Source: http://openjurist.org/491/f3d/1260/culpepper-v-irwin-mortgage-corporation
Timestamp: 2015-11-29 01:38:03
Document Index: 527993205

Matched Legal Cases: ['§ 2601', '§ 2607', '§ 2607', '§ 2607', '§ 2607', '§ 2607', '§ 2607', '§ 2607']

491 F3d 1260 Culpepper v. Irwin Mortgage Corporation | OpenJurist
491 F. 3d 1260 - Culpepper v. Irwin Mortgage Corporation HomeFederal Reporter, Third Series491 F.3d
491 F3d 1260 Culpepper v. Irwin Mortgage Corporation 491 F.3d 1260
John Robert CULPEPPER, Patricia Starnes Culpepper, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants,v.IRWIN MORTGAGE CORPORATION, f.k.a. Inland Mortgage Corporation, Defendant-Appellee.Beatrice Hiers, individually and as a representative of a class of similarly situated persons, Plaintiff-Appellant,v.Irwin Mortgage Corporation, f.k.a. Inland Mortgage Corporation, Defendant-Appellee.
No. 06-11105.
Richard Scott Gordon, Quinn, Gordon & Wolf, Chtd., Towson, MD, Tammy McClendon Stokes, David R. Donaldson, Donaldson, Guin & Slate, L.L.C., Birmingham, AL, for Plaintiffs-Appellants.
Mark G. Schroeder, Robert J. Pratte, Briggs & Morgan, P.A., Minneapolis, MN, Sarah Y. Larson, Maynard, Cooper & Gale, P.C., Birmingham, AL, for Defendant-Appellee.
Before BIRCH and BLACK, Circuit Judges, and PRESNELL,* District Judge.
The appellants, John and Patricia Culpepper and Beatrice Hiers, brought the present class action against appellee Irwin Mortgage Corporation ("Irwin"), a mortgage lender, pursuant to the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et. seq. The appellants alleged that Irwin's payment of yield spread premiums to mortgage brokers — in exchange for delivering interest rates above the "par rate" — violated section 8 of RESPA, 12 U.S.C. § 2607(a). After a lengthy procedural history, which is detailed herein, the appellees ultimately filed motions for summary judgment and to decertify the class, both of which the district court granted.
On appeal, the appellants argue that the district court erred in granting summary judgment in favor of Irwin for two reasons: first, because the "law-of-the-case" doctrine obligates us to adhere to our prior rulings in this case, despite an intervening — and conflicting — statement of policy by the Department of Housing and Urban Development ("HUD"), the administrative agency charged with enforcing RESPA; and, second, because, even applying HUD's test for liability, Irwin's yield spread premium payments were illegal under RESPA. The appellants further argue that the district court erred in decertifying the class.
Upon review, we conclude that two exceptions to the law-of-the-case doctrine apply and that the district court acted properly in applying HUD's test for liability to the facts of appellants' case and in concluding that Irwin was entitled to summary judgment. We also conclude that the district court did not abuse its discretion in decertifying the class, due to its determination that individual issues of fact predominate in this type of action. Accordingly, we AFFIRM.
This is the fourth time we have had cause to review the appellants' RESPA action against Irwin. In Culpepper v. Inland Mortgage Corporation, 132 F.3d 692 (11th Cir.1998) ("Culpepper I"), we reversed a grant of summary judgment in favor of Irwin, vacated the district court's denial of class certification, and remanded for further proceedings. In Culpepper v. Inland Mortgage Corporation, 144 F.3d 717 (11th Cir.1998) ("Culpepper II"), we denied Irwin's petition for a rehearing of Culpepper I, and clarified our decision in that case. In Culpepper v. Irwin Mortgage Corporation, 253 F.3d 1324 (11th Cir. 2001) ("Culpepper III") we clarified the standard for liability under RESPA; we also affirmed the district court's class certification. The procedural backdrop leading to the present appeal is, as our sister circuit has put it, "cumbersome but important." Schuetz v. Banc One Mortgage Corp., 292 F.3d 1004, 1008 (9th Cir.2002).
Our review of this backdrop is as follows. First, we briefly discuss the facts and allegations of the appellants' action against Irwin. Second, we review our holdings in Culpepper I and Culpepper II, as well as the 1999 Statement of Policy issued by HUD in the wake of those decisions. Third, we discuss our opinion in Culpepper III and the 2001 Statement of Policy that HUD issued in direct response to-and in explicit criticism of-Culpepper III. We then discuss the effect of the HUD 2001 Statement of Policy on our RESPA case law. Finally, we discuss the district court proceedings that led to the present appeal.
A. The Borrowers' Action Against Irwin
In 1996, the appellants John and Patricia Culpepper and Beatrice Hiers (hereinafter, collectively, "the Borrowers") brought the instant action,1 on behalf of themselves and all others similarly situated, against Irwin,2 a mortgage lender, alleging that Irwin had acted illegally in paying yield spread premiums to their mortgage brokers. A yield spread premium ("YSP") is "a payment made by a [mortgage] lender to a [mortgage] broker in exchange for that broker's delivering a mortgage that is above the `par rate' being offered by the lender." Heimmermann v. First Union Mortgage Corp., 305 F.3d 1257, 1259 (11th Cir.2002). The "`par rate' refers to the rate at which the lender will fund 100% of a loan with no premiums or discounts to the broker." Schuetz, 292 F.3d at 1007. When a mortgage broker brought Irwin a loan at below the par rate, the broker was required to pay discount points for the loan. See Culpepper I, 132 F.3d at 694. Conversely, when a mortgage broker brought Irwin a loan at a rate above the par rate, Irwin agreed to pay a YSP to the mortgage broker. Id. Generally speaking, the YSP was calculated as a percentage of the total amount of the loan; the exact amount was determined by "the extent to which the actual interest rate exceed[ed] the par rate." Heimmermann, 305 F.3d at 1259.
The particular facts these consolidated cases are not in dispute. Both of the Borrowers obtained their federally insured home mortgage loans through third party mortgage brokers, and Irwin, as the lender, was the source of the funds in each transaction. The Culpeppers obtained their loan with Irwin through Premiere Mortgage Company ("Premiere"), a mortgage broker. The interest rate that they agreed to in connection with their mortgage was 7.5%, despite the fact that the par rate-that is, the rate at which Irwin was willing to make the same loan-was actually 7.25%. Because the loan Premiere assigned to Irwin was above par, Irwin paid Premiere a YSP. At the closing of the transaction, the Culpeppers directly paid Premiere a loan origination fee of $760.50; in addition to this amount, Irwin paid to Premiere a YSP of $1,263.21, approximately 1.675% of the loan amount.
Appellant Hiers obtained her loan with Irwin through Homebuyers Mortgage Incorporated ("HMI"), another third party mortgage broker. Hiers agreed to an interest rate of 7% in connection with her loan, despite the fact that the par rate for an adjustable rate loan was 5.5%. At the closing, Hiers paid HMI an origination fee of $1,544 and a loan discount of $14.64. In addition to these fees, Irwin paid HMI a YSP of $4,538.87, approximately 2.875% of the total loan amount.
Although the YSPs were disclosed to the Borrowers at their closings and were included in their respective HUD closing forms, they argued that the payment of YSPs from Irwin to their brokers, for obtaining above par mortgages, violated RESPA.3 Specifically, the Borrowers argued that Irwin's payment of YSPs violated section 8 of RESPA, which prohibits the payment of "any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or 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). The Borrowers argued that the YSPs constituted illegal referral fees under RESPA, in that they were paid for nothing more than a broker's delivery of a loan with a higher interest rate. In response, Irwin contended that its payment of YSPs to mortgage brokers were not kickbacks or referral fees, but, rather, that the payments fell within the safe harbor of RESPA, 12 U.S.C. § 2607(c), which provides that "[n]othing in this section shall be construed as prohibiting ... the payment to any person of a bona fide . . . compensation or other payment for goods or facilities actually furnished or for services actually performed."
Irwin moved for summary judgment, which the district court granted. The subsequent appeal resulted in our first decision in this case, Culpepper I.
B. Culpepper I and II, and HUD's 1999 Statement of Policy
In Culpepper I, we first noted that "[n]o circuit court [had yet] addressed whether a [YSP] violates RESPA." 132 F.3d at 695. In addressing that issue, we held that a lender's payment of a YSP to a broker would be an illegal referral fee under RESPA "if: (1) a payment of a thing of value; (2)[was] made pursuant to an agreement to refer settlement business; and (3) a referral actually occurr[ed]." Id. at 696. We concluded that the YSP in the Culpeppers' case violated RESPA, since it satisfied all three requirements. Specifically, the YSP had been paid to Premiere pursuant to a pre-existing arrangement between Premiere and Irwin, and the later assignment of the Culpeppers' loan, from Premiere to Irwin, had, in fact, occurred. Id.
We also rejected the argument that the YSP was bona fide compensation for a "good" or "service" performed by Premiere, such that it should be exempt from liability under 12 U.S.C. § 2607(c). Id. at 696-97. We found that Irwin had not shown that the YSP was payment for a "good" under RESPA, because no identifiable "good" was ever transferred from Premiere to Irwin; in fact, Irwin was, from the outset, the original source of the funds and thus the sole owner of the loan. Id. at 696. Nor had Irwin established that the YSP was payment for a "service" that Premiere had provided, because: (1) the Culpeppers had already paid a separate loan origination fee directly to Premiere to cover its "services"; (2) Irwin had stated in discovery that it paid Premiere a YSP "for the right to service the [Culpeppers'] loan," R6-149, Exh. 16 at 6, thereby belying the notion that the YSP was intended to compensate Premiere for the loan services it provided to the Culpeppers; and (3) the brokerage "services" that Premiere provided were the same, whether the loan was above par, below par, or at par. 132 F.3d at 696-97.
In finding that the Culpeppers' YSP was a referral fee that did not fall under the compensable goods/services safe harbor of § 2607(c), we concluded that the YSP was illegal under § 2607(a). Id. at 697. Our Culpepper I decision refrained from inquiring whether the YSP that Irwin had paid to Premiere was reasonable or a "fair market price," stating that the "reasonableness" inquiry only applied if the first step of the § 2607(c) safe harbor was satisfied — that is, if it was first shown that the YSP covered a compensable "good" or "service." Id. at 697. Accordingly, we reversed the district court's grant of summary judgment and remanded for further proceedings.
In Culpepper II, we denied a petition for a rehearing of Culpepper I. See 144 F.3d at 718. In doing so, however, we saw fit to clarify our holding in Culpepper I. We indicated that Culpepper I had not been intended to conclusively establish liability on the part of Irwin, nor had Culpepper I stated that YSPs from a mortgage lender to a mortgage broker were per se illegal under RESPA. Id. Rather, the Culpepper I decision had been limited to the question of whether the district court had erred in granting summary judgment for Irwin on the Culpeppers' RESPA action. Id. Because Irwin had failed to establish that the YSP it had paid to Premiere had been compensation for either goods or services that Premiere had provided, we concluded that the district court had acted prematurely in granting Irwin summary judgment as a matter of law. Id. at 718-19. We stated that nothing in Culpepper I would prevent Irwin, on remand, from arguing its position at trial. Id.
Subsequent to our decisions in Culpepper I and Culpepper II, HUD issued a 1999 Statement of Policy ("SOP") intended "to clarify its position on lender payments to mortgage brokers." See 64 Fed.Reg. 10080. HUD first stated that it was issuing the 1999 SOP because Congress had instructed it to do so, based on the fact that "Congress [had] never intended payments by lenders to mortgage brokers for goods or facilities actually furnished or for services actually performed to be violations of [RESPA] ...." Id. (citation omitted). HUD's SOP indicated that mortgage brokers provided many valuable services to home buyers in processing home mortgage loans, and that it was acceptable for mortgage brokers to receive fees as compensation for those services — either directly from the borrower or indirectly from the lender — so long as the compensation bore a "reasonable relationship to the market value of the goods, facilities, or services provided." Id. at 10086. HUD also expressly stated its view that payments by lenders to mortgage brokers, including YSPs, were not illegal per se. Id. at 10084.
Rather, HUD recommended a two-part "reasonableness test" to determine whether a payment to a mortgage broker such as a YSP was permissible under RESPA. The first step of the inquiry under the HUD test was "whether goods or facilities were actually furnished or services were actually performed for the compensation paid." Id.