No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.
12 U.S.C. § 2607(b). The Fourth Circuit found a limited aim in this provision of the law:
The plain language of § 8(b) makes clear that it does not apply to every overcharge for a real estate settlement service and that § 8(b) is not a broad price control provision. Therefore, § 8(b) only prohibits overcharges when a "portion" or "percentage" of the overcharge is kicked back to or "split" with a third party. Compensating a third party for services actually performed, without giving the third party a "portion, split, or percentage" of the overcharge, does not violate § 8(b). By using the language "portion, split, or percentage," Congress was clearly aiming at a sharing arrangement rather than a unilateral overcharge.
Here, Crossland collected an overcharge and kept it as a "windfall" for itself.
The court refused to press Crossland's markup into the mold of a kickback or fee-split:
This very case demonstrates the problems with concluding otherwise. As previously noted, Boulware does not allege that Crossland's purported overcharge was kicked back to or split with the credit reporting agency or any other third party. Outside of a kickback or fee splitting situation, there is no way to make sense of the statutory directive that "[n]o person shall give and no person shall accept" any portion of an unearned fee. In fact, under Boulware's view, Boulware herself would have to be the giver contemplated by the statute in order for § 8(b) to apply.
It would be irrational to conclude that Congress intended consumers to be potentially liable under RESPA for paying unearned fees.
RESPA § 8(d) establishes criminal sanctions for violations, including up to one year in prison. And it makes both the giver and the acceptor jointly and severally liable.
It would be perverse to find that Congress intended to impose such liability on consumers the very group it was trying to protect in enacting RESPA.
Accordingly, the giver in § 8(b) must be some party in the settlement process besides the borrower herself.
HUD joined the appeal as "amicus curiae." It argued that Boulware's interpretation of Section 8(b) should be adopted because it was consistent with the agency's own view as stated in its Statement of Policy from October of last year (after Echevarria). It promised not to prosecute consumers for "splitting" fees. The court replied that "it is insufficient for HUD to proclaim that the statute will not be enforced against consumers."
Boulware also argued that, when it passed RESPA, "Congress intended to forbid all overcharges and markups by mortgage lenders for every real estate settlement service they might provide." The court refused to enter that uncharted zone:
Boulware is in effect asking us to subject all settlement services, including
title searches, title examinations, title insurance, attorneys' services, property surveys, credit reports, pest inspections, real estate agents' and brokers' services, and loan processing, to broad price regulation. In fact, under her interpretation of the statute, HUD or the federal courts could determine what settlement service fees are reasonable in the first instance, without an allegation that the fees were even marked up. See 66 Fed.Reg. at 53,059 (stating that under HUD's interpretation of § 8(b), which mirrors Boulware's, "[a] single service provider also may be liable under § 8(b) when it charges a fee that exceeds the reasonable value of goods, facilities, or services provided"). Further, Boulware would provide both a private right of action and potential criminal penalties to enforce the price controls she envisions § 8(b) creating.
If Congress had intended § 8(b) to sweep as broadly as Boulware proposes, it could easily have written § 8(b) to state that "there shall be no markups or overcharges for real estate settlement services." Or Congress could have explained that "a mortgage lender shall only charge the consumer what is paid to a third party for a real estate settlement service." But Congress chose not to draft the statute that way. And we have no authority to recast it. If we were to read § 8(b) in the way Boulware suggests, every settlement fee would be the subject of potential litigation and discovery, leading perhaps to increased costs for real estate settlement services in the long run. Though the regulation of charging practices would not be beyond the purview of Congress, this was not Congress' intent in enacting RESPA.
Instead, the view that § 8(b) only applies when there is a kickback or split with a third party is actually the view that is consistent with RESPA's stated purposes. In enacting RESPA, Congress proclaimed that "significant reforms in the real estate settlement process" were needed to protect consumers "from unnecessarily high settlement charges caused by certain abusive practices that ha[d] developed in some areas of the country."
Congress went on to explain that one of the purposes of RESPA was "to effect certain changes in the settlement process," which would result "in the elimination of kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services."
Nothing in § 2601 indicates that RESPA § 8 was intended to eliminate all settlement service overcharges. Instead, its purpose was "to prohibit all kickback and referral fee arrangements whereby any payment is made or thing of value furnished for the referral of real estate settlement business."
And the provision was designed to prohibit "a person that renders a settlement service from giving or rebating any portion of the charge to any other person except in return for services actually performed."
Therefore, if we subjected a settlement service provider to RESPA liability for keeping an overcharge without requiring an allegation that the unearned fee was shared with a third party, "we would radically, and wrongly, expand the class of cases to which RESPA § 8(b) applies."
Boulware v. Crossland Mortgage Corp., ___ F.3d ___, 2002 WL 1025101 (4th Cir. (Md.)).
