To all members and friends of OAITA:
Yesterday, the United States Supreme Court (“SCOTUS”) issued its long-awaited decision in the Edwards v. First American Title case. The Court, in a 9-0 decision, dismissed First American’s appeal as having been improvidently granted. Procedurally, the decision results in the case returning to the U.S. District Court in California where a class action complaint consisting of two separate classes of plaintiffs awaits and now proceeds in earnest against First American.
Substantively, the case permits future individual plaintiffs to sue under RESPA without having to establish that they were damaged or over-charged for their settlement services. The Ninth Circuit holding in Edwards allows such cases to proceed and mirrors similar rulings in the Sixth and Third Circuits.
NAILTA filed two “friend-of-the-court” briefs — one at the Ninth Circuit Court of Appeals and one at the SCOTUS — on behalf of the respondent, Denise Edwards. In her complaint, Edwards alleged that First American violated RESPA by creating an illegal referral arrangement with its title agent in Cleveland, Ohio. Edwards did not allege that she was overcharged for her title services. Rather, she alleged that the title underwriter violated the law that prohibits such arrangements.
The SCOTUS decision essentially leaves the Ninth Circuit holding in place.
NAILTA’s President, Charles Proctor, issued this statement in response to the SCOTUS ruling:
“This decision opens the door to returning the integrity and transparency to the settlement process and the professionalism that independent land title agents bring to that process. This will lead to a quality product for the consumer at a competitive price without giant entities controlling the market, the product, and the settlement process. We look forward to a return to a level playing field in the market place that benefits all homeowners.”
The SCOTUS ruling is an important victory for independent title agents across the United States. While SCOTUS did not rule on the merits of First American’s appeal, the decision dealt a serious blow to the shield used by many illegitimate controlled business arrangements to hide their illegal kickbacks from scrutiny. As much as Edwards is about RESPA and illegal referral arrangements as a consumer issue, the case also impacts fairness and competitive balance in the title industry for its participants.
NAILTA’s mission includes the promotion of competitive balance within the title industry, the preservation of important consumer protection safeguards in the real estate settlement process and protection of the land title industry’s records, standards and professionalism. When those issues are threatened, NAILTA stands up.
Many of you know that the OAITA and NAILTA, were instrumental in bringing the concerns of independent title agents to consumers, legislators and judges. In this regard, we were pleased with the dismissal because it essentially lets stand a Ninth Circuit Court of Appeals ruling in Edwards v. First American Financial Corp. that recognized a borrower’s right to sue an alleged illegal business arrangement under RESPA without having to prove they were overcharged for their settlement service. For years, illegal business arrangements have argued that as long as they charge what independent title agents charge, there can be no claim under RESPA no matter how insidious their kickback scheme is. This “overcharge” defense has kept RESPA litigation tied up in knots while illegal sham operations continue to grow across the United States. Yesterday’s ruling in Edwards is a much-needed end to that argument.
We anticipate that illegal business arrangement operators and their supporters will continue to challenge the right of borrowers to sue under RESPA. We also anticipate that many of the existing CBAs and AfBAs will continue to operate regardless of the high court’s position. Nevertheless, as independent title agents, you should be talking to your mortgage brokers, lenders and realtors about this decision and reminding them of the risks attendant to RESPA litigation. We encourage you to educate your customers, both borrower and referral source, about the difference between an independent title agent and a title agent who pays referral fees, kickbacks or other split compensation for business. The Edwards decision makes clear that the former is preferred over the latter. The Edwards decision also makes clear that any borrower who closes with an alleged illegal business arrangement has a viable claim – maybe even a class claim – against the title entity and the referral source.
Also, don’t forget your deep discount for the OAITA Convention on August 13, 2012 in Columbus, Ohio ends July 14, 2012. If you haven’t already done so, please make plans to take advantage of the 25% discount and register today for the OAITA Convention.
For more information on the event, registration and more, please visit our website at http://www.oaita.org.
Let’s work together to improve our industry!
/s/ Kim Himmel, President
Ohio Association of Independent Title Agents