Dan Krell, Realtor®
DanKrell.com
© 2012

The 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 SCOTUSblog.com, 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.” (http://www.scotusblog.com/?p=147974)

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…” (scotusblog.com)

The 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 (consumerfinance.gov).

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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.

Many contend that the use of eminent domain is increasingly abusive, as highlighted by the case of Kelo v. New London. If you recall, Kelo v. New London involved the taking a private land to be used by developers to revitalize a Connecticut waterfront into upscale homes, a commercial district, and a large (private) research campus. The case was fought through the court system all the way up to the Supreme Court of the United States (SCOTUS). In 2005, the SCOTUS ruled 5-4 in favor of the municipality, New London, CT, with the majority accepting an expanded interpretation of “public use.”

Eminent Domain is a common law process that allows the government (local or federal) to take real property without the owner’s permission. The right of eminent domain is given to governments by the United States Constitution, as specified in the Fifth Amendment. Typically, land that is taken is used for public roads (battles over the ICC are still fresh in our memories), public schools, public utilities, and other public uses. Generally, if the land owner refuses the initial offer for their property, the government initiates condemnation proceedings to take control of the land.

Since the case of Kelo v. New London, similar cases have emerged up across the country. Two high profile cases in New York are being fought and again raising the question about eminent domain abuse.

A case ruling in favor of the State involves the development of a Brooklyn neighborhood into “Atlantic Yards” (Atlantic Yards is to include commercial and residential development, including the Barclays Center- where the New Jersey Nets will call home). Property owners who fought the condemnation of their property for the development of Atlantic Yards were thrown a major obstacle in their fight when they learned that the New York Court of Appeals upheld the condemnation. Additional appeals are probable.

The other case concerns the expansion of Columbia University in New York City. The university’s expansion rests upon the ability to purchase property and land in specific neighborhoods that they feel is appropriate for their needs. When several property owners refused to sell to the university, the State stepped in to condemn the property to force them to sell. Recently, a New York State appellate court ruled against the State (of New York) which possibly characterizes the abuse of eminent domain by abetting Columbia University in acquiring land that was ruled to have no public purpose.

A recent local case of eminent domain has some raising their eye brows as well. Earlier this year, Governor O’Malley asserted the use of eminent domain to save the Preakness Stakes by attempting to force Magna Entertainment to sell Pimlico, Laurel and Bowie race tracks to the State. Questions whether this use of eminent domain is in the spirit of the Constitution may be moot as the race tracks may be sold to other local interested parties.

Eminent domain continues to be a complex and deeply debated issue. If eminent domain’s expanded definition is to allow commercial development for the public good, then consider a recent Wall Street Journal report (November 11, 2009; “Pfizer and Kelo’s Ghost Town”): The local and state government spent $78 Million to raze the Kelo neighborhood, only to find out that developers pulled out. The land is now vacant and without any tax benefit.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Permission to use this article is by written consent only.

Category: Supreme Court

Congress moves to clarify RESPA

The Gambit of Eminent Domain