Congress moves to clarify RESPA

Dan Krell, Realtor®
© 2012

hand shakeThe Real Estate Settlement Procedures Act of 1974 (RESPA) was enacted to protect consumers against certain abusive practices such as kickbacks; it was also supposed to help them become better shoppers for settlement services. RESPA violations were enforced by HUD; however, enforcement became the responsibility of the newly formed Consumer Financial Protection Bureau (CFPB) as of July 21st 2011.

Over the years, RESPA may have been the basis of a number of class action law suits relating to kickbacks, fees, and other lender/title issues. Two recent cases that were heard by the Supreme Court of the United States (SCOTUS) may have demonstrated how the law protects consumers as well as possibly revealing its limitations. Some have even argued that some sections of RESPA may be vague; which has prompted Congress to recently act to clarify RESPA, and may prompt future clarification as well.

On June 28th, (SCOTUS) decided on First American Financial V. Edwards, dismissing the appeal; which made the 9th circuit court ruling stand that allows Edwards to pursue the case regardless of financial harm.

Kevin Russell, partner at Goldstein & Russell, P.C. and contributor to, couldn’t have better summed up the case: “The specific question before the Court in Edwards was whether a plaintiff alleging that her title insurance company violated the Real Estate Settlement Procedures Act (RESPA) must show that she suffered an injury from the insurance company’s unlawful conduct beyond the violation of her legal rights under the statute. RESPA prohibits title insurers and other real-estate-related companies from participating in kickback schemes related to real estate closings. Congress provided that a consumer who discovers an illegal kickback related to her closing can sue to recover statutory damages (and attorney’s fees) without having to prove that the violation caused her any financial injury or any diminution in the quality of the services she received. All she has to show is that the defendant violated her statutory right to have her closing free of the conflicts of interests that arise when the participating companies are paying each other kickbacks.” (

Back in May, SCOTUS offered an opinion on Freeman v. Quicken Loans; where the plaintiff argued that there was a violation of RESPA because they were charged for services they did not receive. SCOTUS’s decision ruled in favor of Quicken Loans. The ruling indicated that the section of RESPA in question, Section 2607(b), only applies to fee splitting – not the actual fees that a provider charges; the opinion stated that this section of RESPA “…manifestly cannot be understood to prohibit unreasonably high fees…” (

hand shakeThe issue highlighted by the opinion in Freeman v. Quicken Loans may be evidence that there are vague areas and limitations to RESPA. Clarification of RESPA may be achieved through changes in the law made by Congress; as in this recent bill (passed by the House on August 1st) titled, H.R. 2446: RESPA Home Warranty Clarification Act of 2011. Partnerships between home warranty companies and real estate brokers have attracted attention from HUD as well as inspiring a few class action suits; this bill clarifies that home warranties and other residential appliance and component service contracts are excluded from RESPA.

Information about RESPA can be obtained from the Consumer Financial Protection Bureau (

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of August 20 , 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.