SCOTUS Archives - Real Estate News and Commentary

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.

by Dan Krell © 2012
DanKrell.com

This week, the Supreme Court (SCOTUS) heard arguments for and against issues surrounding the Patient Protection and Affordable Care Act of 2010 (PPACA). The arguments don’t have much of anything to do with providing healthcare, but rather the arguments are about certain elements of PPACA and the Constitution. In fact, Tuesday’s arguments about the individual mandate could be applied to anything – even the housing market.

The individual mandate portion of the PPACA basically requires certain individuals to purchase healthcare insurance or pay a penalty. Individual mandates are not new, and have been enacted in the past. For example, military drafts and income tax have been mandated (the initial enactment of an income tax was found unconstitutional- so the Constitution was amended which resulted in the sixteenth amendment).

I’m not an attorney, and I’m sure that I don’t begin to scratch the surface of the issue; however, the arguments for and against the individual mandate can basically be summed up as follows: Those that oppose the PPACA individual mandate argue that this mandate is different from others such that it regulates commercial inactivity (e.g., levying a fine when a product or service is not purchased); while those in support of the mandate argue it is not a fine for non-participation, but rather a tax.

Regardless, which way you approach the mandate, some contend that a mandate is only one way to have the public engage in commerce. In an editorial that appeared in the New England Journal of Medicine, Einer Elhauge, J.D. described the individual mandate as an alternative to providing subsidies (Elhauge, E (2012). The Irrelevance of the Broccoli Argument against the Insurance Mandate. The New England Journal of Medicine 366, e1. published on December 21, 2011). Putting aside Elhauge’s reasoning and opinion of the SCOTUS case; he points out that the Government has many ways to affect industries and commerce. Typically, the Government attempts to persuade us to engage in specific businesses industries by providing incentives and subsidies, such as tax credits to industry participants or purchasers of specific products. However, rather than persuading economic activity, the PPACA individual mandate is historic in that it requires participation and fines those who do not participate.

Like other industries, the housing industry is subsidized to encourage participation; home ownership is encouraged through the mortgage interest tax deduction and low interest rate mortgage programs (and for a brief time- first time home buyer tax credits). However, it is not implausible to think that if SCOTUS upholds the individual mandate, Congress could require people to make home a purchase, renovate, or retrofit their homes with green technologies (in an effort to increase economic activity in those industries).

There are some that argue that subsidies are bad enough for the housing market; one argument is that the mortgage interest deduction has artificially elevated home prices. However, some subsidies may only influence the timing of purchases rather than value: recent data suggests that the brief first time home buyer tax credit created short-term spikes of home sales that would have likely occurred over a period of time.

On the face of it, the housing market has little to do with health care. However, this week, housing and other industries may be affected by the SCOTUS decision regarding the healthcare individual mandate. Subsidies verses mandates- it may ultimately be about semantics and interpretation.

More news and articles on “the Blog”
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 March 26, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

Tag: SCOTUS

Congress moves to clarify RESPA

Individual mandates and housing