[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
_____________________________
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 00-11837 APRIL 23, 2003
_____________________________ THOMAS K. KAHN
D. C. Docket No. 98-01032 CV-0DE-1 CLERK
PAMELA C. HIRSCH, individually, and on behalf
of all others similarly situated, DAVID L. HIRSCH,
Plaintiffs-Appellants,
versus
BANKAMERICA CORPORATION, a Delaware
corporation, BANK OF AMERICA FSB, INC., a Hawaii
corporation, BANKAMERICA MORTGAGE, a division
of BankAmerica FSB, a Hawaii corporation,
Defendants-Appellees.
_________________________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________________________
(April 23, 2003)
Before EDMONDSON, Chief Judge, COX and GIBSON*, Circuit Judges.
PER CURIAM:
*
Honorable John R. Gibson, United States Circuit Judge for the Eighth Circuit, sitting by
designation.
In this RESPA case, Plaintiffs Pamela and David Hirsch appeal the district
court’s grant of summary judgment to defendants BankAmerica Corp. and Bank of
America FSB (collectively “Bank of America”). We affirm.
This case is one of several dealing with the legality of the payment of Yield
Spread Premiums (YSPs) by mortgage lenders to mortgage brokers. In
Heimmermann v. First Union Mort. Corp., 305 F.3d 1257 (11th Cir. 2002), we
said that the Department of Housing and Urban Development’s (HUD’s) 2001
Statement of Policy (2001 SOP)1 applies retroactively and governs the disposition
of these cases.
BACKGROUND
Pamela and David Hirsch sought a mortgage loan to purchase a new home.
They hired Rodgers Mortgage Company (Rodgers) to act as their mortgage broker.
The Hirsches told Rodgers that they wanted a low interest rate and the lowest
possible closing costs. Rodgers performed all the services necessary to allow the
1
Real Estate Settlement Procedures Act Statement of Policy 2001-1: Clarification of Statement
of Policy 1999-1 Regarding Lender Payments to Mortgage Brokers, and Guidance Concerning
Unearned Fees Under Section 8(b), 66 Fed. Reg. 53,052 (Oct. 18, 2001).
2
Hirsches to obtain a $150,000.00 home loan; and Rodgers selected Bank of
America as the mortgage lender.2
Rodgers received a total of $2,125.00 for their services. The Hirsches paid
Rodgers a $1,000.00 loan origination fee3 and a $750.00 loan discount fee. In
addition, Bank of America paid Rodgers a $375.00 YSP.4 Rodgers’ total
compensation was approximately 1.4% of the $150,000.00 loan. Rodgers
typically received compensation ranging from 1.5% to 2% of mortgage loans. The
total compensation was in the lower range of what other mortgage brokers in that
market charged for similar transactions.
The Hirsches’ loan closed on 20 June 1996. Later, they filed this case --
initially as a class action -- claiming the payment of the YSP violated section 8 of
2
It is undisputed that Rodgers provided a variety of services including these services:
(a) visiting the Hirsches on several occasions to obtain information;
(b) completing the loan application;
(c) preparing various required disclosure documents;
(d) obtaining and verifying the Hirsches’ financial records;
(e) obtaining a credit report;
(f) arranging an inspection of the property;
(g) arranging for the appraisal of the property;
(h) re-scheduling the closing to accommodate the Hirsches; and
(i) attending the closing of the loan.
3
The Hirsches believed the $1000.00 covered all of Rodgers’ services. The Hirsches claim they
are unaware of services that Rodgers specifically performed to earn the YSP.
4
The YSP was derived from published rate sheets which tied the amount of the YSP to the
amount and the interest rate of the loan.
3
the Real Estate Settlement Procedures Act (RESPA).5 The district court denied
class certification on 20 April 1999. In Richardson v. BankAmerica Corp., No.
99-11554, slip op. (11th Cir. Jan. 24, 2003), we affirmed the district court’s denial
of class certification. While the class certification appeal was pending, Bank of
America moved for summary judgment. The district court granted Bank of
America’s motion because the Hirsches “failed to demonstrate a genuine issue of
fact as to Rodgers’ actual provision of valuable goods and services or the
reasonableness of their compensation for those services.” 6
DISCUSSION
5
Section 8 of RESPA prohibits the payment of referral fees, it provides in pertinent part:
No person shall give and no person shall accept any fee, kickback, or
thing of value pursuant to any agreement or understanding, oral or
otherwise, that business incident to or a part of a real estate settlement
service involving a federally related mortgage loan shall be referred
to any person.
12 U.S.C. § 2607.
This case was filed in the Middle District of Georgia. Pursuant to a consent order, the case
was transferred to the Northern District of Georgia and consolidated with Richardson v.
BankAmerica Corp., Civil Action No. 1:98-CV-1031-ODE.
6
Bank of America also moved for summary judgment on the Richardson’s claims. Finding
material facts at issue, the district court denied summary judgment on those claims. This portion of
the district court’s order is not before us, and we say nothing about it.
4
In its 2001 SOP, HUD emphasized that a YSP -- calculated based on the
difference between the interest rate of the loan and the market rate -- can be “a
useful means to pay some or all of a borrower’s settlement costs” as well as “a
legitimate tool to assist the borrower.” 2001 SOP, 66 Fed. Reg. 53052, 53054
(Oct. 18, 2001). HUD stressed that “neither Section 8(a) of RESPA nor the 1999
[SOP] supports the conclusion that a yield spread premium can be presumed to be
a referral fee based solely upon the fact that the lender pays the broker a yield
spread premium that is based upon a rate sheet . . . .” Id. at 53055. HUD cautioned
that YSPs must be evaluated on a case by case basis in the context of “the specific
factual circumstances applicable to each transaction.” Id. at 53054.
After stating YSPs were not per se legal or illegal, HUD clarified a two part
test -- which we adopted in Heimmermann -- to determine the legality of a
payment from a mortgage lender to a mortgage broker. Id. at 53055; see also
Heimmermann, 305 F.3d at 1263-64. The test is satisfied here.
Under HUD’s test, we first must “determine whether the broker has
provided goods or services of the kind typically associated with a mortgage
transaction.” Heimmermann, 305 F.3d at 1263. HUD, in its 1999 Statement of
5
Policy (1999 SOP)7, listed some services that satisfy this factor. See 1999 SOP, 64
Fed. Reg. 10080, 10085 (Mar. 1, 1999). Rodgers provided many of these services:
taking information from the borrower; filling out the application; analyzing the
prospective borrower’s income and debt; collecting financial information;
initiating/ordering appraisals and inspections; providing disclosures; maintaining
regular contact with the borrower; and attending the closing.8
Because Rodgers did provide actual services, we proceed to the second step
of HUD’s test, “determining whether the total compensation paid to the broker is
7
Real Estate Settlement Procedures Act Statement of Policy 1999-1 Regarding Lender Payments
to Mortgage Brokers, 64 Fed. Reg. 10,080 (March 1, 1999).
8
The Hirsches argue Bank of America failed to identify services performed by Rodgers to earn
the YSP in particular. But HUD instructs us to look at all the services performed and to evaluate
them in the light of all the compensation (not the YSP in isolation) the mortgage broker received
from any source.
HUD does not believe that it is necessary or even feasible to identify or allocate
which facilities, goods or services are performed or provided for the lender, for the
consumer, or as a function of State or Federal law. All services, goods and facilities
inure to the benefit of both the borrower and the lender in the sense that they make
the loan transaction possible . . . .
1999 SOP, 64 Fed. Reg. at 10086. The Hirsches’ subjective belief that the $1000 origination fee was
supposed to cover these services does not automatically transform the YSP into a referral fee.
Rodgers possibly should have done a better job of explaining its compensation to the Hirsches, but
this fact does not make the YSP illegal. A YSP will fail the first element of HUD’s test if it is “a
payment to a broker who provides ‘no, nominal, or duplicative work’ . . . .” Heimmermann, 305
F.3d at 1263 n.8.
The Hirsches argument that the YSP was not itemized as a credit to the borrower in the 200
series of the HUD-1 form and therefore did not offset their costs is also unpersuasive. HUD
recommends -- but does not require -- listing YSPs in the 200 series. 66 Fed. Reg. at 53056. The
YSP was disclosed on the HUD-1 form exactly as HUD requires.
6
reasonably related to the total value of the goods or services actually provided.”
Heimmermann, 305 F.3d at 1264. “Total compensation includes fees paid by a
borrower and any yield spread premium paid by a lender, not simply the yield
spread premium alone.” 2001 SOP, 66 Fed. Reg. at 53055. The Hirsches have
never argued that Rodgers’s total compensation was unreasonable in the light of
the services Rodgers performed. Their argument, in a nutshell, was that the YSP,
in particular, was not actually paid for -- or tied to -- specific services; so, they say
the YSP was improper. This legal position was rejected by HUD’s 2001 SOP
which we adopted in Heimmermann.
We accept the district court’s unchallenged determination of
reasonableness. Because both elements of HUD’s test were met, we AFFIRM the
district court’s grant of summary judgment.9
AFFIRMED.
9
The district court also granted summary judgment because of RESPA’s one-year statute of
limitations. Because we affirm the grant of summary judgment on this ground, we do not decide
whether the claim was timely.
7