The U.S. Supreme Court heard oral argument on February 21, 2012, in Freeman v. Quicken Loans, Inc. to determine whether the unearned fee prohibition in Section 8(b) of the Real Estate Settlement Procedures Act (RESPA) applies only when such fees are split between two or more parties. As reported earlier, at issue is a broad interpretation of Section 8(b) set forth in a 2001 statement of policy issued by the Department of Housing and Urban Development. HUD interprets Section 8(b) to prohibit not only the splitting of fees between two or more parties, but also a single party’s marking up the fee charged by another settlement service provider without providing additional services, and even a single party charging a fee that exceeds the value of services provided by the party.
While it would be unwise to predict an outcome based upon the Court’s musings, a certain amount of tea-leaf reading is possible, particularly given some justices’ penchant to argue with one another through their questions to counsel.
Among Justice Scalia’s concerns was that HUD’s interpretation “immense[ly]” altered the most logical and straightforward reading of what appears to be a kick-back statute by taking certain words in isolation and out of context. Chief Justice Roberts posed similar questions. Justice Breyer raised a possible concern as to the procedural posture in which HUD’s interpretations were implemented, and further inquired as to what congressional concerns were expressed in RESPA’s legislative history. Justice Kennedy asked whether RESPA’s criminal ramifications should influence the degree of deference HUD should be afforded. Justice Alito queried whether RESPA in this instance was just a labeling statute in that the lender could have simply listed everything in one category with apparent impunity.
Justices Kagan and Sotomayor seemed the most inclined to bow to HUD’s expertise. They expressed concern under the Court’s prior decision in Chevron that an administrative agency charged with rule-making, like HUD, was entitled to absolute deference in interpreting an ambiguity in the statute it is meant to enforce, so long as its interpretation was linguistically reasonable.
Overall, the justices’ posed tough questions to both sides, which will add to the anticipation during the coming months in which the Court determines how to rule. An opinion should be forthcoming sometime in the next four months.