Posted Oct 12, 2011 11:00 am CDT
Updated: The U.S. Supreme Court has agreed to decide whether federal law bars mortgage lenders from charging “unearned fees” at closings if they aren’t part of a kickback or fee-sharing arrangement.
The federal government supports the plaintiffs, who claim Quicken Loans Inc. charges unearned fees in violation of the Real Estate Settlement Procedures Act, report the Wall Street Journal’s Developments blog, SCOTUSblog and Courthouse News Service. The plaintiffs claimed they were charged loan-discount fees, but their interest rates were not reduced. The Supreme Court granted cert Tuesday.
The New Orleans-based 5th U.S. Circuit Court of Appeals ruled last year that the law bars lenders and other service providers from paying or receiving kickbacks, but it doesn’t bar unearned fees charged by a single party, according to the Wall Street Journal. For its part, Quicken denies that its fees were unearned or illegal.
“It is undisputed that the loan discount points collected in this case were earned and resulted in a lower interest rate for the borrowers,” Quicken says in a statement provided to the ABA Journal. “Any implication to the contrary is pure fantasy and has been manufactured by certain plaintiff law firms, attempting to twist and manipulate facts to serve their own financial interests.”
The case, Freeman v. Quicken Loans Inc., is a consolidation of suits by three couples who obtained mortgages from Quicken in 2007. SCOTUSblog links to the cert petition (PDF).
Updated on Oct. 12 to include the statement by Quicken Loans.