Term: 2011
Docket: 10-1042
Tammy Foret Freeman, Et Al., Petitioners v. Quicken Loans, Inc.
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10-1042 FREEMAN V. QUICKEN LOANS, INC. DECISION BELOW: 626 F.3d 799 CERT. GRANTED 10/11/2011 QUESTION PRESENTED: Section 8(b) of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2607(b), provides: No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. In this case, the Fifth Circuit joined the Fourth, Seventh, and Eighth Circuits in ruling that this provision prohibits the acceptance of unearned fees only when those fees are divided with a culpable third party, as in a kickback arrangement. It acknowledged, however, that the Third, Second, and Eleventh Circuits, as well as the Department of Housing and Urban Development, have taken the contrary view that the provision also applies to unearned fees retained by a single defendant. The question presented is: Whether Section 8(b) of RESPA prohibits a real estate settlement services provider from charging an unearned fee only if the fee is divided between two or more parties. LOWER COURT CASE NUMBER: 09-30902
In the case of Tammy Foret Freeman, et al. v. Quicken Loans, Inc., homeowners sued Quicken Loans alleging that the company had charged them unearned fees during their mortgage transactions in violation of the Real Estate Settlement Procedures Act (RESPA). The plaintiffs argued that RESPA prohibits any fee where services have not been rendered, while Quicken contended that only fees split between two or more parties without services provided are prohibited by RESPA. In a unanimous decision delivered by Justice Antonin Scalia in 2012, the Supreme Court sided with Quicken Loans and held that Section 8(b) of RESPA does not prohibit a real estate settlement service provider from charging an unearned fee unless the fee is divided between two or more parties. This ruling clarified how courts should interpret this section of RESPA moving forward.
In the dissenting opinion for the case of Tammy Foret Freeman, et al., v. Quicken Loans, Inc., Justice Sonia Sotomayor argued that the majority's interpretation of Section 8(b) of the Real Estate Settlement Procedures Act (RESPA) was too narrow and failed to protect consumers from abusive practices in real estate transactions as intended by Congress. She contended that RESPA should be interpreted to prohibit any unearned fees charged by lenders, regardless if they are split with another party or not. According to her view, this would better align with RESPA’s purpose which is preventing all forms of kickbacks and unearned fees that can increase settlement costs for home buyers. The justice also criticized the majority's reliance on statutory language alone without considering legislative history or policy implications.
