Borrower Loses Appeal In Fourth-Circuit Lender Markups Case

June 5, 2002

Inman News Features

The U.S. Court of Appeals for the Fourth Circuit recently ruled that lending institutions may mark up the settlement services fees they charge borrowers without by definition violating the Real Estate Settlement Procedures Act.

The case began when Maryland resident Tyna Boulware filed a lawsuit against CrossLand Mortgage Co., now a unit of Wells Fargo Home Mortgage Corp., claiming the lender violated RESPA by charging her $65 for a credit report that she alleged cost Crossland only $15. She also sought class-action status for all borrowers who used CrossLand in the prior 12-month period. The U.S. district court dismissed the Boulware v. CrossLand case in October, but Boulware appealed.

The U.S. Department of Housing and Urban Development argued as amicus curiae on behalf of Boulware in front of the appellate court. HUD relied on a policy statement it issued in October interpreting RESPA as giving it the power to regulate settlement service charges.

But the RESPA statute says charges for settlement services (e.g., credit reports, filing fees, reporting fees, title fees, appraisal fees and other incidentals) violate the statute only if there is a kickback or fee splitting arrangement between settlement service providers, according to the Venable law firm, which represented Wells Fargo in the case.

The court?s opinion stated that Congress chose not to draft the statute in a way that would have prohibited markups and overcharges on real estate settlement services and that the court had "no authority to recast" the statute, according to the law firm.

"The decision takes a forceful and clear stand limiting the scope and ability of HUD to regulate settlement service charges between lenders and borrowers," said Venable litigation partner Michael Schatzow.

The decision is precedent only within the fourth circuit.

Copyright: Inman News Service

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North American Title Insurance Company (NATIC) is a seasoned title insurance underwriter, helping title agents to achieve their individual business goals for more than 50 years. Today, the company conducts real estate settlement services in 39 states and the District of Columbia through a network of experienced, independent agents.