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.

A California bank executive was convicted by a federal grand jury last week on six counts of mail fraud for his part in a complex mortgage fraud scheme. Joel Blanford, 44, of San Ramon, faces up to 30 years in prison and a fine of up to $250,000, or twice the value of the gain or loss, whichever is greater.

This case is the product of an extensive investigation conducted by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation.

From approximately April 2003 through October 2005, Blanford, while working as a sales representative for Long Beach Mortgage, a wholesale subprime lender and former subsidiary of Washington Mutual Inc., participated in a scheme to defraud his employer.

Blanford earned compensation based on the volume of loans processed by Long Beach Mortgage. He was convicted of paying a loan coordinator in cash and checks to falsify documents, provide false verification of borrowers’ employment or professional licensing status, and to turn a blind eye to fraudulent representations contained in loan applications and other documents submitted to Long Beach Mortgage.

In each of the years 2003, 2004, and 2005, Blanford received, before taxes and payroll deductions, more than $1 million in commissions and other compensation from Long Beach Mortgage as a result of his scheme. Between April 2003 and October 2005, he paid the loan coordinator more than $50,000 in checks alone.

An earlier trial of Blanford resulted in a hung jury, although this federal jury didn’t seem to have the same trouble.

Not only do real estate professionals have to worry about HUD and the CFPB, but now the FBI is getting more involved – look out criminals.

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?

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.

After an extensive investigation by the California Department of Real Estate and the office of the California attorney general, real estate salesman Matthew Wayne Stewart pled guilty to conspiracy to commit real estate fraud stemming from his actions in two short-sale transactions.

Among other charges, Stewart was accused of exceeding the compensation limitation by requiring the buyers to pay an additional 3 percent short-sale negotiation fee, which was not disclosed to the lenders or sellers.

As part of the plea, Steward was required to surrender his real estate license, serve 90 days in jail, pay restitution of approximately $25,000, and be on formal probation.

Federal authorities say three Southern California men have been indicted for allegedly running a scam involving short sales that caused more than $10 million in loses.

Federal search warrants were executed at homes and businesses in Los Angeles and Orange counties in connection with the schemes. Agents seized more than $1.7 million held in bank accounts, $548,937 in cash, two Bentleys and a Mercedes, and various jewels, officials said.

Given current market conditions and the large number of financially distressed homeowners, the potential for short-sale fraud is huge. Short-sale fraud takes many forms, and all forms have a deleterious effect on the market. To help combat short-sale fraud, the DRE has issued several consumer alerts to help educate consumers and real estate licensees alike.

How are you educating yourself in the new market of short sales?