Resolving The Split On Split Fees Under RESPA: "Freeman v. Quicken" Loans Holds That Fee-Splitting Is Prohibited Only If The Fee Actually Is Split

The authors discuss a recent decision by the U.S. Supreme Court that resolves a circuit split as to whether Section 8(b) of the Real Estate Settlement Procedures Act prohibits undivided unearned fees—but point out that there is a related circuit split that the Court's decision did not explicitly address.

The Supreme Court of the United States recently issued a unanimous decision in Freeman v. Quicken Loans, Inc., No. 10-1042, 566 U.S. — (2012), resolving a split between the Second and Fifth Circuit Courts of Appeals as to whether Section 8(b) of the Real Estate Settlement Procedures Act ("RESPA") prohibits a settlement-service provider from charging a borrower an "unearned" fee, i.e., a fee for which the settlement-service provider in fact provides no service to the borrower. The Court held that such unearned fees are not prohibited by the statute; rather, Section 8(b) is violated only where a provider splits a portion of a settlement-service fee with one or more