Opinion ID: 4572464
Heading Depth: 2
Heading Rank: 1

Heading: The Real Estate Settlement Procedures Act

Text: When Congress passed RESPA in 1974, it enacted “significant reforms” that purported to provide “consumers throughout the Nation . . . with greater and more timely information on the nature and costs of the [real estate] settlement process.” § 2601(a). To see that RESPA’s rules would be followed, Congress gave its new law teeth. RESPA sanctions certain private rights of action, and it empowers federal and state regulators to enforce its dictates. See, e.g., §§ 2605(f), 2607(d), 2608(b). Congress has since authorized the Consumer Financial Protection Bureau (“CFPB”) to administer RESPA by “prescrib[ing] [] rules and regulations . . . necessary to achieve [RESPA’s] purposes.” § 2617(a). One of RESPA’s reforms targeted “the amounts home buyers are required to place into escrow accounts established to insure the payment of real estate taxes.” § 2601(b)(3). In general, an “[e]scrow account” is an “account that a servicer establishes or controls on behalf of a borrower to pay taxes” and other charges. 12 C.F.R. § 1024.17(b); accord Escrow, 5 Oxford English Dictionary 391 (2d ed. 1989) (“A deposit held in trust or as a security.”). RESPA permits lenders to require borrowers to send the tax payments to a mortgage servicer for escrow (instead of the borrower paying taxes directly to the government). See 12 U.S.C. § 2605(g); 12 C.F.R. § 1024.17. The practice of paying taxes through servicers assures lenders that tax payments are made, thus protecting against tax 4 liens and other risks to a lender in the event of foreclosure. See Ronald H. Jarashow, Comment, The Improper Use of Tax and Insurance Escrow Payments by Mortgagees, 25 CATH. U. L. REV. 102, 102–04 (1975). If a federally related mortgage contract imposes this requirement on a borrower, then federal law imposes certain reciprocal requirements on the mortgage servicer. Central to this appeal, 12 U.S.C. § 2605(g) requires “the servicer” to apply escrowed funds to a tax bill on time: “[T]hat is, on or before the deadline to avoid a penalty.” 12 C.F.R. § 1024.17(k)(1). But in 2017, one of plaintiff Rodney Harrell’s tax payments was not made on time. And that missed payment would spiral into the putative class action driving this appeal.