A recent court action could slow class actions over fees paid by lenders to brokers who bring in higher-yielding loans.
Last week the U.S. Court of Appeals for the 11th Circuit clarified a January decision in Culpepper vs. Inland Mortgage Corp., a suit filed two years ago. The court said that last winter's decision "did not bar yield spread premium payment by mortgage lenders in all cases."
Yield spread premiums, or fees lenders pay brokers to secure higher-rate loans, have been a hotly contested issue for years. Lenders argue that rules enforcing the Real Estate Settlement Procedures Act, or Respa, are not clear enough about the legality of these fees. Several lawsuits seeking class-action status have been filed against lenders, but the Culpepper suit is the furthest along.
The new message to plaintiff's lawyers is "there's no easy money, the ATM is closed," said Mark S. Melodia, a lawyer at Reed, Smith, Shaw & McClay, the Princeton, N.J., firm that represents Inland.
A January decision in the Culpepper case, though denying class certification, appeared to say that yield spread premiums are illegal.
Since the January judgment, about 50 similar suits have been filed, Mr. Melodia said, including 25 in Georgia alone. Before the Culpepper decision, only one such suit had been filed against a Georgia lender, he said.
The Department of Housing and Urban Development has been working with lenders and borrowers groups on the issue, but there's "just no way to tell" when the agency will clarify its Respa rules, said a HUD spokesman.