IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 09-30902

TAMMY FORET FREEMAN; LARRY SCOTT FREEMAN,

Plaintiffs - Appellants

v.

QUICKEN LOANS, INC.; TITLE SOURCE, INC.,

Defendants - Appellees

PAUL SMITH; IRMA SMITH,

Plaintiffs - Appellants

v.

QUICKEN LOANS, INC; TITLE SOURCE, INC.,

Defendants - Appellees

JOHN J. BENNETT, III; STACEY B. BENNETT, individually and on behalf of

all others similarly situated,

Plaintiffs - Appellants

v.

QUICKEN LOANS, INC; TITLE SOURCE, INC.,

Defendants - Appellees

United States Court of Appeals

Fifth Circuit

F I L E D

November 17, 2010

Lyle W. Cayce

Clerk

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Appeal from the United States District Court

for the Eastern District of Louisiana

Before JONES, Chief Judge, and HIGGINBOTHAM, and ELROD, Circuit

Judges.

EDITH H. JONES, Chief Judge:

This appeal concerns whether section 8(b) of the Real Estate Settlement

Procedures Act (“RESPA”), 12 U.S.C. § 2607(b), prohibits lenders and others

from charging “unearned, undivided” fees to borrowers at the closing of a

mortgage transaction. The district court granted summary judgment to Quicken

Loans, finding such charges permissible. We affirm, holding that RESPA § 8(b)

requires that the challenged fee be split with another party in order to be

actionable.

I. BACKGROUND

The Freemans, Bennetts, and Smiths each obtained a mortgage from

Quicken Loans in 2007. At the closing of their mortgage transactions, Quicken

charged the Freemans and Bennetts each a “loan discount fee” and charged the

Smiths a “loan origination fee” as well as a “loan processing fee”—although

Quicken contends the loan origination fee was misstated and was actually a loan

discount fee similar to those charged to the Freemans and Bennetts. The

Freemans and Bennetts contend that a loan discount fee may only be charged

when there is a corresponding interest rate reduction and that otherwise it is an

unearned fee for settlement services in violation of RESPA. As Quicken

allegedly did not decrease the interest rate for either the Freemans’ or Bennetts’

loan, the couples argue the fee was unlawful. The Smiths allege that the loan

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origination fee was duplicative of the loan processing fee, and thus an unearned

fee for settlement services, or alternatively, that it was an unlawful loan

discount fee akin to the fees charged to the Freemans and Bennetts.

Each couple filed suit separately in state court, seeking class treatment

and alleging violations of RESPA and state law. Quicken removed the cases to

federal court where they were consolidated. Quicken then moved for summary

judgment, claiming that the couples’ claims were not actionable under

RESPA § 8(b) as the fees were not split with another party, and contending that

as a result the state law claims failed. The district court agreed and granted

summary judgment.

The couples appeal the district court’s interpretation of RESPA. They

concede their state law claims are contingent on the RESPA claim, but argue

that because they should succeed on their RESPA claim, their state claims also

survive.

II. STANDARD OF REVIEW

This court reviews a district court’s grant of summary judgment de novo

applying the same standard as the district court. DePree v. Saunders, 588 F.3d

282, 286 (5th Cir. 2009). The court examines the evidence in the light most

favorable to the nonmoving party, and summary judgment is appropriate if there

is no genuine issue as to any material fact. Id. The essential facts are not

disputed; on appeal the sole question is the interpretation of RESPA, which we

review de novo.

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III. DISCUSSION

The Appellants characterize Quicken’s charges in the form of loan discount

and loan origination fees as “undivided unearned” fees. RESPA § 8(b) states

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 performed.

12 U.S.C. § 2607(b). Appellants contend that the loan discount fees are charges

for a real estate settlement service and that, as there was no interest rate

reduction, the charges did not represent “services actually performed.” Quicken

counters that RESPA does not prohibit undivided unearned fees by a sole

provider; to fall under the statute, fees must be divided between two parties such

that they resemble a kickback or bribe.

1

A.

RESPA § 8(b) has been the subject of several lawsuits to determine its

scope. Additionally, in 2001, HUD, the agency responsible for enforcing RESPA,

issued a statement of policy that identified four types of overcharge schemes that

this provision could potentially cover:

1. Fee splitting, where two or more persons split a fee, any

portion of which is unearned;

Alternatively, Quicken cursorily contends that the loan discount fees are not for 1

settlement services, and therefore are not covered by the statute. See Wooten v. Quicken

Loans, Inc., No. 07-00478-CG-C, 2008 WL 687379, at *5 (S.D.Ala. Mar. 10, 2008) (exempting

“the substantive terms of a loan” from the scope of “settlement services”). Our disposition of

the case on the remaining language of RESPA § 8(b) makes it unnecessary to reach this

argument. 

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2. Mark-ups, where a service provider charges the borrower for

services performed by a third party in excess of the cost of the

services to the service provider but keeps the excess itself;

3. Undivided unearned fees, where a service provider charges

the borrower a fee for which no correlative service is

performed; and

4. Overcharges, where a service provider charges a borrower for

services actually performed but in excess of the service’s

reasonable value.

Statement of Policy 2001-1, 66 Fed. Reg. 53,052 (Oct. 18, 2001). HUD proceeded

to assert that RESPA § 8(b) prohibits all four types of transactions. Id. All

circuits agree that the statute plainly prohibits fee splitting. See, e.g., Krzalic

v. Republic Title Co., 314 F.3d 875 (7th Cir. 2002). Similarly, every circuit

addressing the issue has rejected the contention that simple overcharges are

actionable under the statute. See Martinez v. Wells Fargo Home Mortgage Inc.,

598 F.3d 549, 553-54 (9th Cir. 2010) (noting the Second, Third and Eleventh

Circuits have all specifically held overcharges are not actionable and joining

their conclusion); Patino v. Lawyers Title Ins. Corp., No. 3:6-CV-1479-B,

2007 WL 4687748, at *3 (N.D. Tex. Jan. 11, 2007) (unpublished) (collecting

cases).

The circuits disagree on the remaining two types of fees: mark-ups and

undivided unearned fees. The Fourth, Seventh, and Eighth Circuits have each

2 3 4

held that RESPA § 8 is exclusively an anti-kickback provision. Accordingly,

RESPA § 8(b) requires two culpable parties, a giver and a receiver of the

 Boulware v. Crossland Mortgage Corp., 291 F.3d 261 (4th Cir. 2002). 2

 Krzalic, 314 F.3d at 879.

3

 Haug v. Bank of America, 317 F.3d 832 (8th Cir. 2003). 4

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unlawful fee, rendering mark-ups by a sole services provider not actionable. The

Second, Third, and Eleventh Circuits have rejected the two-party requirement

5 6 7

and held that RESPA § 8(b) prohibits mark-ups. Only the Second Circuit has

explicitly addressed whether RESPA § 8(b) prohibits a sole provider’s undivided

unearned charges and found that it did. Cohen v. JP Morgan Chase & Co.,

498 F.3d 111 (2d Cir. 2007). Presumably, the three circuits that require two

8

culpable actors would not find undivided unearned charges actionable.

B.

With these divergent positions in mind, we enter the interpretive fray. “If

the intent of Congress is clear, . . . the court, as well as the agency, must give

effect to the unambiguously expressed intent of Congress.” Chevron U.S.A. v.

Natural Res. Def. Council, Inc. 467 U.S. 837, 842-43, 104 S. Ct. 2778 (1984).

We hold that the language of RESPA § 8(b) is unambiguous and does not

cover undivided unearned fees. First, the language “No person shall give and no

person shall accept” is not ambiguous as to whether a sole actor’s undivided fees

are covered. The term “and” normally means that both of the listed conditions

must be satisfied. “The use of the conjunctive ‘and’ indicates that Congress was

clearly aiming at an exchange or transaction, not a unilateral act.” Boulware,

 Kruse v. Wells Fargo Home Mortgage, Inc., 383 F.3d 49 (2d Cir. 2004).

5

 Santiago v. GMAC Mortgage Group, Inc., 417 F.3d 384 (3d Cir. 2005). 6

 Sosa v. Chase Manhattan Mortgage Corp., 348 F.3d 979 (11th Cir. 2003). 7

The Third Circuit recently passed up an opportunity to evaluate whether a provider

8

could charge fees for work it did not perform. Tubbs v. N. Am. Title Agency, Inc., No. 09-2757,

2010 WL 3044067 (3d Cir. August 5, 2010) (unpublished). The dissent in Tubbs argued that

remand was unnecessary, despite error by the district court, because the allegations failed to

state a claim. Id. at *2 (Hardiman, J., dissenting).

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291 F.3d at 266. Thus, the provision requires two parties each committing an

act: one party gives a “portion, split, or percentage,” and another party receives

a “portion, split, or percentage.” See id. at 265 (“Therefore, § 8(b) only prohibits

overcharges when a ‘portion’ or ‘percentage’ of the overcharge is kicked back to

or ‘split’ with a third party.”); Mercado v. Calumet Federal Sav. & Loan Ass’n,

763 F.2d 269, 270 (7th Cir. 1985) (“The statute requires at least two parties to

share fees.”). This is not a prohibition on the undivided fees of a sole provider

like those charged to the Appellants.

Second, RESPA § 8(b) must be read in conjunction with its companion

provision, RESPA § 8(a). RESPA § 8(a) uses language identical to RESPA § 8(b):

No person shall give and no person shall accept any fee, kickback, or

thing of value pursuant to any agreement or understanding, oral or

otherwise, that business incident to or a part of a real estate

settlement service involving a federally related mortgage loan shall

be referred to any person.

12 U.S.C. § 2607(a) (emphasis added). That “no person shall give and no person

shall accept” a kickback clearly requires two culpable actors. “A term appearing

in several places in a statutory text is generally read the same way each time it

appears.” Ratzlaf v. United States, 510 U.S. 135, 143, 114 S. Ct. 655 (1994); see

also National Credit Union Admin. v. First Nat. Bank & Trust Co., 522 U.S. 479,

501, 118 S. Ct. 927 (1998) (identifying “the established canon of construction that

similar language contained within the same section of a statute must be

accorded a consistent meaning”). To be consistent with RESPA § 8(a), RESPA

§ 8(b) should require two culpable actors as well.

Third, RESPA § 8(b)’s language “any portion, split or percentage” requires

that two parties share something. See Boulware, 291 F.3d at 265 (“By using the

language ‘portion, split, or percentage,’ Congress was clearly aiming at a sharing

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arrangement rather than a unilateral overcharge.”). The definitions of all three

words require less than 100% or the whole of something. Webster’s defines

“portion” as “an individual’s part or share of something” or “a part of a whole.”

WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1768 (2002). “Split” means

“a product of division by or as if by splitting,” or “a share (as of booty, winnings,

profits).” Id. at 2202. “Percentage” means a “part of a whole expressed in

hundredths.” Id. at 1675.

The Appellants note, citing the Second Circuit, that certain statutes use

“any portion” and “any percentage” to include situations that involve the entirety

of something. Cohen, 498 F.3d at 118-19 (citing anti-embezzlement statutes).

But this is the exception, not the rule, and there are several reasons not to apply

that interpretation here. None of the statutes cited by Cohen uses all three

terms: portions, split and percentage. Using all three terms collectively

emphasizes that Congress intended “part of a whole.” “The traditional canon of

construction, noscitur a sociis, dictates that words grouped in a list should be

given related meaning.” Dole v. Steelworkers, 494 U.S. 26, 36, 110 S. Ct. 929

(1990) (internal quotations and citations omitted). Under the doctrine of

noscitur a sociis, the court “avoid[s] ascribing to one word a meaning so broad

that it is inconsistent with its accompanying words, thus giving unintended

breadth to the Acts of Congress.” Gustafson v. Alloyd Co., 513 U.S. 561, 575,

115 S. Ct. 1061 (1995) (internal citations and quotations omitted). A court

stretches the definition of “portion, split or percentage” to its breaking point to

mean 100% of a charge. Further, none of the other statutes uses “split.” While

portion or percentage may be ambiguous in some limited cases, “split” requires

dividing a single thing among several parties.

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Finally, when read in its entirety, RESPA is an anti-kickback statute, not

an anti-price gouging statute. Congress stated RESPA’s purpose in 12 U.S.C.

§ 2601(b). It explicitly and exclusively prohibits kickback and referral fees:

(b) It is the purpose of this chapter to effect certain changes in

the settlement process for residential real estate that will

result—

(1) in more effective advance disclosure to home buyers

and sellers of settlement costs;

(2) in the elimination of kickbacks or referral fees that tend

to increase unnecessarily the costs of certain settlement

services;

(3) in a reduction in the amounts home buyers are required

to place in escrow accounts established to insure the

payment of real estate taxes and insurance; and

(4) in significant reform and modernization of local record

keeping of land title information.

12 U.S.C. § 2601(b) (emphasis added). Section 2601's purpose statement does

not discuss, mention, or even hint about a general prohibition on overcharges or

unearned fees or other forms of price abuse. If Congress meant to ban other

forms of price abuse, such as undivided unearned fees or unearned fees

generally, then surely it would not have used such limited language. Unearned

fees are not kickbacks, and RESPA does not cover them.

9

There is no reason to recite legislative history given the clarity of the statutory text. 

9

Nonetheless, if we must look to the legislative history, the Senate Report that details

Congress’s intent, S. REP. NO. 93-866 (1974), reprinted in 1974 U.S.C.C.A.N. 6545, supports

this interpretation. When discussing RESPA § 8, the Senate Report begins by saying that:

Section [8] is intended to prohibit all kickback or referral fee arrangements

whereby any payment is made or ‘thing of value’ furnished for the referral of

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C.

The Appellants attempt to rehabilitate their argument by urging us to

follow HUD’s 2001 policy statement. They assert that this policy statement is

entitled to Chevron deference and, accordingly, the court must adopt HUD’s

interpretation that RESPA § 8(b) covers undivided unearned fees. The Second

Circuit adopted this rationale in Cohen. 498 F.3d at 115 (citing Kruse, 383 F.3d

at 57).

10

We are unpersuaded. When the statutory provision is clear on its face,

there is no need to look to any regulatory interpretation, such as the HUD 2001

statement. Chevron, 467 U.S. at 842-43. If the statute is ambiguous, the court

is only required to defer to an agency’s interpretation that “reasonably

effectuate[s] Congress’s intent.” Texas v. United States, 497 F.3d 491, 506 (5th

Cir. 2007). Otherwise, an agency interpretation lacks the “force of law” and will

real estate settlement business. The section also prohibits 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 performed.

Reasonable payments in return for services actually performed or goods actually

furnished are not intended to be prohibited.

Id. at 6551. (emphasis added). Just as in § 2601(b), nothing can be fairly read to cover

undivided fees. The description clearly and only covers the classic kickback situation where

one party refers a client to another party in exchange for a fee.

Further, all of the examples listed in the Senate Report reference charges divided

among multiple parties. Id. If Congress meant to prohibit other forms of price gouging, such

as unearned fees generally, then the Senate Report would have listed at least one example

that does not involve a referral. That Congress did not list such examples strongly implies

that RESPA § 8(b) did not cover such other actions.

Other circuits have avoided the issue of whether the HUD statement is entitled to 10

Chevron deference. See Santiago, 417 F.3d at 389 n.4 (“because we would find HUD’s

interpretation to be persuasive under Skidmore, we would not need to reach whether Chevron

deference is warranted.”); Krzalic, 314 F.3d at 879; Sosa, 348 F.3d at 984. 

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not receive Chevron deference, but instead will be granted Skidmore deference

and given “respect proportional to its ‘power to persuade.’” United States v.

Mead Corp., 533 U.S. 218, 235, 121 S. Ct. 2164 (2001). Even assuming arguendo

that this RESPA provision is ambiguous, the HUD statement is not due Chevron

deference because there is no indication that the HUD statement carries the

force of law. See Krzalic, 314 F.3d at 882 (Easterbrook, J., concurring) (stating

that regulatory interpretations that do not follow rule-making guidelines under

the APA are entitled to Skidmore deference only). “Interpretations such as those

in opinion letters–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.” Christensen v. Harris County, 529 U.S. 576,

587, 120 S. Ct. 1655 (2000). Where the agency has not used a deliberative

process such as notice-and-comment rulemaking, or where the process by which

the agency reached its interpretation is unclear, the court cannot presume

Congress intended to grant the interpretation the force of law. For example, the

Fifth Circuit has denied Chevron deference to IRS revenue rulings, the CMS

11

Medicaid Manual, FTC interpretive rules, and litigation briefs. Unlike other

12 13 14

HUD regulations interpreting RESPA, the HUD Statement of Policy was not

promulgated through traditional notice-and-comment rulemaking or any similar

deliberative process and does not identify any clear methodology by which it

 Kornman & Assocs, 527 F.3d 443 (5th Cir. 2008). 11

 S.D. ex rel. Dickson v. Hood, 391 F.3d 581 (5th Cir. 2004). 

12

 Walton v. Rose Mobile Homes, 298 F.3d 470 (5th Cir. 2002) 13

 Pool Co. v. Cooper, 274 F.3d 173, 177 n.3 (5th Cir. 2001). 

14

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reached its conclusion. Accordingly, the HUD statement is not due Chevron

deference.

Even under Skidmore deference, the HUD statement is unpersuasive. The

discussion of RESPA § 8(b) is perfunctory and conclusory. It expresses

disagreement with the Seventh Circuit’s interpretation of RESPA § 8(b) in

Echevarria v. Chicago Title & Trust Co., 256 F.3d 623 (7th Cir. 2001) but

provides no concrete reasoning for its conclusion. 66 Fed. Reg. at 53,053. HUD

claims to have a “long-standing interpretation” that RESPA covers undivided

unearned fees but offers no clear evidence for this point. Id. at 53,058. It asserts

that a fee need not be split because of the disjunctive word “or,” but offers no

discussion, just a conclusory statement. Id. It does not address any legislative

history or alternate interpretation. Because we are interpreting a statute, HUD

must provide some manner of statutory interpretation that would bolster its

position. HUD failed to do so.

D.

Finally, the Appellants argue that RESPA should ban undivided unearned

fees because this type of pricing scheme puts consumers in the same economic

position as a kickback. The Third Circuit found this “same economic position”

argument persuasive when analyzing whether RESPA § 8(b) prohibited

markups. Santiago, 417 F.3d at 388-89.

This is not so much an argument as a quarrel with Congress. By its terms,

RESPA does not regulate economic outcomes; it only bans certain predatory

methods. Congress did not mean to criminalize the charging of fees for

settlement services, however they are characterized, as long as they are

disclosed and not within RESPA § 8(a) or (b). 12 U.S.C. § 2607(d) (imposing

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criminal penalties and potential imprisonment for any violations of

RESPA § 8(b)).

15

IV. CONCLUSION

Because the statutory text is clear, RESPA prohibits only kickbacks and

referral fees, not unearned fees by a sole provider of settlement services. The

charges imposed by Quicken on Appellants for loan discount fees and a loan

processing fee are not prohibited by RESPA § 8(b).

The judgment of the district court is AFFIRMED.

Our disposition of the RESPA claim necessarily requires rejection of Appellants’ 15

dependent state law claims.

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HIGGINBOTHAM, Circuit Judge, dissenting:

I respectfully dissent. I would, in the main, take the path set forth in the

Second Circuit’s well-reasoned opinion in Cohen v. JP Morgan Chase &

Company and hold that unearned undivided loan discount fees violate § 8(b) of

1

the Real Estate Settlement Procedures Act (“RESPA”).

2

The lone aspect of Cohen I would not adopt is its decision to give Chevron

deference to the interpretation of RESPA § 8(b) articulated by the Department

3

of Housing and Urban Development (“HUD”) in its Statement of Policy 2001-1.

4

This Court is only required to grant Chevron deference to an agency’s

interpretation of an ambiguous statute if the interpretation has “the force of

law,” a description generally reserved for interpretations that are the product

5

of “a relatively formal administrative procedure tending to foster the fairness

and deliberation that should underlie a pronouncement of such force,” such as

6

traditional notice-and-comment rulemaking. The HUD Statement of Policy was

not promulgated through traditional notice-and-comment rulemaking, and I am

not persuaded that the process through which it was promulgated was

sufficiently considered to merit Chevron deference. I share the Seventh Circuit’s

concern over the Statement of Policy’s lack of analysis, which expresses

disagreement with that court’s decision in Echevarria v. Chicago Title & Trust

 498 F.3d 111, 114-26 (2d Cir. 2007).

1

 12 U.S.C. § 2607(b). 

2

See generally Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 3

(1984).

 Statement of Policy 2001-1, 66 Fed. Reg. 53,052 (Oct. 18, 2001). 

4

See United States v. Mead Corp., 533 U.S. 218, 226-27 (2001).

5

Id. at 229. 

6

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Company but gives no reason for that disagreement “except that HUD has

7

always regarded such fees as forbidden by the statute, though previously it had

failed to make this clear. No evidence or interpretive methodology is mentioned;

no abuse pointed to that might justify the contorted interpretation urged by

HUD.” As Judge Posner explained, “something more formal, more deliberative,

8

than a simple announcement” was needed to invoke Chevron deference and “[a]

simple announcement is all we have here.” While I agree with the Second

9

Circuit that the policy statement is more than a simple announcement, without

10

a more formalized process through which the Agency’s views might be

challenged and sharpened—such as what occurs in a formal adjudication or

notice-and-comment rulemaking—I would not conclude that the Statement of

Policy warrants deference under Chevron. Per Skidmore, I would give HUD’s

11

interpretation only such respect as is proportional to its power to persuade.

This concern aside, I would adopt the approach and conclusions of Judge

Raggi’s fine opinion in Cohen. The statutory phrase “any portion, split, or

percentage of any charge . . . other than for services actually performed” is

ambiguous with respect to Congress’s intent to prohibit unearned undivided fees.

Prohibiting such fees strikes at a core objective of RESPA: promoting

transparency of costs associated with settlement. RESPA is aimed at reducing

abuses by those in the mortgage industry through charging borrowers fees for

work not actually performed. While the greatest concern may be when that fee

 256 F.3d 623 (7th Cir. 2001) 7

Krzalic v. Republic Title Co., 314 F.3d 875, 881 (7th Cir. 2002) (citations omitted), cert. 8

denied, 539 U.S. 958 (2003). 

See Krzalic, 314 F.3d at 881 (citing Barnhart, 535 U.S. at 212, and Mead Corp., 533 9

U.S. at 229–31). 

See Kruse v. Wells Fargo Home Mortg., Inc., 383 F.3d 49, 59-61 (2d Cir. 2004). 10

See Mead, 553 U.S. at 234-35 (citing Skidmore v. Swift & Co., 323 U.S. 134 (1944)).

11

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is part of a hidden referral relationship, the damage done to borrowers is similar:

they are led to believe they are paying for something they are not. Following

Cohen would not lead us down the path to a rate-setting regime. The task of the

court is very different when determining whether any service was provided as

opposed to whether the price charged is a reasonable one. When the fee is

entirely unearned, the court is not forced to determine the reasonableness of a

fee—a task for which courts are not well suited—because the reasonable fee for

nothing is nothing.

Accordingly, I respectfully dissent.

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