Supreme Court To Hear Mortgage Fees RESPA Case

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                                     October 11, 2011, 11:25 AM ET

Supreme Court to Consider Mortgage-Fees Lawsuit

By Brent Kendall

The U.S. Supreme Court agreed Tuesday to clarify the circumstances in which home
buyers can sue mortgage lenders for allegedly charging them unearned fees during the
closing process.

The case centers on a group of lawsuits from Louisiana in which borrowers alleged
Detroit-based Quicken Loans Inc. charged them loan-discount fees but did not provide
reduced interest rates in return.

Quicken Loans said the fees were legal and denied allegations that the fees were

At issue is how to interpret the Real Estate Settlement Procedures Act, a 1974 law that
sought to address abuses in the mortgage industry by prohibiting kickbacks or referral
fees in connection with the settlement process.

The plaintiffs argue the law was meant to forbid both kickbacks and unearned fees. The
Obama administration is supporting their position, saying the U.S. Department of
Housing and Urban Development has consistently interpreted the law to prohibit the
charging of any unearned fees.

Lower courts have disagreed on how to interpret the law. The New Orleans-based Fifth
U.S. Circuit Court of Appeals sided with Quicken Loans last year on a 2-1 vote, ruling
the law did not impose a flat ban on unearned fees. The appeals courts said the law
only prohibits lenders and other service providers from paying or receiving kickbacks.

The case is Freeman v. Quicken Loans, 10-1042. Oral arguments will take place early
next year, with a decision expected by the end of June.

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