Two Recent Cases on RESPA Violations

Bob Flynn of Signature Title notes two recent cases involving the Real Estate Settlement Procedures Act (“RESPA”) that are of particular interest to attorneys working with title and settlement companies.  The first case is a class action suit pending in the U.S. District Court known as Baehr v. The Creig Northrop Team, P.C. et al.  In Baehr, a class of homebuyers alleges an illegal and inappropriate relationship between real estate agents and a real estate settlement company.  In short, the Plaintiffs allege that the settlement company paid the agents salaries and fees for work and services that were not provided and that the payments were actually illegal kickbacks for the referral of business.  There has been no decision yet, and the allegations are merely that – allegations.  However, the case is a lesson and reminder to attorneys working with real estate settlement companies regarding how to conduct relationships and pay for the referral of business in conformity with RESPA.

The second case involves a company engaged in negotiating short sales and performing related services.  The Maryland Commissioner of Financial Regulation ordered the company, ATC Financial LLC, and its owners, Sean Der and James Weiskerger, to cease and desist from engaging in any further credit service business activities with Maryland consumers based upon, among other things, altering fees on HUD-1’s after approval by the short sale lender.  Since the issuance of the original order, the Commissioner and the Respondents have entered into an Interim Settlement Agreement that allows the Respondents to continue operating for clients with pending closings.  Among other requirements of the Interim Settlement Agreement, the Respondents must provide a final HUD-1 for each transaction to the title company prior to submission to the lender.  The lesson is simple – the HUD-1 must disclose all fees payable as part of the transaction, and if the HUD-1 changes, it needs to be reapproved.

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