Over the last year, the real estate industry has seen a ton of high-profile RESPA cases, both in circuit courts and the US Supreme Court. With all these settlements and decisions, settlement service providers must be aware of how these rulings will affect their businesses.

On November 1, RESPA News is hosting a webinar to educated title and settlement service professionals on the significance of cases including:

• Edwards v. First American
• Freeman v. Quicken Loans
• Carter v. Welles Bowen

Additionally, this webinar will discuss how recent activities from the Consumer Financial Protection Bureau (CFPB) match up with these recent court discussions.

Click here to register for the webinar

On June 28, 2012, the United States Supreme Court dismissed the case of First American Financial Corporation, v. Denise P. Edwards, stating that review had been “improvidently granted.”

This leaves standing the Ninth Circuit Court of Appeals decision in Edwards v. The First American Corporation, in which the California court rejected First American’s argument that the plaintiff could not sue for a RESPA violation because she had not been overcharged for title insurance.

In the underlying case, the plaintiff, Edwards, sued First American, alleging that First American paid illegal kickbacks in exchange for the referral of title insurance business. The plaintiff claimed that, in connection with the purchase of her home, Tower City referred the title insurance to First American, and that this referral was illegal under RESPA.

First American moved to dismiss the class action complaint on the ground that plaintiff had not suffered any financial injury and, therefore, she had no standing to sue. The District Court agreed with plaintiff and denied the motion to dismiss.

The Ninth Circuit agreed with the District Court. The Ninth Circuit explained that RESPA does not require a showing of an overcharge. Rather, a plaintiff has a statutory cause of action under RESPA even when there is no showing of an injury separate and apart from the violation of the statute itself.

The Supreme Court’s dismissal of the First American case leaves the Ninth Circuit’s decision as the controlling law in California. A consumer may bring a claim, including on behalf of a class, for a RESPA violation even when the consumer has not been overcharged, or otherwise directly injured, as a result of the violation.

This decision will open the floodgates for aggressive class action attorneys to go after corporations that may have broken the law. This could cost the industry millions of dollars and countless hours of work time.

The bottom line is that now, even inconsequential financial gains can get you into a lot of trouble.

Senator Richard Shelby, R-Alabama, grilled Consumer Financial Protection Bureau (CFPB) chief Richard Cordray about the extent of the CFPB’s powers.

Shelby contends that the bureau is “completely immune from congressional oversight,” and asked several questions about whether it has the authority to modify, or grant exemptions from, certain statutory requirements of Dodd-Frank and bypass congressional will.

Shelby rant was about a mortgage disclosure requirement in Dodd-Frank that the CFPB recently said it was considering making exempting some companies from because the form would be difficult to explain to consumers.

Sen. Shelby believes that the CFPB could simply ask Congress to amend the statute, but that’s not what he sees Cordray’s agency doing.

“Instead, the bureau has interpreted its exemptive authority so broadly that it believes it can just ignore the statute,” Shelby said. “After all, if the bureau can easily ignore a statute, it raises the more serious question of whether Congress or the bureau has the final say over what the law is.”

For his part, Cordray sought to defuse the matter as best he could.

“I absolutely do not think we can rewrite statutes,” Cordray said. “I will say, interestingly enough, there are many requests for us to consider our exemption or modification authority… but we do not believe we have the authority to ignore or rewrite the law.”

At the hearing, Cordray described how the bureau has responded to the 72,297 complaints it had received from consumers as of Sept. 3. At that rate, the CFPB is expected to field 120,000 consumer complaints a year, the majority of them on mortgage lending and servicing.

“The volume of complaints we’re receiving is heavy, and it’s hard work to keep up with it,” Cordray said.

This is a big election coming for the CFPB and the Dodd-Frank act. What do you think should be done with the CFPB?

California took another big step towards becoming one of the most favorable states in regards to homeowners rights when Gov. Jerry Brown signed a bill Monday forcing owners of foreclosed and vacant homes to maintain the property or face up to a $1,000 fine per day of violation.

The bill is part of the Homeowner Bill of Rights, a slew of new legislation drafted and introduced through state lawmakers with the assistance of California Attorney General Kamala Harris.

The latest enacted bill gives local governments the power to impose a fine of up to $1,000 a day for code violations. The local governments must give owners, including banks, at least 14 days to start fixing the alleged violation and 30 days to complete the correction before issuing the fine.

Interestingly, one of the violations includes “not failing to take action to prevent mosquito larvae from growing in standing water or other conditions that create a public nuisance.” This comes after a woman in Studio City, recently diagnosed with the West Nile virus, traced the contraction to mosquitoes breeding in a nearby foreclosure’s neglected swimming pool.

The new bill could be costly for careless owners of these homes. One of the largest owners of REO homes is Fannie Mae, which, according to its latest financial filing, owns more than 10,000 REO properties in California as of June 30.

If an investor or homeowner buys a property that was foreclosed on at any point since Jan. 1, 2008, the local government must give at least 60 days to remedy any violations found since taking title. The law does give room to provide less time “if deemed necessary.”

If you’re an REO expert, RE-Insider would love to hear from you. How are you planning on educating your buyers about the new Homeowners Bill of Rights?

The Consumer Financial Protection Bureau (CFPB) is tightening the screws on home buying. Are you ready?

On Monday, the CFPB released their proposed combined mortgage disclosures under the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA).

The new rules would establish disclosure requirements and forms for most residential first mortgages.

The new rule requires two disclosures:

Loan Estimate Disclosure – explains key features, costs and risks associated with the mortgage, provided within three business days of first applying

Closing Disclosure – explains all costs associated with the loan, provided three business days before the close of the loan

The disclosures offer clear warnings about prepayment penalties and include data points that make the estimates more reliable, the bureau said.

The new disclosure forms have already gone through 10 rounds of testing and re-tweaking and are designed to be more clear and concise.

The public has until Nov. 6 to review and provide comments on most of the CFPB’s proposal. However, comments are due for specific portions after 60 days on Sept. 7. The CFPB will review and analyze the comments before issuing final rules.

What feedback would you give on the new forms? Tell us and tell the CFPB by clicking here.

Four Seattle area residents were arrested today on a 21-count indictment charging them with conspiracy, bank fraud, wire fraud and mail fraud, announced U.S. Attorney Jenny A. Durkan.

The mortgage fraud scheme ran from 2006-2008 and defrauded more than ten banks, financial institutions, and mortgage lenders, of more than $8.6 million. More than 50 mortgages were involved on properties in a variety of communities around Puget Sound including Medina, Renton, South Seattle, Bellevue, Redmond, and Kirkland.

Jonathon Mendoza Martinez, 34, of Bellevue, his sister, Jazim Villalba Martinez, 30, of Seattle, Cecia Perez Morales, 35, of Kirkland and Jorge Castrejon Pichardo, 41, of Mountlake Terrace made their initial appearances in U.S. District Court in Seattle.

According to the indictment, three of the defendants worked at Emerald City Escrow and at Nationwide Home Mortgage and conspired to use straw buyers to defraud banks. The fourth defendant worked at a tax preparation business and provided some of the false documentation submitted with the loan applications.

The conspirators submitted false financial, employment, and tax information to apply for residential mortgage loans. They falsely inflated the sale price of the properties. After the lenders funded the loans, the conspirators kept the excess proceeds and the straw buyers quickly defaulted on the mortgages. The victim banks included Washington Mutual (now JPM Chase), Bank of America, American Sterling Bank, ING Bank, IndyMac Bank, and Merrill Lynch & Co., Inc., among others.

Documents in the scheme were submitted via mail and wire. In all, the defendants secured, or aided and abetted in securing, through unqualified buyers, at least fifty mortgage loans, representing approximately $22,396,660 in loan proceeds, based on false and fraudulent representations, resulting in a loss to financial institutions and mortgage lenders totaling approximately $8,672,330.

Each count in the indictment is punishable by up to 30 years in prison and a $1 million fine.
Read more on this story here.