a putative class action in a state court against Countrywide alleging violations of the Missouri Second Mortgage Loan Act. The case was removed to a federal court on diversity grounds based on the Class Action Fairness Act, 28 U.S.C. § 1332(d). A summary judgment was granted in favor of Countrywide on the basis that the fees had been refunded and no loss was suffered.

But on appeal, the U.S. Court of Appeals, Eighth Circuit, found, among other things, that because the fees had been financed, the Washingtons were charged two days’ interest on the $790 and reversed the lower court’s decision.

Long Nguyen claims in a lawsuit against Bank of America that he agreed to an automatic deduction for a bi-monthly payment when he refinanced a $130,000 loan in 2001, according to Fox Television Stations Inc. But BofA allegedly waited up to four days after the due date to apply the payments — reportedly raising his loan costs by $9,000 and extending his maturity from 2016 to 2029.

Nationstar Mortgage LLC is fighting a federal lawsuit filed earlier this year in West Virginia by David J. Triplett. The borrower, who seeks class action certification, claims that he is being overcharged because of the manner in which Nationstar applies late charges.

In its answer to the complaint, Lewisville, Texas-based Nationstar denied claims made by Triplett. Earlier this month, the deadline for Triplett to file a motion to compel Nationstar to respond to discovery requests was extended until Oct. 18.

PNC Bank, N.A., and PNC Financial Services Group Inc. in July answered a complaint filed in December 2010 in U.S. District Court for the Western District of Pennsylvania by Ellen S. Essig. PNC denied the claims outlined in the class action.

In her lawsuit, Essig alleges that PNC has been overcharging for subordination fees on home-equity lines of credit since Dec. 24, 2004. While the HELOC agreement specifically authorizes a $100 each time PNC agrees to subordinate its lien position to the lien position of another creditor, “the subordination clause is a vague, indefinite and uncertain because it is unclear on its face what ‘another creditor’ means,” the complaint says.

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Mortgage Daily Staff

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