Source: https://alta.org/news/news.cfm?20040914-US-Second-Circuit-Court-Of-Appeals-Defers-To-HUD-That-Mark-Ups-May-Violate-RESPA--8b
Timestamp: 2018-01-20 11:10:41
Document Index: 57341119

Matched Legal Cases: ['§ 8', '§ 8', '§ 8', '§ 8', '§8', '§ 8', '§ 8']

ALTA - U.S. Second Circuit Court Of Appeals Defers To HUD That Mark-Ups May Violate RESPA § 8(b)
In a decision that conflicts with the views of the Fourth, Seventh and Eighth Circuit Courts of Appeal, the U.S. Court of Appeals for the Second Circuit has concluded that HUD’s view, as expressed in Policy Statement 2001-1, 66 Fed. Reg. 53,052 (Oct. 18, 2001), that RESPA § 8(b) applies to mark-ups of third party charges should be given deference. Kruse v. Wells Fargo Home Mtge, Inc. (No. 03-7665, 2nd Cir. Sept. 10, 2004).
The decision, however, is less than a complete victory for HUD or those who have advocated that any mark-up of third party charges should be deemed a violation of § 8(b), which prohibits any person from receiving or accepting any portion, split or percentage of a settlement service charge other than for services rendered. The court also made clear that, contrary to the views HUD expressed in the 2001-1 Policy Statement, § 8(b) does not apply to purported “overcharges” by a settlement service provider for its own services.
The case involved a nationwide class action brought on behalf of consumers who had obtained mortgage loans from Wells Fargo dating back to 1995. The plaintiffs alleged that Wells Fargo had violated RESPA and state unjust enrichment laws by (a) overcharging them for certain services rendered by Wells Fargo (i.e., for underwriting the mortgage loans through Fannie Mae and Freddie Mac underwriting services), and (b) marking up the charges of third parties for tax services, flood certifications, and document preparation without providing additional services.
With regard to the application of §8(b) to mark-ups of third party charges, the court took a different approach. On that issue, the court found that, despite the conclusions of the three other circuits, the language of § 8(b) was ambiguous as to whether an unearned mark-up was prohibited and, in light of that ambiguity, relevant Supreme Court decisions dictated that the courts should defer to HUD’s reasonable determination filling in the gap created by such ambiguity. The Second Circuit concluded that even though Policy Statement 2001-1 was not issued after a notice-and-comment rulemaking, the Policy Statement was a document “of sufficient gravity to be worthy of deference” and reflected the agency’s intent to utilize its Congressionally-delegated authority to promulgate rules that would have the binding effect of law.
However, it is not yet clear whether Wells Fargo may have violated § 8(b) because the court remanded the case back to the district court to determine whether Wells Fargo performed services in connection with the tax services, flood certifications and document preparation charges provided by third parties.