Supreme Court Hears Arguments in RESPA Unearned Fees Case

The Supreme Court heard oral arguments this week in the controversial mortgage fees case — Freeman v. Quicken Loans. How they rule may pave the way for tricky new precedents in what constitutes a kickback.

This particular lawsuit revolves around whether a provision of RESPA that bans service providers from charging for services they did not actually render applies only when the unearned fees are split between two or more parties.

Previously, three lower courts have ruled the law applies to all unearned fees whether they are retained by a single entity or multiple parties. Quicken Loans said several other courts reached different holdings on the issue, sparking appeals up to the Supreme Court.

The original plaintiffs, the Freeman, Bennett and Smith families, secured loans in Louisiana from Quicken Loans and soon found themselves facing “loan discount fees” at the closing of their mortgages, according to legal briefs filed in the case.

Not long after the dispute began, the families filed suit on behalf of all similarly situated plaintiffs, alleging Quicken Loans charged the loan discount fee, but did not reduce their interest rates.

The case led to subsequent appeals with the case narrowing down to the issue in front of the U.S. Supreme Court on how to apply RESPA rules to unearned loan servicing fees.
Quicken Loans released a statement about the hearing Tuesday.

“Quicken Loans has never charged unearned fees and never will,” the lender said. “The company won this case on summary judgment in Federal Court on undisputed evidence that the fees Quicken Loans collected were, in fact, earned. The ruling in favor of Quicken Loans was upheld on appeal by the U.S. Court of Appeals for the Fifth Circuit.”

The company added, “Quicken Loans, like all lenders, has and continues to offer clients the option of ‘buying down’ their interest rate by paying loan discount points. This practice is a universal standard across the lending industry and is in accordance with state and federal laws. It was proven the loan discount points collected were earned and resulted in a lower interest rate for the borrowers.”