United States: No RESPA Respite - Continued

The CFPB continues to crack down on basic RESPA violations. On August 12, 2014, the CFPB announced yet another Consent Order with alleged violations of RESPA. In this case, an on-line retail mortgage company, the company's CEO, and an affiliated management corporation agreed to pay $14.8 million in restitution to consumers. The CFPB also demanded $6 million in civil money penalties, $1.5 million of which is the personal responsibility of the company's CEO. As forecasted in our earlier client alert, this Consent Order reaffirms the CFPB's intent to enforce "common" RESPA violations, with an emphasis on basic compliance.


The Consent Order included claims against Amerisave Mortgage Company (Amerisave) under the Consumer Financial Protection Act for unfair and deceptive practices in connection with its advertising of mortgage rates and representation of appraisal fees. The CFPB also alleged that Amerisave improperly charged consumers fees prior to presenting consumers with Good Faith Estimates (GFEs). Under RESPA, lenders are prohibited from charging consumers any fees for appraisals, inspections, or other settlement services prior to providing the consumer with a GFE. Lenders are, however, permitted to charge consumers the actual cost of credit reporting fees prior to providing a GFE. In this case, the CFPB alleged that consumers were required to pay a $35 application fee, as well as an inflated credit report fee, prior to obtaining a GFE. Prior to providing the consumer with the GFE, Amerisave also required consumers to provide credit card authorization for the purpose of scheduling appraisals. The CFPB found that imposing these fees violated the plain language of RESPA. The CFPB emphasized that charging fees prior to providing the GFE makes consumers less likely to compare rates because they have already invested in closing the loan with the lender. Additionally, the CFPB reasoned that Amerisave was able to pad its profits by charging upfront fees to consumers who ended up not closing their loans with Amerisave.

The CFPB also claimed that Amerisave's referral of appraisal services to its affiliate, Novo Appraisal Management Corporation (Novo), violated RESPA's disclosure requirements for Affiliated Business Arrangements (ABAs). RESPA expressly prohibits the payment or acceptance of kickbacks and fees for referring real estate settlement services in connection with federally related mortgages. RESPA contains an exception to this prohibition for ABAs. Specifically, lenders must provide ABA disclosures at the same time the consumer receives the GFE. The ABA disclosures must inform the consumer of the business affiliation and contain a "written estimate of the charge or range of charges generally made by the provider." Further, consumers must have a choice of whether to utilize the affiliated business's services, and nothing of value may be received from the arrangement, other than a return on an ownership interest. Properly constructed ABAs will not ordinarily result in Section 8 violations as long as the lender provides the statutory notice, a form of which is provided in the RESPA regulations.1

The CFPB found that Amerisave referred 99% of its appraisal business to Novo since 2011. Novo is owned in part by Amerisave's CEO and his family through beneficial trusts. The CFPB alleged that Amerisave's website misled consumers by stating that the appraisal company was independent from Amerisave. Amerisave also informed consumers that it only accepted payment for the appraisals as a convenience to consumers. The CFPB claimed that Amerisave actually directed fees to Novo through referrals by not allowing consumers to choose the appraisal company. In doing so, Amerisave did not disclose its affiliation to Novo until after Amerisave received authorization to charge consumers for Novo's appraisal services. The CPFB alleged that Amerisave forced consumers to pay up to $500 for an appraisal conducted by Novo while consumers did not understand how the fees would ultimately benefit Amerisave and its CEO. The CFPB reasoned that Novo shareholder distributions to the beneficial trusts of Amerisave's CEO and his family constituted improper referral fees and kickbacks under Section 8 of RESPA. The shareholder distributions were improper because they were largely the result of profits that Novo generated from the appraisal referrals Novo received from the CEO of Amerisave.

In addition to the over $20 million in penalties, Amerisave is now subject to restrictive compliance requirements and additional regulatory scrutiny. Specifically, Amerisave must bear the cost of developing a compliance plan, which, over the next three years, will be subject to an independent consultant's review and annual reporting requirements.


Amerisave may have come to the CFPB's attention because of other alleged consumer protection violations, including its advertising of loan terms. But once the CFPB became interested in Amerisave, the CFPB discerned basic RESPA violations in Amerisave's operations. The CFPB will continue to enforce RESPA, particularly ABAs. No one knows who's next on the CFPB's RESPA hit list, but basic RESPA compliance issues remain a priority for the agency.


1. HUD established other requirements for setting up and operating a lawful ABA. HUD's authority to do so was set aside in Carter v. Welles-Bowen Realty, Inc., 736 F.3d 722 (6th Cir. 2013).

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Angela Kleine
In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions