U.S. Supreme Court to hear title insurance kickback case – Boston Real Estate – Boston.com

Richard D. Vetstein talks about how a title insurance case has made its way to the US Supreme Court.

In a case closely watched by the title insurance and real estate settlement services industry, the United States Supreme Court has agreed to hear a class action which will decide whether consumers can sue under the Real Estate Settlement Practices Act (RESPA) over a title insurance referral arrangement that allegedly violated RESPA’s anti-kickback provisions. The case’s outcome could shield title insurers, banks and other lenders from litigation under RESPA and a wide range of federal and state laws. If First American wins this case, we could see title insurance companies in Massachusetts taking a much more active role in the operations of their favorite and most profitable agents.

The case is Edwards v. First American Title Co. For more coverage of the case, read the SCOTUS Blog summary here.

No kickbacks

Class action attorneys file hundreds of cases each year on behalf of borrowers alleging violations of RESPA, which prohibits “any fee, kickback or thing of value,” in exchange for a business referral. RESPA also forbids that a “portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service” be paid for services that are not actually rendered to the customer. If a violation of the statute is proven, a court can award a plaintiff treble damages, or triple the amount, for any charge paid.

In a lawsuit filed in 2007, Denise Edwards claimed her title insurer, Tower City Title Agency LLC of Highland Heights, Ohio, entered into a “captive insurance agreement” with First American Title that was illegal under RESPA. The lawsuit said that because First American paid $2 million for a 17.5 percent minority interest in Tower City in 1998, it received the majority of the local agent’s referral business which violated RESPA. The suit sought class action status on behalf of all consumers who purchased title insurance through a title agency that was subject to an exclusive referral agreement with First American, and damages of up to $150 million.
The case went up to the 8th Circuit Court of Appeals which sided with Edwards that “the damages provision in RESPA gives rise to a statutory cause of action whether or not an overcharge occurred.”

Supreme Court review
The Supreme Court will review the constitutional issue of whether consumers must prove they were actually injured under RESPA and other truth in lending laws. A favorable ruling for First American could mean a significant dent in costly class action suits under RESPA and TILA. Oral argument is expected in the Fall term, in October.

Massachusetts impact: cozier agent relationships?

Beyond curtailing or expanding consumers’ ability to bring all sorts of claims under RESPA and Truth in Lending (TILA), a favorable result for First American could enable title companies to get into much cozier relationships with attorney agents in Massachusetts.

Massachusetts is a so-called attorney agency state, where attorneys issue title insurance policies. Title insurance companies in Massachusetts cannot (yet) legally invest in or own law firms (although this rule is being challenged nationally). So we don’t have a “captive insurance agreements” or the like. Certainly, some attorney agents prefer to give their business to one or two particular title insurance companies, but to my knowledge, there’s no formal agreement among insurers and agents here in Mass.

If First American wins this case, we could see title insurance companies in Massachusetts considering captive insurance agreements and taking a much more active role in the operations of their favorite and most profitable agents. We will see….

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Continuing Ed for Title Agents

Consumer agency seeks more feedback on loan disclosures | Inman News

Bureau: More than 13K comments on draft forms for simplified mortgage disclosure

By Inman News, Friday, June 24, 2011.

Inman News™

The Consumer Financial Protection Bureau has received more than 13,000 comments on two draft proposals for a simplified mortgage disclosure form it’s in the process of developing, and will be asking for additional comments on revisions it plans to post next week.

When the new loan disclosure form is finalized, it will replace the separate forms borrowers are currently provided to satisfy requirements of the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).

The TILA disclosure form in use today, developed by the Federal Reserve, focuses on loan terms. The “Good Faith Estimate,” or GFE, developed by the Department of Housing and Urban Development to satisfy RESPA requirements, is designed to help borrowers also evaluate trade-offs between a loan’s interest rate and settlement service charges.


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NY Appellate Division | Bank of NY v Silverberg – MERS Does NOT Have The Right to Foreclose on a Mortgage in Default or Assign That Right to Anyone Else | Foreclosure Fraud – Fighting Foreclosure Fraud by Sharing the Knowledge

The ubiquitous Mortgage Electronic Registration Systems, nominal holder of millions of mortgages, does not have the right to foreclose on a mortgage in default or assign that right to anyone else if it does not hold the underlying promissory note, the Appellate Division, Second Department, ruled Friday. “This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation,” Justice John M. Leventhal wrote for a unanimous panel in Bank of New York v. Silverberg, 17464/08. “Nonetheless, the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property.” The opinion noted that MERS is involved in about 60 percent of the mortgages originated in the United States.

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Continuing Ed for Title Agents