Supreme Court Rules in RESPA Case, “Warning” to CFPB?

The Supreme Court ruled in favor of Quicken Loans last week in a longstanding case filed over split fees charged by a Quicken loan officer. The case had implications for the interpretation of the Real Estate Settlement and Procedures Act (RESPA) by the Department of Housing and Urban Development, and more recently, by HUD. 

But the outcome, which was decided unanimously, may say more about the Supreme Court’s statements to the CFPB and HUD than about RESPA, some say.

The decision marks a “defeat” for the CFPB in its interpretation of RESPA in the case, says Chris Willis, partner with Ballard-Spahr. While the CFPB was not directly involved in the case, it filed an amicus brief offering comments in favor of the interpretation of the plaintiff earlier this year. 

Advertisement

The case, Freeman v. Quicken Loans, made issue of whether section 8 of RESPA should be interpreted to require the division of a fee between two entities, or whether a single entity can charge an unearned fee, Willis explains. Initially, a circuit court deemed that the sharing of a fee was required.

The Supreme Court, which ruled last week, agreed with the Fifth Circuit Court. However, there is more to the case than the decision and what it means for RESPA’s interpretation. 

“…Freeman makes it clear that the industry can—and should—oppose the CFPB’s efforts to add prohibitions to federal laws that Congress did not provide for in those laws,” Willis wrote following the decision. “The Supreme Court agreed, but the real significance of its decision lies in its strongly-worded statements rejecting the interpretation of [RESPA] by HUD (and adopted by the CFPB), and rejecting the CFPB’s amicus brief urging reversal of the Fifth Circuit’s ruling.

The CFPB filed an amicus brief in the case siding with the HUD interpretation earlier this year. It has said it will continue to file amicus briefs in the future. The Supreme Court’s position in this case could say something about how the Court views CFPB input, Willis says. 

“In addressing the HUD/CFPB interpretation of the statute, the Court characterized it as ‘manifestly inconsistent with the statute’ and a ‘palpable overreach,'” Willis writes. “As a result, the Court refused to give any deference to the HUD/CFPB interpretation of [RESPA’s Section 8] … Moreover, the Court’s rejection of the arguments advanced by the Bureau in its amicus brief will hopefully encourage lower courts to look on other CFPB amicus briefs with a similarly critical eye.”

Written by Elizabeth Ecker

Join the Conversation (8)

see all

This is a professional community. Please use discretion when posting a comment.

  • I am not so sure this case is all that meaningful when it comes to the CFPB.  The CFPB has an entirely different mandate than HUD.  It seems within reason the CFPB could come to the same conclusion as HUD but based on the authority and directive seemingly provided the CFPB under Dodd-Frank, the Supreme Court could reverse its current position also on a 9-0 vote.

  • I am not so sure this case is all that meaningful when it comes to the CFPB.  The CFPB has an entirely different mandate than HUD.  It seems within reason the CFPB could come to the same conclusion as HUD but based on the authority and directive seemingly provided the CFPB under Dodd-Frank, the Supreme Court could reverse its current position also on a 9-0 vote.

  • Amen! Is this truly a crack in the proverbial armor of this ignorant and out of control entity designe dto ruin the housing and mortgage industry al under the guise of helping the consumer. These people have done nothing but increased costs, made lending more confusing than ever for consumers, and have simply undermined the entire process. Fingers crossed for November when the people (who work for a living and believe in our constitution) win our freedoms back!

  • Amen! Is this truly a crack in the proverbial armor of this ignorant and out of control entity designe dto ruin the housing and mortgage industry al under the guise of helping the consumer. These people have done nothing but increased costs, made lending more confusing than ever for consumers, and have simply undermined the entire process. Fingers crossed for November when the people (who work for a living and believe in our constitution) win our freedoms back!

  • I feel this is a big win for our industry. It shows we can challenge the actions and rulings of the CFPB. In short, even with the CFPB’s power they posses, they can’t always rule the roost!

    I realise the CFPB was not directly involved in the case, however, it filed an amicus
    brief offering comments in favor of the interpretation of the plaintiff
    earlier this year.

    This was a definite defeat for the CFPB. Can this open up the door to possibly challenge the CFPB on the subject of LO compensation and other issues concerning the actions they have taken and are about to take in the future?

    John A. Smaldone

  • I feel this is a big win for our industry. It shows we can challenge the actions and rulings of the CFPB. In short, even with the CFPB’s power they posses, they can’t always rule the roost!

    I realise the CFPB was not directly involved in the case, however, it filed an amicus
    brief offering comments in favor of the interpretation of the plaintiff
    earlier this year.

    This was a definite defeat for the CFPB. Can this open up the door to possibly challenge the CFPB on the subject of LO compensation and other issues concerning the actions they have taken and are about to take in the future?

    John A. Smaldone

    • John,

      Despite the role/non-role, the CFPB had in this case, it was not a ruling against them.  It was simply a ruling in regard to the court case at hand which was taken to the initial court long before there was a CFPB.

      Yes, we can challenge the rulings and actions of the CFPB but none of those were at issue since the case went to court even before that self acclaimed great Cherokee American, Ms. Warren, was appointed as an assistant to a yet to be inaugurated President.

      Even though we disagree on this one, have a great weekend, John.

string(94) "https://reversemortgagedaily.com/2012/05/31/supreme-court-rules-in-respa-case-warning-to-cfpb/"

Share your opinion