Bloomberg News

Mortgage Closing Overcharge Case Gets U.S. High Court Review

October 11, 2011

(Updates with Quicken statement in eighth paragraph.)

Oct. 11 (Bloomberg) -- The U.S. Supreme Court agreed to clarify the scope of a federal law aimed at protecting home buyers from being overcharged by companies that provide real estate settlement services.

The justices today accepted an appeal from a group of Louisiana consumers seeking to sue Quicken Loans Inc. over fees they paid at their mortgage closings.

The home buyers say Quicken charged as much as $1,100 in “loan discount fees” without providing the interest-rate reduction those fees typically bring.

The fight at the high court centers on a provision in the 1974 Real Estate Settlement Procedures Act that bars settlement providers in at least some cases from collecting money for services they didn’t perform.

The question for the justices is whether that provision applies only when two companies split the disputed fee -- as in the case of a kickback. A New Orleans-based federal appeals adopted that reading of the statute in throwing out the suit against Detroit-based Quicken, putting it at odds with other courts around the country.

The Obama administration urged the Supreme Court to accept the home buyers’ appeal and overturn the lower court ruling.

Quicken said in a statement that the suit’s underlying premise is wrong.

“It is undisputed that the loan discount points collected in this case were earned and resulted in a lower interest rate for the borrowers,” the company said.

Quicken is a unit of closely held Rock Holdings Inc.

The case is Freeman v. Quicken, 10-1042.

--Editors: Justin Blum, Don Frederick

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.


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