Joel Price and Joshua and Cynthia Krupa, representing a class of borrowers, appeal the district court's summary judgment favoring Landsafe Credit, Inc. and Countrywide Home Loans, Inc. regarding their claims under the Real Estate Settlement Procedures Act (RESPA). Countrywide, a mortgage broker, and Landsafe, a credit reporting agency, are subsidiaries of Countrywide Financial Corporation. Historically, Landsafe charged Countrywide $25 for each credit report, which Countrywide passed on to customers who successfully obtained loans, absorbing costs for those who did not. To avoid these absorbed costs, Countrywide requested Landsafe to implement a new pricing structure in August 2002, which charged $35 for reports linked to locked loans and nothing for others, allowing Countrywide to transfer the entire credit report cost to customers. This change was revenue-neutral for Landsafe. The plaintiffs, who secured loans through Countrywide in 2003 and 2004, were charged the new $35 fee. They alleged violations of RESPA’s anti-kickback and anti-markup provisions, but the district court ruled against them, stating that the pricing structure could be interpreted as a kickback for Landsafe's preferential treatment in receiving Countrywide's business.
The district court granted summary judgment to Countrywide and Landsafe, determining that the revised pricing policy did not breach RESPA’s anti-kickback provision. Key findings included that Landsafe's profits remained unchanged, and Countrywide consistently purchased nearly all its credit reports from Landsafe before and after the pricing change. RESPA's anti-kickback provision prohibits any fees or kickbacks related to referrals in federally related mortgage loan services. The interpretation by the Department of Housing and Urban Development indicates that the receipt of value linked to business referrals suggests an agreement that could imply a kickback. However, for a violation to occur, there must be evidence of an agreement where Countrywide agreed to provide more business to Landsafe, which was not present. The plaintiffs claimed that the pricing change allowed Countrywide to pass on the full cost of credit reports to customers, which could be seen as receiving something of value. Nonetheless, no agreement existed that would guarantee Landsafe additional business in return. The undisputed facts showed that the volume and value of business referred to Landsafe remained constant, as established by the plaintiffs themselves. The change in pricing was designed to be neutral for Landsafe, meaning it would not increase its overall revenue from Countrywide. There was no evidence suggesting that the arrangement aimed to enhance Landsafe's business from Countrywide or that there was a threat to reduce that business if the pricing change did not occur. Therefore, no violation of RESPA’s anti-kickback provision was established.
The plaintiffs asserted a claim under the anti-markup provision of RESPA, arguing that the $35 fee for credit reports from Countrywide included costs unrelated to the reports, effectively subsidizing Countrywide for services to other customers. The district court rejected this claim, noting that all fees collected by Countrywide were fully paid to Landsafe, which provided the credit reports, and that the price increase corresponded to services rendered for the locked-in customers. According to RESPA's anti-markup provision, fees must be for services performed, and any portion not allocated to services would constitute a violation. The court referenced a precedent (Sosa v. Chase Manhattan Mortgage Corp.) where a similar claim was dismissed because the plaintiffs did not demonstrate that any retained portion of a fee was not for services rendered. In this case, the plaintiffs received services in exchange for their payment, and since Countrywide retained none of the fee, there was no illegal markup. Consequently, the district court's summary judgment in favor of defendants Landsafe and Countrywide was affirmed, and the court did not address the defendants' alternative argument regarding the safe harbor provision. The claim of lack of standing by the defendants was also dismissed as unpersuasive.
