Skip to main content
Menu Icon Menu Icon

InfoBytes Blog

Financial Services Law Insights and Observations


Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • CFPB posts guidance on RESPA

    Federal Issues

    On September 1, the CFPB posted guidance to its website that affirms guidance on the Real Estate Settlement Procedures Act (RESPA) that the Department of Housing and Urban Development previously issued. In 2011, the Dodd-Frank Act transferred responsibility for RESPA from HUD to the CFPB. At the time, the Bureau stated that it would apply “the official commentary, guidance, and policy statements” that HUD had issued on RESPA “pending further CFPB action” and would give “due consideration” to other (i.e., informal) guidance and interpretations. Although the Bureau has issued certain consent orders and other statements that may cast doubt on whether it interprets RESPA in the same manner that HUD did, in the most recent posting, the Bureau confirms that the list of documents posted by the Bureau generally “continue to be applied today by the CFPB.”

    Federal Issues Dodd-Frank CFPB RESPA HUD

  • Key Takeaways from the CFPB’s First Public Enforcement Action Alleging Violations of RESPA Section 8 Since 2017

    Federal Issues

    The Consumer Financial Protection Bureau (CFPB) has issued a consent order to a residential mortgage loan originator to resolve allegations that it provided illegal incentives to real estate brokers and agents in exchange for mortgage loan referrals.  This is the CFPB’s first public enforcement action alleging violations of RESPA Section 8 since 2017.

    The CFPB issued a parallel consent order against a real estate brokerage firm for accepting the incentives in exchange for referrals.

    Allegations Against the Lender

    The consent order against the lender alleges that the lender paid for several subscription services – for example, to a service that provided information concerning property reports, comparable sales and foreclosure data – and then provided free access to such services to real estate agents and brokers, which the CFPB determined to be a thing of value. According to the consent order, the agents and brokers who received access to the subscription services also referred mortgage business to the lender, which the CFPB alleges was in exchange for the free services and therefore violated RESPA Section 8(a).

    The consent order also alleges that the lender hosted and subsidized events, including paying for food, beverages and entertainment, for the benefit of real estate agents and brokers. The consent order further alleges that the lender gave real estate agents and brokers free tickets to sporting events, charity galas and other events where the real estate agents and brokers would have otherwise needed to pay for their own admission, food, and alcohol.  The CFPB alleges that these events frequently cost the lender several thousand dollars or more. The CFPB asserts that the lender’s contributions to these events constituted a thing of value to the real estate agents and brokers and were given to create, maintain and strengthen mortgage referral relationships, in violation of RESPA Section 8(a).

    Finally, the CFPB alleges that the lender had marketing services agreements (“MSAs”) with numerous real estate brokerages, and that many of the compensable services were either performed by the lender itself rather than the brokerages or, based on the Bureau’s allegations against the broker, were not performed by the brokerages.

    Also, the consent order noted that the MSAs required the real estate brokers to promote the lender to the broker’s own agents rather than to consumers. The lender also encouraged its MSA partners to use a third-party smartphone app. The real estate agents shared the app with their clients. The app featured a photo of the lender’s loan officer and the lender’s logo and included buttons where consumers could contact the lender’s loan officer for assistance. As a result, the CFPB alleges that the payments the lender made to the brokerages were structured and implemented to generate referrals, rather than to compensate the brokerages for any marketing services they actually performed.

    Allegations Against the Real Estate Broker

    The consent order against the broker alleges that the broker’s real estate agents and brokers accepted the subscription services and subsidized events. It also alleges that the broker received payments in connection with an MSA that was primarily focused on the lender getting referrals from the broker’s brokers and agents rather than the broker marketing the lender to the public, and that the broker failed to perform many of the marketing tasks required by the MSA but received payments anyway. For example, the consent order alleges that the MSA required the broker to send 15,000 marketing emails a month while allocating 50% of the content to the lender, display video advertisements for the lender at its physical locations and create a number of property websites displaying the lender’s content.  However, the broker allegedly failed to perform any of these marketing services.


    We note several key takeaways from these consent orders:

    • Taken at face value, none of the conduct alleged to violate RESPA Section 8(a) is novel or particularly notable. The crux of the alleged violations involved paying for obvious things of value in exchange for referrals and entering into MSAs where the contemplated marketing services were either not provided or directed to potential referral sources and not consumers. The consent orders, therefore, are largely consistent with prior RESPA enforcement actions involving lenders and real estate brokers.
    • This is the first public CFPB enforcement action alleging violations of RESPA Section 8 since 2017, which makes clear that although the CFPB’s focus on RESPA Section 8 may have waned somewhat from the Cordray era, it is still monitoring for RESPA Section 8 violations and will bring public enforcement actions when violations are discovered. Coupled with February’s Advisory Opinion on Digital Mortgage Comparison Shopping Platforms, the CFPB is clearly still engaged in RESPA compliance.
    • The reference to the mobile app with a loan officer’s photo and the lender’s logo, and the ability for the consumer to reach out to the lender directly, is in accord with longstanding CFPB and HUD guidance that exclusivity is indicative of a referral to the extent that it “affirmatively influences” a consumer to select a particular provider of settlement services. This viewpoint was recently espoused in the CFPB’s Advisory Opinion on Digital Mortgage Comparison Shopping Platforms, and it appears that the CFPB views this principle as generally applicable.


    In addition to agreeing to cease engaging in the conduct alleged, the lender was ordered to pay a civil monetary penalty of $1.75 million and also agreed to implement a compliance program designed to prevent any future violations should the lender resume retail mortgage operations. The lender also agreed to meet certain recordkeeping and reporting requirements. 

    In addition to agreeing to cease engaging in the conduct alleged, the broker was ordered to pay a civil monetary penalty of $200,000 and meet certain recordkeeping and reporting requirements.

    In agreeing to enter into the consent orders, the lender and broker did not admit or deny any findings of fact or conclusions of law related to the violations alleged by the CFPB.

    Read the lender’s consent order.

    Read the broker’s consent order.

    Read the CFPB’s press release.

    Want to learn more? Contact John Kromer or Steve vonBerg.

    Federal Issues CFPB Consumer Finance RESPA Enforcement Referrals Real Estate Mortgages Loan Origination

  • District Court: Servicer’s QWR responses did not violate RESPA


    The U.S. District Court for the Western District of Washington recently granted summary judgment in favor of a defendant mortgage servicer related to alleged RESPA violations concerning qualified written requests and notices of error. Plaintiff entered into a permanent loan modification for which she made timely payments until she applied for new financing. One year later, plaintiff noticed a deferred principal balance that she claimed was not listed on her 2019 loan modification agreement. Plaintiff asserted that she called seeking to have the deferred principal balance removed and sent a notice of error (NOE) letter to the defendant, claiming, among other things, that the loan documentation did not mention the deferred amount. Defendant acknowledged the NOE and timely responded that the modification agreement included the deferred principal balance.

    In granting defendant’s motion for summary judgment, the court held that while plaintiff’s allegations “are framed as a RESPA violation … [p]laintiff’s true concern is that [defendant] misrepresented the terms of the 2019 loan modification.” The defendant, however, complied with RESPA by providing “a statement of the reasons for which the servicer believes the account of the borrower is correct as determined by the servicer,” and plaintiff’s “disagreement with the servicer’s determination does not create a claim under RESPA.” Further, the court found that the deferred principal balance was in fact included on the executed loan modification agreement, and that the plaintiff did not suffer any actual harm under RESPA or otherwise.

    Courts RESPA Consumer Finance Mortgages QWR

  • District Court: Plaintiff failed to prove damages in RESPA suit


    The U.S. District Court for the Northern District of Texas recently granted summary judgment in favor of a defendant mortgage servicer related to alleged RESPA violations. Plaintiff obtained a refinanced loan that was serviced by the defendant. Plaintiff later sued the defendant after becoming frustrated by receiving repeated calls suggesting he refinance the loan. Once litigation commenced, the defendant began sending the monthly mortgage statements to plaintiff’s counsel. In 2021, plaintiff sent a request for information to the defendant seeking a range of monthly billing statements, which the defendant allegedly only partially provided. Plaintiff’s attorney further claimed to have received an escrow review statement from the defendant referencing an escrow surplus check that the plaintiff also claimed not to have received. The plaintiff claimed violation of RESPA by pointing to the defendant’s alleged failure to adequately respond to his requests for statements or to provide the surplus check. The defendant moved for summary judgment, arguing that neither the facts nor the law supported the plaintiff’s claims.

    The plaintiff eventually conceded that there is no private right of action under RESPA’s escrow payment regulation and withdrew the claim. The court also took issue with his claim that the defendant failed to adequately respond to his request for information. Even if the defendant failed to adequately respond, the plaintiff could not plead or prove actual damages, the court said. “Neither party disputes that RESPA requires plaintiffs to plead and prove actual damages from an alleged violation,” the court wrote. “Instead, they focus their arguments on the sufficiency of the alleged damages. [Defendant] alleges that [plaintiff] provides no evidence to demonstrate how he suffered damages from the fact that it provided only three of the fourteen requested monthly statements.” Plaintiff tried to argue he was owed monetary damages due to being deprived of the escrow surplus funds and by being unfairly assessed convenience fees when making payments through the defendant’s online portal. He further claimed he suffered medical and mental anguish. However, the court concluded that evidence presented by the defendant refuted these claims (the convenience fee claim, the court said, could not be connected to the RESPA claim) and said plaintiff also failed to support his claims of medical and mental anguish. Further, plaintiff failed to present evidence supporting his claim for statutory damages, the court said, finding no genuine dispute of material fact in the record.

    Courts Consumer Finance RESPA Mortgages QWR

  • District Court denies servicer’s claims that it never received QWR


    The U.S. District Court for the Eastern District of Missouri recently considered whether a mortgage servicer received a borrower’s qualified written request (QWR) relating to a missed mortgage payment. The borrower sent a money order to cover two monthly mortgage payments, but the payments were not properly credited to her account. The borrower made several attempts to contact the mortgage servicer about the improperly credited payment. After receiving a formal notice of default, the borrower sent a “Request for Information and Notice of Error” (NOE) to the servicer explaining the situation and asking that her account be updated to reflect that all payments had been made and requesting the removal of late fees and charges. She also asked that her loan be removed from default status and sent letters to the credit reporting agencies formally disputing the delinquent payment reports. According to the court’s opinion, the borrower claimed that the servicer violated RESPA by failing to respond and violated the FCRA by failing to conduct a reasonable investigation into her credit disputes and verifying inaccurately furnished information.

    In considering both parties’ motions for summary judgment, the court granted the borrower’s motion on liability with respect to her RESPA claim and denied the servicer’s motion for summary judgment on the FCRA claims on the basis that the borrower provided evidence of actual damages resulting from the servicer’s alleged FCRA violation. The court explained that RESPA requires mortgage servicers to respond to a QWR within five days to acknowledge receipt, and again within 30 days by either correcting the account, providing a written explanation as to why it believes the account is correct, or providing the information requested by the borrower or an explanation of why the information requested is unavailable. Failure to do so entitles a borrower to any actual damages suffered as result of the failure. Claiming the NOE was a QWR, the borrower presented evidence, including a certified mail receipt allegedly showing the NOE was signed for by one of the servicer’s representatives. The servicer countered that because it had no record of the correspondence, its RESPA duties were not triggered. The servicer further argued that the NOE did not qualify as a QWR because it failed to provide sufficient information for it to investigate or respond to the request, and that even if it was a QWR, the borrower had failed to show actual damages.

    The court disagreed, determining (i) that the servicer failed to prove it did not receive the NOE, and (ii) that the NOE constituted a QWR. “The information in the letter alone is sufficient to qualify as a QWR,” the court wrote. “The letter quite specifically states the error [the borrower] believed to have occurred…. This is not an ‘overbroad’ and generalized statement of ‘bad servicing.’ It identifies an error specifically contemplated by RESPA’s regulations.” The court further added that “RESPA does not require that a lender’s violations be the sole cause of a borrower’s emotional distress. It merely requires that damages be causally related to a violation of the statute.” However, the court noted that the borrower still needs to prove at trial the extent of damages caused by the servicer's alleged violation.

    Courts RESPA Qualified Written Request Consumer Finance Credit Reporting Agency Mortgages

  • District Court dismisses RESPA claims that servicer failed on QWRs


    The U.S. District Court for the Western District of Washington recently ruled on a loan servicer’s motion for summary judgment concerning claims that the servicer violated RESPA when it failed to respond to multiple qualified written requests (QWR) alleging account errors and improperly reported alleged delinquencies to credit reporting agencies (CRAs). Plaintiffs executed a promissory note and deed of trust, and later entered into a Chapter 11 bankruptcy plan to modify the terms of the loan. Plaintiffs sued, asserting violations of RESPA and various state laws, claiming, among other things, that the servicer failed to timely respond to their QWRs, provided false information to CRAs, and failed to adjust the loan to reflect the modified payment schedule from the bankruptcy plan.

    The court granted summary judgment in favor of the servicer. On the QWR-related allegations, the court found that, “while the [plaintiffs] say that [the servicer] did not address the issues raised in the QWRs, their brief does not identify a single issue that went unaddressed. . . Their brief does not, for example, point to a request in any QWR that went unanswered in [the servicer’s] corresponding response. Merely providing a laundry list of documents—without specifically identifying how [the servicer’s] responses were incomplete—is insufficient.” The court also found that the plaintiffs failed to show that the servicer’s responses were misleading, confusing, or incorrect. Though the plaintiffs provided a list of statements made by the servicer when responding to the QWRs, plaintiffs failed to explain what exactly was inaccurate or confusing about the servicer’s responses, the court said.

    While the court flagged one possible inconsistency in at least one of the servicer’s responses (where the servicer incorrectly stated the monthly principal amount due but corrected the mistake less than a month later), the court determined that “this alone does not suffice under RESPA.”

    With respect to plaintiffs’ allegations of false credit reporting, the court concluded that there was no evidence that the servicer submitted negative information about plaintiffs to a CRA, nor did the plaintiffs demonstrate how any such reports hurt their credit or identify whether the reports were filed within RESPA’s 60-day non-reporting period. Under RESPA, a servicer is prohibited from providing certain information regarding “any overdue payment, owed by such borrower and relating to such period or qualified written request, to any consumer reporting agency” during the 60-day period beginning on the date the servicer receives a QWR. The court further noted that the plaintiffs failed to show that they suffered actual damages “flowing from” the alleged RESPA violations, which is a requirement of the statute.

    The court granted summary judgment on the RESPA claims in favor of the servicer and remanded the remaining state-law claims to state court.

    Courts RESPA Consumer Finance Mortgages Mortgage Servicing Qualified Written Request Credit Reporting Agency State Issues

  • Special Alert: CFPB’s RESPA advisory addresses online mortgage-comparison platforms

    Federal Issues

    The Consumer Financial Protection Bureau (CFPB) issued guidance yesterday making clear that those who operate or participate in online mortgage-comparison shopping platforms will be closely scrutinized for compliance with the prohibition on payments for referrals to mortgage lenders. “Companies operating these digital platforms appear to shoppers as if they provide objective lender comparisons, but may illegally refer people to only those lenders paying referral fees,” the agency said. Here’s what you need to know:

    What happened?

    The CFPB issued an Advisory Opinion on how the Real Estate Settlement Procedures Act (RESPA) applies to online mortgage-comparison platforms. The agency said platform operators violate RESPA “when they steer shoppers to lenders by using pay-to-play tactics rather than providing shoppers with comprehensive and objective information.” Specifically, the agency said operators receive a prohibited referral fee when they use or present information in a way that steers consumers to mortgage lenders in exchange for a payment or something else of value.

    Federal Issues Agency Rule-Making & Guidance CFPB Consumer Finance RESPA Digital Platform Competition Mortgages Referrals Section 8 Advisory Opinion

  • FDIC issues November enforcement actions

    On December 30, the FDIC released a list of orders of administrative enforcement actions taken against banks and individuals in November. The FDIC made public nine orders consisting of “two consent orders; two orders terminating deposit insurance; three orders to pay civil money penalties; one order terminating consent order; and one Section 19 order.” Among the orders is a civil money penalty against a Wisconsin-based bank related to violations of the Flood Disaster Protection Act. The FDIC determined that the bank had engaged in a pattern or practice of violations that included the bank’s failure to: (i) obtain adequate flood insurance on the building securing a designated loan at the time of loan origination; (ii) obtain adequate flood insurance at the time of the origination; (iii) notify borrowers that the borrower should obtain flood insurance where a determination had been made that flood insurance had lapsed or a loan was not covered with the required amount of insurance; (iv) provide borrowers with a Notice of Special Flood Hazard and Availability of Federal Disaster Relief Assistance when making, increasing, extending or renewing a loan; and (v) provide borrowers with a Notice of Special Flood Hazard and Availability of Federal Disaster Relief Assistance within a reasonable time before the completion of the transaction. The order requires the payment of a $39,000 civil money penalty.

    The FDIC also issued a civil money penalty against an Oregon-based bank for allegedly violating Section 8(a) of RESPA “by entering into mortgage lead generation arrangements with the operator of a real estate website and the operator of an online loan marketplace that were used to facilitate and disguise referral payments for mortgage business.” The FDIC also determined that the bank violated the FTC Act “by making deceptive and misleading representations in three of the bank’s prescreened offers of credit” and violated the FCRA “by obtaining the consumer reports of former loan clients with recent credit inquiries without a legally permissible purpose.” The order requires the payment of a $425,000 civil money penalty.

    Additionally, the FDIC issued a consent order against a Tennessee-based bank alleging the bank engaged in “unsafe or unsound banking practices relating to weaknesses in capital, asset quality, liquidity, and earnings.” The bank neither admitted nor denied the allegations but agreed, among other things, that its board would “increase its participation in the affairs of the bank by assuming full responsibility for the approval of the bank’s policies and objectives and for the supervision of the bank’s management, including all the bank’s activities.” The bank also agreed to maintain a Tier 1 Leverage Capital ratio equal to or greater than 8.50 percent and a Total Capital ratio equal to or greater than 11.50 percent. The FDIC also issued a consent order against a New Jersey-based bank claiming the bank engaged in “unsafe or unsound banking practices relating to, among other things, management supervision, Board oversight, weaknesses in internal controls, interest rate sensitivity, and earnings.” The bank neither admitted nor denied the allegations but agreed, among other things, that it would retain a third-party consultant “to develop a written analysis and assessment of the bank’s board and management needs (Board and Management Report) for the purpose of ensuring appropriate director oversight and providing qualified management for the bank.”

    Bank Regulatory Federal Issues FDIC Enforcement Flood Disaster Protection Act Flood Insurance RESPA FTC Act FCRA Consumer Finance

  • District Court denies dismissal of RESPA "dual-tracking" suit


    On November 1, the U.S. District Court for the Northern District of Ohio declined to grant summary judgment in favor of a mortgage servicer defendant in a Regulation X, RESPA, and Ohio Residential Mortgage Lending Act (RMLA) suit against the mortgage servicer and a law firm (collectively, “defendants”). The case concerned a loan modification that plaintiff had allegedly sought from defendants, for which the defendant mortgage servicer ultimately denied, and the defendant law firm initiated a foreclosure action. The defendant mortgage servicer challenged the count in the complaint alleging that the defendant mortgage servicer’s moving for summary judgment in the state foreclosure action violated Regulation X and RESPA’s prohibition on dual tracking. Dual tracking “occurs when a lender ‘actively pursues foreclosure while simultaneously considering the borrower for loss mitigation options.’” The defendant mortgage servicer argued that the prohibition on moving for summary judgment found in Regulation X did not apply because the plaintiff rejected the loan modification. The defendant mortgage servicer based this argument on the fact that it did not receive the plaintiff’s executed modification by a certain date. Because of this, the defendant mortgage servicer argued that it was permitted to move forward with a foreclosure judgment, and its decision to reverse the denial of the modification was at its discretion and not subject to the requirements of 12 C.F.R.1024.41(g).

    The court found, however, that there was a genuine dispute as to whether the plaintiff returned the loan modification agreement by the designated date. The court continued, “[the defendant mortgage servicer’s] explanation regarding all three of the exceptions found at §41(g) subsections (1) through (3) each expressly depend upon the factual assertion that [the plaintiff] did not return a signed modification agreement and thereby rejected same. Inasmuch as there is evidence that [the plaintiff] did so, the court cannot conclude that [the defendant mortgage servicer] is entitled to judgment as a matter of law regarding the exceptions in §41(g) of Regulation X.” Among other things, the court also found that the defendant mortgage servicer “failed to act with reasonable care and diligence, in good faith, to safeguard and account for money tendered by [the plaintiff].” The court concluded by finding that the plaintiff sufficiently identified plausible damages as a result of a RESPA violation, further permitting her claims to stand.

    Courts Mortgages Foreclosure Loss Mitigation Mortgage Servicing RESPA Regulation X State Issues Ohio Consumer Finance

  • 2nd Circuit: NY law on interest payments for escrow accounts is preempted


    On September 15, the U.S. Court of Appeals for the Second Circuit held that New York’s interest-on-escrow law impermissibly interferes with the incidentals of national bank lending and is preempted by the National Bank Act (NBA). Plaintiffs in two putative class actions obtained loans from a national bank, one before and the other after certain Dodd-Frank provisions took effect. The loan agreements—governed by New York law—required plaintiffs to deposit money into escrow accounts. After the bank failed to pay interest on the escrowed amounts, plaintiffs sued for breach of contract, alleging, among other things, that under New York General Obligations Law (GOL) § 5-601 (which sets a minimum 2 percent interest rate on mortgage escrow accounts) they were entitled to interest. The bank moved to dismiss both actions, contending that GOL § 5-601 did not apply to federally chartered banks because it is preempted by the NBA. The district court disagreed and denied the bank’s motion, ruling first that RESPA (which regulates the amount of money in an escrow account but not the accruing interest rate) “shares a ‘unity of purpose’ with GOL § 5-601.” This is relevant, the district court said, “because Congress ‘intended mortgage escrow accounts, even those administered by national banks, to be subject to some measure of consumer protection regulation.’” Second, the district court reasoned that even though TILA § 1639d does not specifically govern the loans at issue, it is significant because it “evinces a clear congressional purpose to subject all mortgage lenders to state escrow interest laws.” Finally, with respect to the NBA, the district court determined that “the ‘degree of interference’ of GOL § 5-601 was ‘minimal’ and was not a ‘practical abrogation of the banking power at issue,’” and concluded that Dodd-Frank’s amendment to TILA substantiated a policy judgment showing “there is little incompatibility between requiring mortgage lenders to maintain escrow accounts and requiring them to pay a reasonable rate of interest on sums thereby received.” As such, GOL § 5-601 was not preempted by the NBA, the district court said.

    On appeal, the 2nd Circuit concluded that the district court erred in its preemption analysis. According to the appellate court, the important question “is not how much a state law impacts a national bank, but rather whether it purports to ‘control’ the exercise of its powers.” In reversing the ruling and holding that that GOL § 5-601 was preempted by the NBA, the appellate court wrote that the “minimum-interest requirement would exert control over a banking power granted by the federal government, so it would impermissibly interfere with national banks’ exercise of that power.” Notably, the 2nd Circuit’s decision differs from the 9th Circuit’s 2018 holding in Lusnak v. Bank of America, which addressed a California mortgage escrow interest law analogous to New York’s and held that a national bank must comply with the California law requiring mortgage lenders to pay interest on mortgage escrow accounts (covered by InfoBytes here). Among other things, the 2nd Circuit determined that both the district court and the 9th Circuit improperly “concluded that the TILA amendments somehow reflected Congress’s judgment that all escrow accounts, before and after Dodd-Frank, must be subject to such state laws.”

    In a concurring opinion, one of the judges stressed that while the panel concluded that the specific state law at issue is preempted, the opinion left “ample room for state regulation of national banks.” The judge noted that the opinion relies on a narrow standard of preempting only those “state laws that directly conflict with enumerated or incidental national bank powers conferred by Congress,” and stressed that the appellate court declined to reach a determination as to whether Congress subjected national banks to state escrow interest laws in cases (unlike the plaintiffs’ actions) where Dodd-Frank’s TILA amendments would apply. 

    Courts State Issues Appellate Second Circuit New York Mortgages Escrow Interest National Bank Act Class Action Dodd-Frank RESPA TILA Consumer Finance


Upcoming Events