Haynsworth Sinkler Boyd, P.A.

Financial Services Companies Avoid Class Action

Landmark case involving the Federal Real Estate Settlement Procedures Act (RESPA)

Our clients: two prominent financial services companies.

At issue: one of the first proposed class actions in the nation brought under Section 9 of the Real Estate Settlement Procedures Act (RESPA), a unique and seldom litigated statute.  Until the publication of the District Court’s opinion granting summary judgment, there were no reported cases in the country interpreting the application of the Section 9 in a consumer real estate transaction in which the seller pays for one of the title insurance policies.

The stakes: a nationwide class action was proposed by individuals who had purchased foreclosed properties from a large national bank, through its agent.

Section 9 of RESPA prohibits sellers from requiring (either directly or indirectly) as a condition of sale, that title insurance be purchased by the buyer from a particular title company.  

The named plaintiff/purchaser alleged that the sellers required her to buy title insurance from a particular title company in violation of Section 9

The court disagreed, and found that the sellers had not imposed, either directly or indirectly, any requirement on the buyer’s purchase of title insurance. 

The court also rejected the plaintiff’s arguments that “economic incentives” and certain “economic realities” of the transaction gave rise to a prohibited “indirect” requirement under RESPA. 

Instead, the court agreed with our position that the plain language of the statute, as supported by its interpretation and application by the Department of Housing and Urban Development, compelled a finding that HSB’s clients did not violate RESPA.

Outcome: The South Carolina Federal District Court granted summary judgment in favor of our clients, and as a result, all class allegations were dismissed.  The United States Court of Appeals for the Fourth Circuit affirmed the District Court's ruling.

The District Court's decision is reported at 515 F. Supp. 2d 649