the legality of yield spread premiums under section 8 of RESPA does not depend on the fact or
place of HUD-1 disclosure. First Franklin concludes thereby that since there is no express or
implied private right of action for failure to make disclosures on the HUD-1 under section 4 of
RESPA, Sims lacks standing to bring a case on behalf of herself as well as a class.

Sims, however, is asserting a claim under Section 8 of RESPA and HUD Regulation X,
24 C.F.R. § 3500.14 for the payment and receipt of compensation that does not represent services
actually performed in connection with the origination of the loan. As the defendant has not
made clear how the plaintiff has failed to state a legitimate claim under Section 8, this court finds
that the plaintiff has standing to assert a claim on behalf of herself.

B. Class Requirements under Rule 23

The plaintiff argues that her proposed classes meet the numerosity, typicality,
commonality, and adequacy requirements under Fed.R.Civ.P. Rule 23(a). Additionally, the
plaintiff alleges that common questions of law or fact predominate over questions the questions
that would pertain to the individual members, making a class action suit a superior method by
which to handle this controversy as required by Rule 23(b). In this court’s view, the plaintiff
does not meet the requirements under 23(b)(3) and therefore cannot represent class.

Section 8 of RESPA prohibits any referral fees while allowing payments for “goods or
facilities actually furnished or for services actually performed.” 12 U.S.C. § 2607(a), (c).
HUD’s policy statement on this issue establishes a two-part test to determine if a lender’s
payment to a broker violates RESPA: 1) whether the goods or facilities were actually furnished
for the compensation paid, and 2) whether the payments were reasonably related to the value of

these goods or services actually performed. 64 Fed.Reg. 10084. (March 1, 1999).


5) common questions of law or fact predominate over individual questions, and a

class action is the superior method for resolving the case.
Fed.R.Civ.P. 23(b). The burden of demonstrating that the case satisfies Rule 23's requirements
falls on the party seeking certification. Patterson v. General Motors Corp., 631 F.2d 476, 480 (7th
Cir.1980), cert. denied, 451 U.S. 914, 101 S.Ct. 1988, 68 L.Ed.2d 304 (1981). "Failure to meet
any one of the requirements of Rule 23 precludes certification of a class." Valentino y. Howlett,
528 F.2d 975, 978 (7th Cir.1976) (per curiam). However, the court has no “authority to conduct a
preliminary inquiry into the merits of a suit in order to determine whether it may be maintained
as a class action." Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177, 94 S.Ct. 2140, 40 L.Ed.2d
732 (1974). In deciding a motion for class certification, the court must take all well-pleaded

allegations in support of the motion for certification as true. Hardin v. Harshberger, 814 F Supp.

703, 706 (N.D.1I1.1993).

Only First Franklin has responded to Sims’s motion. First Financial argues that the
plaintiff's motion should be denied because she fails to bring a claim under RESPA.
Alternatively, First Franklin argues that the plaintiff fails to establish numerosity, typicality, or
adequacy, as a representative given the unique nature of his disclosure allegations. Additionally,
First Franklin asserts that the individual issues predominate in this case and therefore, a class
action would not be the superior method of adjudication.

A. Standing
This court views First Franklin’s initial contention, that Sims lacks standing to assert a

disclosure claim on behalf of herself or a putative class, as meritless. First Franklin asserts that


The defendant argues that HUD’s two-step test confirms the fact-intensive, loan-specific
inquiry required to analyze Section 8 RESPA claims. This court agrees. The inquiry under step
one is whether the broker actually provided the proper number and type of compensable goods,
facilities, or services in connection with the origination of the loan. Golan v. Ohio Savings Bank,
1999 WL 965593, *5 (N.D.III). The HUD policy statement provides a non-exhaustive list of
fourteen different “services” a broker may provide to justify compensation paid by a wholesale
retailer. 64 Fed. Reg. At 10085. Consequently, whether an individual mortgage broker provided
services to an individual borrower in any given loan transaction requires a transaction-by-

transaction inquiry. Golan, 1999 WL 965593 at *7.

The second step of the HUD policy statement also raises individualized, fact-intensive
questions that predominate over any questions common to the class. According to HUD, a lender
satisfies the second step by presenting evidence that the “total compensation” the broker received
is “reasonably related to the value of the goods or facilities that were actually furnished or
services that were actually performed.” 64 Fed. Reg. 10084. “Total compensation” means the
broker’s compensation from all sources, including “direct origination and other fees paid by the
borrower,” and any “indirect fees” from the lender (such as a yield spread premium) even though
ultimately paid by the borrower thorugh a higher interest rate. 64 Fed. Reg. At 10086. Under
step two, this “total compensation” must be “commensurate with that amount normally charged
for similar services, goods or facilities. This analysis requires careful consideration of fees paid
in relation to price structures and practices in similar transactions and in similar markets,” Id.
HUD considers this second step the “determinative test under RESPA.” Id. at 10085.

The plaintiff has failed to show that the generalized evidence will suffice to show the


Minzte Order Form (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Judge Sitting Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 01 C 0016 DATE 9/27/2001
CASE Ora Sims vs. First Franklin Financial Corp. and Illinois Mortgage Consultants, Inc.,
TITLE
[in the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
qd) im Filed motion of [ use listing in “Motion” box above.]
(2) oO Brief in support of motion due
(3) oO Answer brief to motion due. . Reply to answer brief due.
(4) 0 Ruling/Hearing on set for __at
(5) im Status hearing[held/continued to] [set for/re-set for] on set for _ at
(6) im Pretrial conference[held/continued to] [set for/re-set for] on set for at _
(72) Qo Trial[set for/re-set for] on at
(8) o [Bench/Jury trial] [Hearing] held/continued to at
(9) im This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) OGeneralRule21 CIFRCP41(a)(1) O FRCP41(a)(2).
ao [Other docket entry] _ For the reasons stated in the attached Memorandum Opinion and Order, the
plaintiff ‘s motion for certification of a class in this matter is DENIED. [Doc. # 7].
(bee
‘) mld ‘
di) ff [For further detail see order attached to the original minute order.]
No notices required, advised in open court.
No notices required, umber of otiees
Notices mailed by judge’s staff. .
; Shr 2 8 700
Notified counset by telephone. te docket
xX Docketing to mail notices.
Mail AO 450 form. pay iat
Copy to judge/magistrate judge.
courtroom L date mailed notice
vg(le) deputy’s
initials
Date/time received in
central Clerk’s Office ‘wailing deputy initials



unreasonableness required by the regulations. As recognized by several district courts, the
reasonableness analysis requires an individualized examination of particular facts of each loan

transaction. See, e.g., Golan y. Ohio Sav. Bank, 1999 WL 965593 (N.D.IIl. Oct. 15, 1999)

(Palimeyer, J.), petition for rev. denied, (7" Cir. Nov. 16, 1999); Buckley v. Firstar Home
Mortgage, U.S. Dist. LEXIS 21511 (N.D. Il. Aug. 26, 1999) (Zagel, J.); Hinton v. First Am.

Mortgage, 1998 WL 111668 (N.D.III. Mar. 4. 1998)(Plunkett, J.). As the plaintiff does not
provide sufficient evidence to suggest that the law in this Circuit has changed, the plaintiff's
motion for class certification is denied.
Conclusion
For the foregoing reasons, the plaintiff ‘s motion for certification of a class in this matter
is DENIED.

Enter:

youd l)

David H. Coar
United States District Judge

Dated: ‘SEP 2 7 2001


IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
Ora Sims, )
)
Plaintiff, )
) No. 01 C1116
v. )
)} HONORABLE DAVID H. COAR
First Franklin Financial Corporation and )
Illinois Mortgage Consultants, Inc., )
)
Defendants. )

1)
SEp ” Neen

82 QD,
MEMORANDUM OPINION AND ORDER

Ora Sims (“Sims” or “plaintiff”) has sued First Franklin Financial Corporation (“First
Franklin” or “defendant”) and Illinois Mortgage Consultants (“IMC”) over fees she was charged
in connection with her loan, which Sims claims violate the Real Estate Settlement Procedures
Act, 12 U.S.C. § 2601 et seq. (“RESPA”), and the Illinois Consumer Fraud and Deceptive
Business Practices Act, 815 ILCS 505/1 et seq. (“CFA”). Sims has filed a motion for class
certification on Counts I-IV of her complaint. First Financial opposes the plaintiff's motion. For
the following reasons, the plaintiff’s motion is denied.

Statement of Facts

On June 2, 2000, Sims received a non-purchase-money loan from First Financial on the

his residence for personal, family or household purposes. The loan was arranged by IMC, which

had agreed to act as the plaintiff's mortgage broker. At closing, First Financial distributed its

. 5

own funds.


The broker compensation paid by First Franklinon and was described as a “yield service
premium”(““YSP”) on Sims’ HUD-1 settlement statement. A YSP is a payment by a lender to the
borrower’s mortgage broker that represents compensation for increasing the borrower’s interest
rate. If the borrower signs the loan papers at a higher rate then the lender’s minimum, the lender
pays the broker a “yield spread premium” linked to the increase in the rate.

Sims alleges that First Franklin and IMC have a policy of imposing or receiving charges
through a “yield service premium’(“YSP”) that are merely for the referral of business, or are
duplicative, or are for services that are not actually performed or nominally performed through ,
all in violation of RESPA. As a result, Sims alleges that he and members of the proposed class
were induced into paying higher interests rates and, additionally, paid additional costs that were
in excess of reasonable compensation for the services provided. In her own case, Sims alleges
that IMC received $4,715.00 in fees and First Franklin paid IMC a YSP of $1,910.00.

Analysis

Before this court is Sims’s motion for class certification on Counts I-IV of her complaint.
For the following reasons, his motion is denied.

Fed. R. Civ. P ("Rule") 23(a) sets forth four basic requirements that a proposed class must
satisfy: (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy of representation. In
addition, a class must also satisfy one of the following requirements of Rule 23(b):

1) there is a risk that separate actions by individual members of the class would
(A) result in inconsistent judgments "establish[ing] incompatible standards of
conduct for the party opposing the class" or (B) produce individual adjudications
that "would as a practical matter be dispositive of the interests of the other [class]
members ... or substantially impede their ability to protect their interests"; or

2) the opposing party has acted or refused to act on grounds applicable to the class
as a whole, so that injunctive or declaratory relief is appropriate as to the entire