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Mark-ups, Splits, Unearned Fees: How Far Does RESPA 8(b)Extend?

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November/December 2001 - Volume 80, Number 6

by Sheldon Hochberg

Section 8 of RESPA prohibits a settlement service provider from paying a referral fee or otherwise giving a portion of its charge to another person other than for services rendered. On this, everyone agrees. But does §8 prohibit a provider from charging the consumer more than the "fair value" of the services rendered? Or charging the consumer for services not rendered? In short, does §8 limit what a provider of settlement services may charge the consumer if the provider is not paying a referral fee or otherwise splitting its charge with another person who does not render services in return for that payment? That very important RESPA question is the focus of this article.

What Does the Statute Say?

Section 8(b) of RESPA, 12 U.S.C. 2607(b) (1995), provides that: 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 rendered.

Because of the broad reference to "no person," this language can be read to mean that settlement service providers ("persons") who render little or no services in return for a fee charged to the consumer are "accept[ing]" a "portion" of a "fee" "other than for services actually rendered." On the other hand, by imposing obligations and liabilities on both the person paying the unearned fee and the person receiving the unearned fee, the statutory language appears to be focusing on the splitting of fees between persons involved in the settlement process, rather than on the payment of fees by the consumer. Otherwise, the consumer might be viewed as violating §8(b) in paying an earned fee, an obviously absurd result.

Further light (or, perhaps, confusion) as to the plain meaning of §8(b) may be shed by the companion prohibition of RESPA §8(a), which prohibits the payment and receipt of any fee, kickback, or thing of value, pursuant to an agreement for the referral of business. Reading the two provisions in tandem, one can argue either that (i) §8(b) reinforces the prohibition in §8(a) by prohibiting payments between parties involved in the settlement process when no real services have been rendered even if there is no clear linkage to an agreement to refer business, or (ii) Congress must have intended §8(b) to cover payments beyond those covered by §8(a) and, accordingly, interpreting §8(b) to cover payments by consumers to settlement service providers (in addition to covering payments between settlement service providers) would give separate meaning and effect to §8(b).

What Does HUD Say?

While HUD has not squarely addressed this issue through a duly promulgated regulation, it has, with increasing clarity, suggested that §8(b) applies to settlement charges paid by consumers where little or no services are provided even when the charge has not been divided between two parties./fn 1 For example, §3500.14(c) of HUD’s RESPA regulations as amended in 1992 (24 C.F.R. §3500.14(c) (2000)) provides: A charge by a person for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates this section. The source of the payment does not determine whether or not a service is compensable. Nor may the prohibitions of this part be avoided by creating an arrangement where the purchaser of services splits the fee.

Section 3500.14(g)(3) of the regulations (also adopted in 1992) goes on to state: Multiple services. When a person in a position to refer settlement service business . . . receives a payment for providing additional settlement services as part of a real estate transaction, such payment must be for services that are actual, necessary and distinct from the primary services provided by such person.

While it is not clear that these regulations are addressing charges to consumers (one court that has considered the issue has concluded that these provisions apply only in the context where a fee is split between two parties), there is less ambiguity in two other HUD statements on this issue.

In discussing the prohibition against referral fees in the information booklet required by RESPA §5, HUD states "[i]t is also illegal for anyone to accept a fee or part of a fee for services if that person has not actually performed settlement services for the fee." /fn 2 The booklet goes on to provide an example of such a prohibited practice: "a lender may not add to a third-party’s fee, such as an appraisal fee, and keep the difference." Although the example provided is one of potential fee-splitting between settlement service providers, the implication of the main sentence is that accepting a fee from the consumer where services are not actually performed is a violation of §8(b).

HUD’s clearest statement of its views on §8(b) were presented in the explanatory comments accompanying the release of its Statement of Policy 1996-1 on Computer Loan Origination Systems (CLOs) (61 Fed. Reg. 29,248-50 (June 7, 1996)). In responding to the argument that §8(b) did not provide a legal basis for HUD’s original proposed rule regulating the conditions under which borrowers could be asked to pay for CLO services, HUD made clear that: (i) it disagreed with those court decisions that had concluded that §8(b) only applies where two parties split a settlement service fee; (ii) the interpretation of §8(b) as permitting a single settlement service provider to charge "unearned or excessive fees" so long as it does not share the fees with another party is "an unnecessarily restrictive interpretation of a statute designed to reduce unnecessary costs to consumers;" and (iii) §8(b) could apply in a number of contexts: (1) where one settlement service provider receives an unearned fee from another provider; (2) where a provider charges the consumer for third-party services and retains an unearned fee from the payment received; or (3) where a provider accepts a portion of a charge, "including 100% of the charge", for other than services actually performed.

The first context in which HUD says that §8(b) could apply is clearly contemplated by the language of the statute. Although several recent district court decisions have lent some support to HUD’s view that §8(b) can be applied in the second context /fn 3 , where one party "marks up" another provider’s charges, reaching that result under the language of §8(b) may be problematical. /fn 4

Apart from whether the mark-up of another provider’s charges is a violation of §8(b) if the amount of the mark-up cannot be justified on the basis of the services rendered by the person marking up the charge, HUD has made clear that the amount actually paid to the provider of the services must be separately shown on the

HUD-1 settlement sheet as Paid Outside Closing ("P.O.C."). 24 C.F.R. § 3500.8(b) (specifying that the HUD-1 form shall be completed in accordance with the Instructions set forth in Appendix A to the regulations), and Appendix A to 24 C.F.R. Part 3500, General Instructions and Instructions for Section L (specifying that "[t]he names of the recipients of the settlement charges in Section L . . . should be included on the blank lines" and "[f]or all items except those paid to and retained by the Lender, the name of the person or firm ultimately receiving the payment should be shown.")

Finally, HUD’s position on the application of §8(b) in the third context, that §8(b) prohibits unearned or "excessive" fees charged by a settlement service provider to consumers, has far-reaching, and potentially disturbing, consequences. It should be noted that a recent Supreme Court decision has made clear that, under the Court’s 1984 hallmark Chevron decision, the courts do not need to defer to an agency pronouncement that is not embodied in a decision following formal adjudication or in a regulation issued pursuant to notice and comment rulemaking. See Christensen v. Harris County, 120 S.Ct. 1655, 1662-63 (2000) ("Interpretations such as those in opinion letter, like interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law, do not warrant Chevron-style deference.")

Nevertheless, if HUD’s view is ultimately upheld by the courts, it could provide a basis for a challenge to any settlement fee or charge that HUD or a consumer believes is not justified by the services rendered or is "excessive." As will be discussed below, the legislative history of §8(b) is inconsistent with HUD’s view, and virtually all of the courts that have considered the issue have concluded that the language of §8(b) will not support HUD’s interpretation.

What Does the Legislative History of §8(b) Reveal?

The legislative history of §8(b) makes clear that the provision was directed at payments by settlement service providers to other providers and was never intended as a vehicle to regulate payments by consumers.

The provision ultimately enacted as §8(b) was initially introduced in 1972 by Rep. Wright Patman, the chairman of the House Banking Committee, as §103 of H.R. 13337, the "Real Estate Settlement Reform Act of 1972." As introduced by Rep. Patman, a Texas populist and frequent critic of lawyers, the measure provided that no attorney who performed any legal services in connection with a settlement involving a federally related mortgage loan could receive any commission in connection with the issuance of title insurance in the transaction. Mr. Patman’s concern appeared to be that attorneys were not rendering any additional services to the title insurance company beyond those for which they were already being paid by the consumer, although §103 would have prohibited such payments even when the attorney was rendering legitimate services to the title insurer in connection with the issuance of the policy.

When the bill was considered by the full House Banking Com-mittee, a substitute sponsored by Reps. Robert Stephens and Ben Blackburn of Georgia (referred to as the "Stephens Substitute") was adopted by the Committee. Section 907 of the bill as reported by the full Committee modified the Patman approach to prohibit any person from giving and any person from receiving any portion, split or percentage of any charge for title insurance other than for services actually performed in the issuance of such title insurance. (H.R. Rept. 92-1429, at 88 (Sept. 21, 1972).) The focus of the provision in the Stephens Substitute was whether real services were rendered by anyone , attorney or otherwise, who was receiving a portion of the title insurance premium from the title insurance company, rather than on prohibiting attorneys from ever receiving title insurance commissions. Rep. Stephens explained this change from the Subcommittee bill as "designed to strengthen the existing language, making the category of cases against which the prohibition runs a much broader one." (118 Cong. Rec. 28,118 (Aug. 14, 1972).) The bill, however, failed to reach the House floor before the end of the 92nd Congress.

In the 93rd Congress, Reps. Stephens, Blackburn and others introduced H.R. 9989, which was a modified version of the "Stephens Substitute." Section 106(b) of H.R. 9989 incorporated the language of what is now §8(b) of RESPA, thus expanding the prohibition on fee-splitting from title insurance to all settlement services. Sen. Bill Brock (R. Tenn.) introduced the same legis-lation in the Senate as S. 3164 on March 17, 1974. In a floor state-ment at the time of introduction, Sen. Brock described the provision as "prohibit[ing] any fee-splitting among persons who render settlement services unless the fee is paid in return for serv-ices actually rendered." (120 Cong. Rec. 6,586 (March 13, 1974).)

H.R. 9989 was reported out by the House Banking Committee on July 9, 1974. The House Banking Committee report described §106(b) as "prohibit[ing] a person or company that renders a settlement service from giving or rebating any portion of the charge to any other person except in return for services actually rendered." (H.R. Rep. No. 93-1177 at 7 (1974).) Identical language was contained in the Senate Banking Committee report on S. 3164. (S. Rept. No. 93-866 at 6 (1974).)

During the August 14, 1974 debate on the bill on the House floor, Rep. Blackburn was asked whether §106(b) would permit a civil or criminal action against a settlement service provider if the provider’s charges were not reasonably related to the value of the services rendered. (120 Cong. Rec. 28,263 (Aug. 14, 1974).) On August 20, 1974, Rep. Blackburn amplified his response emphasizing that: (a) section 106(b) would not authorize such a suit, (b) the House Banking Committee report made clear that the prohibition "was intended to deal only with fee-splitting arrangements among participants in the settlement process," and (c) any other interpretation would subject consumers who pay unearned fees to liability because the section says no person shall give and no person shall receive an unearned fee. He concluded: "[t]hus, there should be no question that section 106 does not in any way authorize a civil suit nor subject an attorney or anyone else who provides settlement services to civil or criminal penalties if the homebuyer believes that the charge made to him is in excess of the reasonable value of the services rendered. What is subject to civil and criminal penalties is if the person rendering the settlement service gives or splits a portion of the fee he receives with someone else and the person receiving the payment provides no legitimate service in return." (120 Cong. Rec. 29,442-43 (Aug. 20, 1974).)

In sum, the legislative history of §8(b) leaves no doubt regarding congressional intent. Every version of the provision addressed only fee splitting between settlement service providers. Accordingly, when read in context of the development of the provision, the phrase "no person shall give and no person shall receive" was clearly intended to expand the coverage of the provision to include payments between any settlement service providers, not just title companies and attorneys.

How Have the Courts Interpreted §8(b)?

The majority of court decisions to date have rejected the contention that §8(b) can be used to challenge a settlement service charge that a consumer (or a consumer’s lawyer) believes is "too high" or is not for services actually rendered. Rather, with limited exceptions, the courts have affirmed that §8(b) only applies to the split of a settlement service charge between two providers, one of whom does not provide services for the portion of the charge it receives.

The two most important decisions have been decided by unanimous panels of the U.S. Court of Appeals for the Seventh Circuit. In the first decision decided more than 15 years ago, Mercado v. Calumet Fed. Sav. & Loan Assn, 763 F.2d 269, 271 (7th Cir. 1985), plaintiffs claimed that the S&L’s charges for agreeing to refinance their loan was a violation of §8(b) because it was not for services rendered. The panel characterized this claim as a "transparent attempt to transform section [8](b) into a general mortgage loan antifraud provision in circumvention of the statute’s plain language and purpose." In commenting on the use of §8(b) to challenge fees that are thought to be too high, the court stated that if a party "imposed a single fee of $100 per transfer of title, it would not be possible to attack that fee under RESPA by saying that everything over $25 is ‘too high’ and ‘abusive’ because the cost of service is only $25. Congress considered and rejected a system of price controls for fees; it concluded that the price of real estate services should be set in the market [citing 1974 U.S. Code Cong. & Admin. News 6549-50]. It directed §8 against a particular kind of abuse that it believed interfered with the operation of free markets, the splitting and kicking back of fees to parties who did nothing in return for the portions received. . . . Doubtless RESPA is a broad statute, directed against many things that increase the cost of real estate transactions. . . . But the objective of the statute is not a warrant to disregard the terms of the statute."

Nearly a decade later, another panel of the Seventh Circuit, in Durr v. Intercounty Title Co. of Ill., 14 F.3d 1183 (7th Cir.), cert. denied, 513 U.S. 811 (1994), reiterated that §8(b) only applies where the defendant gives or receives a portion, split or percentage of a settlement service charge to a third person. In that case, the plaintiff sought class action status for a complaint that the title company had violated §8(b) in adding $8 to the Cook County Recorder’s charge for recordation of a deed and mortgage, even though the bill to the plaintiffs made clear that a service and handling charge had been included for instruments recorded. Citing its earlier decision in Mercado, the court concluded that because the complaint failed to contain an allegation that a portion of the charge was paid to a third-party other than for services rendered, it failed to state a cause of action under §8(b). /fn 5

Several other court of appeals and district court decisions have applied the Mercado reasoning to reject §8(b) claims of purported "overcharges" that did not involve fee splitting. See Willis v. Quality Mtge. USA, Inc., 5 F.Supp.2d 1306, 1310 (M.D. Ala. 1998) (granting motion to dismiss claim that a lender’s appraisal review and document preparation fees were not for services rendered and therefore violated §8(b) as interpreted by HUD; court concluded that HUD’s interpretation that charges for which no or nominal services are performed violate §8(b) only applies when a settlement service provider is splitting a fee with another party who does not render services and that HUD "is empowered to interpret the statute, not to create new laws"); Bloom v. Martin, 865 F. Supp. 1377 (N.D. Cal. 1994), aff’d on other grounds, 77 F.3d 318 (9th Cir. 1996) (granting motion to dismiss complaint that demand and reconveyance fees violated §8(b) because there was no allegation that the fees were shared with another person); Callahan v. Commonwealth Land Title Ins. Co., 1990 U.S. Dist. LEXIS 14524 (E.D. Pa. 1990) (approving class action settlement involving charges for notary services that were allegedly not performed and noting that a "serious question" exists as to whether §8(b) applies since there was no fee splitting); Duggan v. Independent Mtge. Corp., 670 F. Supp. 652, 654 (E.D. Va. 1987) (concluding that §8(b) does not apply "where payment may be in excess of the value of the services rendered" and allegation that a lender received money for something it failed to do presents a "garden variety breach of contract dispute.")

In contrast, there appears to be only one district court decision that has concluded that §8(b) may be violated by overcharges that are not split with a third party: DeLeon v. Beneficial Construction Co., 55 F. Supp.2d 819 (N.D. Ill. 1999) (declining to dismiss §8(b) count that mortgage broker charged for services it did not render.) The significance of this decision is limited in view of the fact that the court completely failed to consider or address the Seventh Circuit precedents in Durr and Mercado.

An interesting recent decision is Christakos v. Intercounty Title Co., 2000 U.S. Dist. LEXIS 12438 (N.D. Ill. Aug. 25, 2000) in which the court granted class action status in a case where it was alleged that a title company had charged borrowers in refinancing transactions a $29 fee for recording the release of the prior mortgage even though (a) it had not performed that service, (b) the recording had been performed by the prior lender, and (c) the prior lender had charged the borrower a fee ($23.50) for the recording. Although the title company had not directly shared its $29 recording fee with a third person, the court nevertheless concluded that the borrower had paid total recording fees of $53.50 of which the title company had received a portion, $29, for services it had not rendered. Accordingly, the court found that its decision was in accord with Durr and Mercado because there was a "split" of the $53.50 in total recording fees paid by the borrower. "Although this is not the typical kickback situation envisioned by RESPA’s drafters, the plain language of the statute and regulations are broad enough to cover a situation where a borrower pays two amounts to two parties for the exact same service, one of whom performs the service, and one of whom receives the unearned fee while providing no service whatsoever."

Application of §8(b) in Various Contexts

While the courts will have the last word on this, based on the language and legislative history of the provision, and current precedent, the following guidelines appear to be warranted.

First, a title company or any other settlement service provider ("Provider A") that will be making a charge for a settlement service to the consumer should not give a portion of its fee to a third person , particularly someone who is in a position to refer business to Provider A, unless the payment represents reasonable compensation for goods or services provided. There is no question that §8(b) applies in this context and the Provider should be prepared to justify the reasonableness of any such payments.

Second, Provider A should avoid marking up the charge of another settlement service provider (Provider B) unless it is comfortable that it can justify the amount of the mark-up on the basis of services it performs in connection with that charge. Even then, Provider A should keep in mind that, if its practice is challenged, establishing such justification may be difficult and that the company may not be able to get a case dismissed on a motion to dismiss or for summary judgment. From a RESPA standpoint, if Provider A believes that it is incurring real effort and expense in connection with another Provider’s charges, it would be preferable to increase its own fees or charge a separate fee with an appropriate name. The fact that competition may make it difficult to implement these alternatives and that it is easier to get the extra revenue by simply increasing some other party’s charge only points out the underlying problems with such mark-ups.

Third, while strong arguments can be advanced that §8(b) does not apply when Provider A makes a charge for which no services are provided, all providers of settlement services would be well-advised to avoid such practices. Not only can such practices give rise to litigation, including potential class action litigation, but the fact that RESPA §8(b) may not apply does not mean that the practice cannot be successfully challenged under state law theories of liability. As the Christakos decision demonstrates, such charges are particularly risky if they appear to be for a service that another party actually performs and charges for. Moreover, the charging of such "junk fees" has come under increasing consumer criticism and has led to the call for more fundamental reform of the way in which consumers are charged for settlement services.

Fourth, if some services are provided in connection with a charge made to the consumer, §8(b) should not be read as providing a cause of action to challenge the fee as being "unearned" or "too high." Indeed, reading §8(b) as authorizing such a challenge would inevitably result in HUD or the courts having to determine what is an "appropriate" or "reasonable" charge for the service. Congress explicitly rejected federal rate regulation of real estate settlement costs when it enacted RESPA and such an interpretation of §8 would necessitate the kind of rate regulatory scheme that Congress rejected almost thirty years ago. As the courts have recognized, RESPA is a broad statute directed against certain practices that increase the cost of real estate settlements, but it is not a general license for HUD or the courts to proscribe conduct that Congress has not circumscribed.

Finally, how does §8(b) apply to the activities and charges of so-called "vendor management" companies (hereafter "VMCs")? These are companies that may assist lenders, real estate developers and others who have repeated needs for various settlement services (in some cases, for transactions in various parts of the country) by arranging for a package of those settlement services from various providers that may be independent of the VMC or affiliated with the VMC. While a full discussion of these VMC arrangements is beyond the scope of this article, some initial observations may be made.

Any analysis of whether particular VMC arrangements pose problems under RESPA is necessarily fact-dependent. This is highlighted by the following two polar examples: (1) a company not affiliated with a lender goes into the business of helping nationwide lenders meet their needs for various settlement services by identifying and selecting various providers, negotiating their charges, monitoring their performance, and assuming significant financial and oversight responsibility for the services provided; and (2) a mortgage lender establishes a subsidiary that it calls a VMC; the company has no real employees and no significant expenses or responsibilities, but is used as a vehicle through which the charges of settlement service providers used by the lender are funneled so that the subsidiary can mark up those charges and keep the difference. (Most real world situations are likely to fall somewhere in between, but the two examples help make clear a number of relevant issues.)

In the first example, the independent VMC is clearly providing real services to the lender. Assuming that neither the VMC nor the settlement service providers selected by the VMC are paying any referral fees to the lender, and the only benefit the lender derives from the VMC’s activity is lower charges (or better service) for the settlement services it needs, the VMC’s charges should not be viewed as violating §8(b). Those charges would have been set in arm’s length negotiations between the VMC and the lender and can be assumed to reflect market value for the services rendered by the underlying providers and by VMC. In theory, this should be true whether the VMC (i) makes a separate charge for its "packaging" services and simply passes through the charges made by the providers in the package, or (ii) marks up the prices of the various providers in the package by amounts that, in the aggregate, provide the net revenue that the VMC expects to realize in the transaction.

In practice, however, HUD or the courts may have different views on the two approaches. From a RESPA standpoint, clearly the first approach is the safest. The VMC is making a charge for services it has rendered and there is no mark-up or splitting of a settlement charge that could be alleged to be in violation of §8(b). The second approach, however, raises §8(b) issues because there is a splitting of charges between the VMC and the settlement service providers. This is not to say that there is an "unlawful" split. If the amount of the VMC’s mark-up can be justified on the basis of the services rendered by the VMC, there is no §8(b) violation. However, at present there is no guidance from HUD or the courts as to whether the amount of the mark-up has to be justified for each of the settlement services that have been marked-up, or whether the VMC can justify the total amount of all of the mark-ups based on the total value of the VMC’s services. Moreover, as anyone familiar with RESPA has come to realize, determining the "reasonableness" of a charge for which there is no ready market price can be difficult and uncertain.

With regard to the second example, calling the lender’s affiliate a "vendor management company" does not get around the concerns that the mark-ups made by the company may not be justifiable on the basis of services actually performed. Moreover, the fact that the amount of the mark-up would not have been negotiated at arm’s length further complicates any attempted justification for the amount of the mark-up.

One final point deserves noting. Beginning as early as 1994, HUD staff has opined that when lenders charge consumers an aggregate fee that includes settlement services provided by third parties, they are required to disclose the amounts they pay for such services to the third-party providers. See Letter of February 18, 1994, from HUD Senior Attorney Grant E. Mitchell, reproduced in Paul Barron & Michael A. Berenson, Federal Regulation of Real Estate and Mortgage Lending, (Fourth Ed.) at App. 2-90 (stating that when a lender charges a $500 application fee that consists of a $200 appraisal fee, a $50 credit report fee, and $250 retained by the lender as a true application fee, the appraisal and credit report fees must be shown as P.O.C. on the HUD-1.) More recently, in response to questions posed by a California state court, the General Counsel of HUD has stated that: If the lender charges additional amounts for performing actual services in connection with a particular settlement service purchased from a third party (for example, processing and evaluating an applicant’s credit report purchased from a third-party credit reporting company), those amounts cannot simply be added to the fee paid to the third-party provider for disclosure purposes. Rather, such charges by lenders for processing or other services must be broken out from the particular third-party fee and specifically identified and disclosed in the line item reserved for processing or origination costs (line 801) or, in accordance with section 3500.9(a)(4), may be inserted in blank spaces. /fn 6

In short, according to these two HUD letters, if a lender or, presumably, a lender-owned VMC marks up the charge of a third-party provider, the amount of the mark-up should be separately disclosed on the HUD-1 form. While HUD has not been as clear in other non-lender contexts, there is reason to believe that it would apply the same disclosure requirement to other settlement service providers who mark up other provider’s charges as well. Accordingly, irrespective of whether a particular mark-up is a violation of §8(b), to comply with HUD’s disclosure requirements the HUD-1 form must disclose not only the ultimate amount charged to the consumer for the particular settlement service, but the name of the third-party provider of the settlement service and the amount (before the mark-up) paid to that provider.


1 In a related context, "HUD's game of winking, nodding, and frowning" has been criticized as leaving the courts "with no clear administrative direction." Barbosa v. Target Mortgage Corp., 968 F. Supp. 1548, 1555 (S.D. Fla. 1997).

2 U.S. Department of Housing and Urban Development, Office of Housing + Federal Housing Administration, "Buying Your Home: Settlement Costs and Helpful Information" (June 1997) at 13 (available at HUD's website

3 See McCulloch v. Great Western Bank, 1998 U.S. Dist. LEXIS 8226 (W.D. Wash. Seattle Div. 1998) (denying motion to dismiss §8(b) count alleging that bank had charged plaintiff $50 for a credit report for which the bank had paid $10), and Martinez v. Weyerhauser Mtge Co., 959 F.Supp. 1511 (S.D. Fla. 1996) (refusing to grant summary judgment to defendant on §8(b) count where the defendant charged the plaintiff $65 for courier fees but could only document $56.25 in courier expenses.)

4 See the author's article "Recent Court Decisions Shed Light on RESPA Section 8," Title News, July/Aug. 1998 at 7, 9, 24-25 (concluding that (i) while the practice of marking-up another provider's charge may be the kind of practice that §8(b) should condemn, it is not clear how one squares such an interpretation with the actual language of §8(b), and (ii) the fact that HUD and several courts have concluded that the mark-up of another party's fees can violate §8(b) suggests that such practices should be avoided.)

5 At least one court has criticized the decision for seemingly requiring the existence of a fourth party + a person with whom the party marking up a third-party's charge would split the overcharge. See McCulloch v. Great Western Bank, 1998 U.S. Dist. LEXIS8226 (W.D. Wash. 1998). In fact, there is justification for this criticism.

6 See Letter of December 10, 1999, from Gail W. Laster, General Counsel of HUD, to the Hon. Bruce E. Mitchell, Judge of the Los Angeles County Superior Court, reproduced in Paul Barron & Michael A. Berenson, Federal Regulation of Real Estate and Mortgage Lending, (Fourth Ed.) at App. 2-46. The letter also discusses HUD's view that mark-ups not justified by services rendered are a violation of RESPA §8(b).

Sheldon E. Hochberg is a partner in the Washington, DC law firm of Steptoe & Johnson LLP. In addition to representing ALTA®, state land title associations, and title companies on RESPA and banking-related issues, he has provided advice to the title insurance and property/casualty industries on Fair Credit reporting Act issues. He can be reached at

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