RESPA CLASS ACTION LAWSUITS

March 22, 2019

RESPA Seminar: Marx Sterbcow to discuss “Whither the Bureau: State UDAAP, Regulatory and Private Sector Compliance Issues, Activities and Requirements” at the 26th Annual RESPRO Conference in New Orleans on March 27, 2019

Marx Sterbcow with the Sterbcow Law Group’s RESPA Law Resource Center has been invited to speak at the Real Estate Settlement Providers Organization’s “RESPRO” 26th Annual Conference in New Orleans, Louisiana on March 27, 2019 at 8:45 AM at the Ritz Carlton Hotel’s Carrollton Ballroom. The presentation “Whither the CFPB: State Unfair Deceptive Abusive Acts Practices, Regulatory and Private Sector Compliance Issues, Activities and Requirements” will review the most recent federal and state mortgage, title insurance, and real estate brokerage regulatory actions.” The session will discuss how the Consumer Financial Protection Bureau and various state mortgage and title insurance regulatory agencies are interpreting UDAAP/RESPA. The session will also discuss what compliance expectations the CFPB’s Enforcement division will have when a company is under investigation and the general outlook of what is going on or not going on at the CFPB. The presentation will hit on issues involving private sector mortgage lending compliance involving Affiliated Business Arrangements and those how those expectations extend to class action mitigation risks.

Charles “Chuck” Cain from Cincinnati, Ohio (Executive Vice President Agency at WFG and Of Counsel to the Sterbcow Law Group) and Francis “Trip” Riley from Princeton, New Jersey (Partner with Saul Ewing Arnstein & Lehr, LLP) will co-present with Mr. Sterbcow in this session.

December 8, 2015

RESPA CONSUMER CLASS ACTION LAWSUIT FILED AGAINST REALOGY, PHH CORP, TRG, NRT, AND OTHERS SURROUNDING THEIR AFFILIATED BUSINESS ARRANGEMENTS

by Marx Sterbcow

A consumer class action RESPA lawsuit was filed on November 25, 2015 by Timothy L. Strader Sr., against PHH Corporation, REALOGY Holdings Corp., PHH Mortgage Corporation, PHH Home Loans LLC, RMR Financial LLC, NE Moves Mortgage LLC, PHH Broker Partner Corporation, REALOGY GROUP LLC, REALOGY Intermediate Holdings, Title Resources Group LLC, West Coast Escrow Company, TRG Services Escrow Inc., NRT LLC, REALOGY Services Group LLC, and REALOGY Services Venture Partner LLC in United States District Court for the Central District of California. (Case No. 8:15-CV-1973).

The allegations in this consumer class action lawsuit largely surround issues involving violations of Section 8(a) and Section 8(c)(4) of the Real Estate Settlement Procedures Act of 1974, as amended, 12 U.S.C. §§ 2601 et seq (“RESPA”), and its implementing regulations, 12 C.F.R. §§ 1024.1 et seq. (“Regulation X”). RESPA – and, in particular, the prohibition on referral fees and kickbacks in 12 U.S.C. § 2607 – was explicitly designed to protect consumers “from unnecessarily high settlement charges caused by certain abusive practices,” such as those described in this Complaint. 12 U.S.C. § 2601(a). As such, 12 U.S.C. § 2607(a) prohibits the giving or accepting of any “fee,” “kickback,” or “thing of value” in exchange for business incident to or part of a “settlement service” (as those terms are defined in RESPA and Regulation X) involving a federally related mortgage loan.

The complaints states the Defendants violated RESPA and distorted the market for title insurance and other settlement services in at least two different manners:

First, PHH and Realogy created an affiliated business arrangement called PHH Home Loans, which the Plaintiffs contend was a sham joint venture carefully engineered to facilitate and disguise the payment of unlawful referral fees and kickbacks in exchange for the referral of title insurance and other settlement services to Realogy’s subsidiary, Title Resource Group (“TRG”). The allegations further state that prior to October 21, 2015, PHH was bound under a Strategic Relationship Agreement to refer all title insurance and settlement services to TRG. The consumers referred by PHH Home Loans paid approximately $1650 to TRG for title insurance and other settlement services. If this allegation is accurate it would violate Section 8(c)(4) under RESPA* which prohibits the “Required Use” of an affiliate if the consumer paid for those services.

Pursuant to the Strategic Relationship Agreement, PHH Home Loans is the exclusively recommended mortgage lender for Realogy’s real estate brokerage network, which is operated by NRT, LLC (which operates such brands as Coldwell Banker, Sotheby’s International Realty, ZipRealty, The Corcoran Group, and Citi Habitats.

The Plaintiffs also state that PHH receives a right of first refusal for the purchase of the mortgage servicing rights for PHH Home Loans originated mortgages, which permit PHH Home Loans to sell the servicing rights to PHH “on terms no less favorable” than those that could be obtained from an independent third party and that PHH owns a disproportionate share of the servicing rights for those mortgages relative to PHH’s overall market share of residential mortgage servicing. The complaints states that the details of this relationship have not been publicly disclosed to consumers.

Second, the Plaintiffs allege that under a related Private Label Solutions (“PLS”) model–in which PHH manages all aspects of the mortgage process for various large banking institutions that PHH directs the PLS Partners to refer title insurance and other settlement services to TRG without disclosing to consumers the existence of PHH’s affiliation with TRG, nor the fact that PHH was required to cause the PLS Partners to refer title insurance and other settlement services to TRG under the terms of the Strategic Relationship Agreement.

The complaint further states that the undisclosed mandatory referral arrangement existed for over 10 years until October 21, 2015, when PHH and Realogy amended the Strategic Relationship Agreement to delete the mandatory referral provision. PHH filed their latest Form 10-Q with the SEC on November 5, 2015 and based on the exhibits it did not include the mandatory referral provision language. The Plaintiffs contend the reason that PHH deleted this provision is due to the Consumer Financial Protection Bureau v. PHH Corporation enforcement action where the CFPB fined PHH $109 million dollars for its relationship with Atrium Reinsurance Corporation, an affiliate of PHH.

This is a RESPA class action case worth monitoring given the allegations, parties involved, and the CFPB’s related case against Atrium now pending in Federal District Court. Judge Fernando M. Olguin is presiding over the case.

If you have any questions about how your company’s affiliated businesses are structured please contact us to set up a consultation.
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August 27, 2015

Marx Sterbcow to appear on the Real Estate Mortgage Shoppe Radio Program

by Marx Sterbcow

Marx Sterbcow will appear Saturday, August 29th, 2015 on the Real Estate Mortgage Shoppe with Radio Host Jo Garner from 9:00 AM to 10:00 AM CST on WREC 600 AM on iHeart Radio. The topic is “Ask The Expert–How the New Real Estate Lending Guidelines Affect You.”

August 24, 2015

BREAKING: 9th Circuit Court of Appeals Grants Class Certification in Edwards v. First American Corp RESPA Class Action

by Marx Sterbcow

The United States Court of Appeals for the Ninth Circuit issued their 24 page Opinion today, August 24, 2015, in the Denise P. Edwards versus The First American Corporation; First American Title Insurance Company class action lawsuit. No. 13-55542 D.C. No. 2:07-cv-03796-SJO-FFM.

The Edwards v. First American class action lawsuit was originally filed on June 12, 2007 and has spent over 8 years bouncing from federal court to federal court.

The 9th Circuit Court of Appeals affirmed in part and vacated in part the United States District Court for the Central District of California’s order denying class certification in a case where the Plaintiffs alleged that First American Title engaged in a national scheme of paying title agencies things of value in exchange for the title agencies’ agreement to refer future title insurance business to First American in violation of the Real Estate Settlement Procedures Act “RESPA”.

June 3, 2015

TILA-RESPA “TRID” Enforcement Delay Announced by CFPB

by Marx Sterbcow

The Consumer Financial Protection Bureau “CFPB” announced today they will delay “enforcement” of the new Truth In Lending-RESPA Integrated Disclosure “TRID” rule for an undefined period of time. Over two hundred members of Congress were pushing for an enforcement delay until December 31, 2015 but the CFPB did not place a definitive time frame for compliance thus leaving the date that CFPB enforcement starts very murky.

The CFPB also said they will apply a standard of “sensitivity” in their TRID enforcement oversight with companies who provide “good-faith efforts” to comply with TRID. However, the Bureau failed to define what “sensitivity” or “good-faith efforts” actually mean and how they will be applied.

The enforcement delay is certainly a good step because the CFPB clearly heard from the industry that a number software companies were unable to get their lending customers ready in time. The American Bankers Association recently conducted a study which said that 8 out of 10 bank members couldn’t verify when their software system would be ready or were informed their software system wouldn’t be ready before June. The Loan Originator System “LOS” troubles were discussed in a blog post we did in January.

March 24, 2015

ATS Secured Webinar on RESPA Section 8: Understanding Marketing & Advertising Regulations

by Marx Sterbcow

Marx Sterbcow, Managing Attorney of the Sterbcow Law Group LLC, will be presenting on the ATS Secured & Advanced Bank Solutions Webinar Series on Tuesday, March 31, 2015 (1:30 PM – 2:30 PM CDT) on the topic of “RESPA Section 8: Understanding Marketing & Advertising Regulations.” The webinar will cover the topics such as marketing agreements, advertising agreements, co-branding, lead generation, CFPB expectations on financial institutions, third party vendor management marketing concerns for financial institutions, and preparing your organization to remain RESPA compliant.

The ATS Secured & Advanced Bank Solutions Webinar Series is free and you can register by clicking on this link here

October 31, 2014

RESPA Webinar: “Marketing Services Agreements in the New Era of RESPA Enforcement”

by Marx Sterbcow

October Research has scheduled a webinar for Tuesday, November 18, 2014 from 2:00-3:30 PM EST in which Marx Sterbcow of the Sterbcow Law Group; Charles Cain who is the Senior Vice President Midwest Agency Manager of WFG National Title Insurance Company; and Phil Schulman who is a Partner with K&L Gates, will discuss the latest developments involving the use of Marketing Services Agreements (MSAs).

The webinar will provide insights into the latest Consumer Financial Protection Bureau CFPB enforcement action involving Lighthouse Title, HUD Audit of Cornerstone Mortgage, and litigation cases revolving around the use of MSAs. A review of RESPA Sections 8(a) and 8(c)(2) and HUD’s 2010 RESPA Interpretive Rule, language terminology Do’s & Don’ts for MSAs, and the likelihood of additional CFPB investigations and enforcement activity will be addressed in this 90 minute webinar.

August 29, 2014

Marx Sterbcow achieves the AV Preeminent Rating from Martindale-Hubbell

by Marx Sterbcow

New Orleans, LA (PR Newswire) August 29, 2014 – Martindale-Hubbell® has confirmed that attorney Marx David Sterbcow has been given an AV Preeminent Rating, Martindale-Hubbell’s highest possible rating for both ethical standards and legal ability.

The AV Preeminent rating is an objective indicator designed to help buyers of legal services identify, evaluate and select the most appropriate lawyer. The reviews are based on evaluations of lawyers by other members of the bar and the judiciary in North America. AV Preeminent® (4.5-5 out of 5) is a significant rating accomplishment – a testament to the fact that a lawyer’s peers rank him or her at the highest level of professional excellence.

Mr. Sterbcow and his firm have had an extensive real estate and financial services law practice since the firm was founded in 2004. He represented the National Association of Mortgage Brokers in its suit against the Federal Reserve Board and has litigated matters involving RESPA, mortgage fraud, and antitrust in several federal jurisdictions. Mr. Sterbcow is also listed to Superlawyers and New Orleans Magazine’s Top Lawyers.

April 28, 2014

FEDERAL COURT SAYS OVERNIGHT DELIVERY FEES ARE SETTLEMENT SERVICES

by Marx Sterbcow

A RESPA class action lawsuit filed in the U.S. District Court for the Central District of California ruled that overnight delivery fees constituted settlement services under the Real Estate Settlement and Procedures Act “RESPA”. The case Henson v. Fidelity National Financial Inc., 2014 WL 1246222 (C.D. Cal. March 21, 2014) alleges that Fidelity has agreements with various overnight delivery companies (i.e. UPS, Federal Express, and OnTrac) which violate RESPA when Fidelity receives “marketing” fees in exchange for referring overnight delivery business to the overnight carriers through Fidelity’s escrow subsidiaries.

The lawsuit states that Fidelity is the controlling parent of various escrow subsidiaries and these escrow subsidiaries use UPS, Federal Express, and OnTrac (the “delivery companies”) to handle overnight deliveries in connection with processing and closing federally related mortgage loans. Fidelities subsidiaries then charge escrow customers for these delivery services in the customers real estate transactions. The lawsuit alleges that Fidelity has separate, written “master” agreements with each of the delivery companies through a subsidiary of Fidelity called EC Purchasing in which EC receives a split of the charges received by the delivery carriers and kickbacks in exchange for referring delivery services to the overnight delivery companies.

The lawsuit also states that because Fidelity exercises substantial control over their subsidiaries that no “marketing” services were actually performed nor did Fidelity put in place mechanisms to ensure they were performed under the master agreement. The payments were alleged to be based on the volume of business referred. The defendants argued that overnight delivery fees or express services were not in the real estate business and thus RESPA and Regulation X did not apply. The Court held that the term “settlement service” as used in Regulation X included overnight delivery services and stated the congress did not explicitly provide an exemption in RESPA for overnight delivery services and because Congress did not provide for an exemption neither should the Court.

January 31, 2014

RESPA: FEDERAL COURT CERTIFIES MARKETING AGREEMENT CLASS ACTION

by Marx Sterbcow

The United States District Court for the District of Maryland, Northern Division certified a Real Estate Settlement Procedures Act “RESPA” class action lawsuit on Tuesday, Jan. 28, 2014 involving marketing agreements between a “Team” of real estate agents “and Lakeview Title Company, Inc. The Creig Northrop Team, PC (a/k/a The Northrop Team) is a team of independent contractor real estate agents who work for Long & Foster Real Estate, Inc.. The class action lawsuit arises out of an alleged scheme for a team of real estate agents to receive over half million dollars in illegal kickbacks from a title insurance company for referrals over a period of 13 years.

Patrick Baehr, et al., v. The Creig Northrop Team, P.C., et al. (Civil No: 1:2013cv00933). Judge William D. Quarles is the presiding judge in this case.

The allegations specifically state that the defendants “used a ‘sham employment arrangement and a sham marketing agreement’ ‘to generate unearned fees and kickbacks.'” The employment agreement allegation involves Carla Northrop who was a full-time employee of the Northrop Team but secretly received payments from Lakeview Title under an employment agreement, even though Ms. Northrop allegedly did not perform any services or actual work for Lakeview Title nor was she provided an office, telephone number, or email address showing she was working for Lakeview Title. The employment agreement was not disclosed to the plaintiffs in this case. These allegations if proven would likely violate 12 U.S.C. §2607 of RESPA which is the prohibition against kickbacks and unearned fees section.