On May 24, the U.S. Supreme Court unanimously held that section 8(b) of the Real Estate Settlement Procedures Act (RESPA) is violated only if a charge for settlement services is divided between two or more persons and that the section does not cover the collection of an unearned, unsplit fee by a single settlement service provider. Freeman v. Quicken Loans, Inc., No. 10-1042, 2012 WL 1868063 (U.S. May 24, 2012). Plaintiffs had alleged that their lender charged them loan discount fees but did not provide a lower interest rate in return. Plaintiffs claimed that charging these fees violated section 8(b) of RESPA, arguing that RESPA may be violated even when only one party receives an unearned fee and not only where a fee is split between two parties. Plaintiffs cited a 2001 HUD Policy Statement declaring that a settlement service provider may violate section 8(b) when it receives an unearned fee. The defendant lender countered that HUD’s interpretation should be afforded no deference. The Supreme Court, in an opinion written by Justice Antonin Scalia, held that section 8(b) “unambiguously covers only a settlement-service provider’s splitting of a fee with one or more other persons; it cannot be understood to reach a single provider’s retention of an unearned fee.” The Court struck down HUD’s interpretation, finding that HUD’s position “is manifestly inconsistent with the statute HUD purported to construe,” and that, because HUD’s Policy Statement “goes beyond the meaning that the statute can bear,” it was not necessary to determine whether HUD’s position was due Chevron deference. The Court’s opinion affirmed the underlying decision from the Court of Appeals for the Fifth Circuit and resolved a split among the judicial circuits. The Second, Third and Eleventh Circuits previously had held that section 8(b) did apply to unearned fees retained by a single person.
Seventh Circuit Holds TCPA Prohibits Automated Calls to Cell Phones without Consent from Current Subscriber
On May 11, the U.S. Court of Appeals for the Seventh Circuit held that the Telephone Consumer Protection Act (TCPA) requires consent from a current cell phone subscriber to receive automated calls – even if a former subscriber to the same number had previously given consent to be contacted. Soppet v. Enhanced Recovery Company, LLC, No. 11-3819, 2012 WL 1650485 (7th Cir. May 11, 2012). The court affirmed a district court decision certifying a class of consumers who alleged that their cell phones were automatically dialed in violation of TCPA. The defendant debt collectors argued that it was not a violation of the TCPA to call a cell phone number if a previous subscriber to that number had given the consent required by the TCPA because the previous subscriber was the “intended recipient” of the call. The court rejected this argument because, even though the TCPA does not define who the “called party” is that must consent to be contacted, its use throughout the TCPA indicates that “called party” refers to the currently subscribed cell phone user, and not to any previous user.
On May 24, the Residential Mortgage-Backed Securities (RMBS) Working Group announced the launch of a new web site to facilitate the reporting of RMBS fraud, as well as the formation of a coordination team “to facilitate various investigations underway around the country.” For more information on the RMBS working group, see InfoBytes, Jan. 27, 2012.
On May 23, Fannie Mae announced that the 90-day temporary repurchase accommodation period established in Servicing Announcement SVC-2011-12 has been extended to December 31, 2012. Absent the accommodation, servicers would have had 30 days to complete repurchases or submit paperwork required to formally appeal repurchase or make-whole requests. The accommodation was previously set to expire on June 30, 2012.
On May 23, Fannie Mae announced the postponement of its June 1, 2012 effective date for lender-placed property insurance requirements applicable to servicers (Fannie Mae’s initial announcement was reported in InfoBytes, Mar. 16, 2012). The May 23 announcement does not provide a new effective date. Until Fannie Mae announces a new effective date, it is encouraging servicers to implement the requirements “as practically feasible.”