Case Study: Schuetz v Banc One Mortg Corp
This case study talks about the difference between legal fees and illegal kickbacks between mortgage barrower, broker, and lender. Bettina J. Scheutz (the barrower) thought it was unfair that she had to pay an additional $516.00 to Home Mortgage Financial Corporation (the mortgage broker) for the yield spread premium. She already paid them $1,661 in direct fees, consisting of $688.00 for loan origination, $688.00 for loan discount, and $285.00 for processing, but Banc One (the mortgage lender) also gave Home Mortgage Financial Corporation a yield spread premium of $516.00 which is paid by the barrower through a higher interest rate. This payment was identified on Schuetz's HUD-I Settlement Statement as "Mortgage Broker fee to Home Mortgage from BANC ONE." Since Schustz’s already paid Home Mortgage Financial Corporation $1,661 in direct fees. Schustz’s argued in court that the yield spread premium of $516.00 was a kickback from Banc One to Home Mortgage Financial Corporation and kickbacks are a violation of the Real Estate Settlement Procedures Act. Bettina J. Scheutz was unsuccessful in her arguments to the district courts and the district granted the summary judgment in favor of Banc One.
The district courts sided with Banc One because of The Department of Housing and Urban Development’s Statement of Policy, 64 Fed.Reg. at 10084 that was issued in March 1, 1999. The 1999 Statement of Policy basically states that yield spread premium payments may be legal or illegal depending on why a yield spread premium is charged to the barrower. A payment from a mortgage lender to a broker is permissible under Section 8 of RESPA if goods or facilities were actually furnished or services were actually performed for the compensation paid and if the payments...
References: 292 F. 3d 1004 - Schuetz v. Banc One Mortgage Corporation. Retrieved from http://openjurist.org/292/f3d/1004/schuetz-v-banc-one-mortgage-corporation
Colin Robertson. Yield Spread Premium. Retrieved from http://www.thetruthaboutmortgage.com/mortgage-dictionary/yield-spread-premium/
RESPA - Real Estate Settlement Procedures Act. Retrieved from http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/res/respa_hm
SCHUETZ v. BANC ONE MORTGAGE CORPORATION. Retrieved from http://caselaw.findlaw.com/us-9th-circuit/1375952.html
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