RESPA Lawyer BlogMarx Sterbcow will be presenting on Thursday, December 7, 2023, at The 33rd Annual Robert C. Sneed Texas Land Title Insitute Conference in San Antonio, Texas at the Hyatt Regency Hill Country. The session at the Texas Land Title Association‘s annual event will discuss the Real Estate Settlement Procedures Act “RESPA” and affiliated business arrangements.
Articles Posted in RESPA LITIGATION
Marx Sterbcow presenting at the Real Estate Settlement Providers Council “RESPRO” 2023 Fall RISE Conference
The Sterbcow Law Group’s Marx Sterbcow will be speaking at RESPRO’s 2023 Fall Conference on September 12, 2023, in Bachelor Gulp, Colorado at the Ritz-Carlton Hotel. Marx will be presenting two different sessions. The first topic “State Attorney Generals Have Declared War Against Illegal Affiliated Business Arrangements” with RESPRO President & Executive Director Ken Trepeta will discuss what the state attorney generals are analyzing to see whether a title or mortgage affiliated business arrangement is properly structured and operating legally. They will discuss areas of compliance which some may overlook until they receive a subpoena from a government agency. The second session will be a “Fair Lending Update” with Richard Andreano, who is a Partner at Ballard Spahr, LLP in Washington D.C. This session will discuss the continued focus of regulators and elected officials on fair lending in the mortgage space, including redlining (both traditional and digital), appraisal bias, reconsiderations of value, and automated valuation models.”
Marx Sterbcow Speaking at the Southeast Land Title Association’s 55th Annual Mid-Year Conference
Marx Sterbcow, Managing Attorney of the Sterbcow Law Group, is speaking at the Southeast Land Title Association‘s Mid-Year Conference in Birmingham, Alabama on Monday, April 24th at the Ross Bridge Resort & Spa. Mr. Sterbcow will speak on CFPB and RESPA compliance matters including an in-depth discussion on how to properly set up and operate Affiliated Business Arrangements so you comply with federal and state RESPA regulations.
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.
RESPA CONSUMER CLASS ACTION LAWSUIT FILED AGAINST REALOGY, PHH CORP, TRG, NRT, AND OTHERS SURROUNDING THEIR AFFILIATED BUSINESS ARRANGEMENTS
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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Marx Sterbcow to appear on the Real Estate Mortgage Shoppe Radio Program
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.”
BREAKING: 9th Circuit Court of Appeals Grants Class Certification in Edwards v. First American Corp RESPA Class Action
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”.
TILA-RESPA “TRID” Enforcement Delay Announced by CFPB
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.
TILA-RESPA implementation deadline triggering warning signs for industry
The TILA-RESPA Integrated Disclosure Rule’s implementation date is beginning to cause heightened concern and worry for those involved in the residential lending industry. One reason is the emerging news that a number of the 3rd party vendors engaged to write the loan originator system “LOS” software may not be able to do so until April, May, June, or even worse that some of the LOS systems that are rolled out may not be in compliance when the residential lender implements the LOS into their system. One reason for the delay by these vendors is that they were busy designing and creating other software to address the Qualified Mortgage “QM” rule that went into effect on Jan. 1, 2014 and only now are the turning to the TILA-RESPA integration.
Kate Larson, Regulatory Counsel, with the Consumer Bankers Association wrote an article for InformationWeek on the “2015 Banking Regulatory Outlook” on Jan. 7, 2015 in which she stated “Despite their diligent efforts, many of our members are concerned their systems will not be ready by the August 2015 deadline because of the limited number of vendors in the market.”
The downstream impact of a delayed LOS system integration is causing many banks and mortgage bankers to have to reassess their risks associated with their third party vendor management compliance obligations with respect to the TILA-RESPA Rule. Many banks and mortgage bankers to whom we have spoken will only be utilizing one title vendor because they are concerned about the integration timeline and do not want to be left shut down in whole or in part on or after August 1st, 2015 as a result of spreading their compliance across to many vendors.
There are simply to many lenders, banks, credit unions, mortgage brokers, and others who are relying on the limited number of mortgage software companies to integrate the new TILA-RESPA LOS system. Several of the TILA-RESPA disclosure task force groups we serve on are sensing real concern by the various trade associations.
On the title side of the business, many of the title software companies have finished or are finalizing their software systems to address the compliance of their title vendors. However, finalization of these systems depend on the mortgage LOS systems integration, testing that integration, and educating the employees of both the lenders and title vendors.
The CFPB has been adamant that they will not delay the implementation date of this rule and even if by some miracle the CFPB suspends enforcement for 6 months (similar to what HUD did with the 2010 RESPA Reform Rule) this will not provide sufficient safeguards because the secondary market may not purchase loans that are not in compliance with new TILA-RESPA Rule. In sum, if something is out of compliance then the lenders face claims by investors that they have violated the reps. and warrants under their repurchase agreements, thus leaving them exposed to future mortgage buy-back claims.
We are hearing that a few of the biggest banks will be completely ready by the end of Feb. 2015 as they went in-house and designed their LOS systems due to concerns about meeting the implementation rule deadline. However, let’s hope the 3rd party LOS software companies can get their systems in place, integrated & tested with their title vendor(s), and all the staff trained well in advance of August 1st, 2015.
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Wells Fargo announces RESPA-TILA Integrated Disclosure Form Plans
Wells Fargo announced that effective August 1, 2015 it will control the generation and delivery of the borrower’s Closing Disclosure form in anticipation of the TILA-RESPA Integrated Disclosure Rule. The new Closing Disclosure is a mix of the existing Truth-in-Lending (TIL) disclosure and the Settlement Statement (HUD-1). Wells Fargo stated in the Wells Fargo Settlement Agent Communications newsletter on September 24, 2014 they will be taking over this process in order to meet internal compliance and governmental regulator compliance expectations on the bank.
Wells Fargo said the reason they will be delivering the Closing Disclosure Form is because they want to maintain evidence the borrower received the disclosure at least three days prior to the closing since this is a critical compliance requirement they must meet. The bank disclosed that having readily accessible data for internal and external compliance audits was another major reason for this decision.
Wells Fargo disclosed that their view under the new rules is “…that the settlement agent continues to be responsible for the Seller’s information and will prepare and deliver the Seller’s Closing Disclosure. A copy must be provided [by the Settlement Agent] to Wells Fargo for our loan file in order to comply with the final rules.”