Bureau Won’t Appeal Borders & Borders RESPA Decision

May 22, 2018

The Bureau of Consumer Financial Protection (Bureau) has decided not to appeal a 2017 decision by a federal judge who ruled that Kentucky-based law firm Borders & Borders did not violate the Real Estate and Settlement Procedures Act (RESPA).

While the Bureau decided not to appeal the decision, Acting Director Mick Mulvaney cautioned the industry against presuming he agrees with everything in the district court’s opinion.

“In fact, I do not,” Mulvaney said. “My decision was based on several factors, not all of which were related to my evaluation of the district court’s opinion. I want you to know that the Bureau will continue to enforce section 8 of RESPA when it encounters unlawful conduct that undermines the fair and transparent functioning of the market for real estate settlement services or disadvantages businesses operating lawfully.”

Speaking during ALTA’s Advocacy Summit in Washington, D.C., Mulvaney told attendees they have the right to know what the law is “before we come after you.”

“We are working hard to make sure we tell you what the law is before enforcing it,” he added. “Regulation by enforcement is gone. We will continue to enforce the law—including RESPA—in a way that is more evenhanded instead of pushing the envelope.”

In past public statements, Mulvaney had indicated that the Bureau’s reading of RESPA in the PHH case was regulation by enforcement that he was looking to end. Mulvaney did not state, however, that the case against Borders & Borders was regulation by enforcement or depended on a novel interpretation of RESPA.

U.S. District Judge Charles Simpson of the Western District of Kentucky ruled last year that Borders & Borders qualified for RESPA’s safe harbor provision, which shelters “affiliated business arrangements” if they are disclosed to the consumer being referred to the partner company.

In October 2013, the Bureau filed a lawsuit accusing Borders & Borders of illegally paying kickbacks for real estate settlement referrals through a network of shell companies. The Bureau alleged Borders & Borders operated nine joint ventures with the owners and managers of local real estate and mortgage broker companies. The Bureau said the law firm used the joint ownership to disguise illegal kickbacks as legitimate profit sharing. The complaint alleged that when a local real estate or mortgage broker company with a pre-existing arrangement referred a homebuyer to Borders & Borders for closing or other settlement services, the law firm would arrange for the title insurance to be issued by the corresponding joint venture. The profits from the joint venture then would be split between the joint venture’s owners: the Borders principals and the referring real estate or mortgage broker.

According to the Bureau, the nine joint ventures were not bona fide entities and did not have their own office space, email addresses or phone numbers, and all nine companies shared a single independent contractor who was also an employee of Borders & Borders. The Bureau alleged each company only issued title insurance policies for homebuyers who had been referred by Borders & Borders and did no advertising to attract other business. The companies performed no substantive title work, all of which was instead performed by Borders & Borders staff.

Simpson, however, said Borders & Borders “gave its customers timely disclosures when it referred title insurance work to the Title LLCs.”


Contact ALTA at 202-296-3671 or communications@alta.org.

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