Local Law Firms Home > Real Estate Law News > Fifth Third Bank Sued for RESPA Real Estate Law Violation Fifth Third Bank Sued for RESPA Real Estate Law Violation Cincinnati-based Fifth Third Bank stands accused of violating the RESPA Real Estate Law regarding taking referral fees from parties involved in loans. The parties in this case were mortgage insurers, who were told they had to buy reinsurance from a subsidiary of the bank or risk losing the business. Banks typically require homebuyers to take out private mortgage insurance if the down payment is lower than 20 percent of the property value. The bank arranges the whole thing and adds the premium to the monthly mortgage payment the customer has to pay. What Fifth Third Bank did was to choose insurers and then tell them that they had to pass on the risk to Fifth Third RE, a subsidiary which provides reinsurance. So every time a customer took out a mortgage loan and had to purchase mortgage insurance, Fifth Third RE earned from the reinsurance premium. Section 8 of the Real Estate Settlement Procedures Act (RESPA) prohibits such referrals unless it is payment for a service being offered directly to the customer. In this case, there was no disclosure to the customers that the bank itself was taking the reinsurance via its subsidiary. From 2004-2011, the bank earned $54 million in such reinsurance premiums, while it paid out less than $5 million. This amounted to a "sham," as per a complaint filed by three plaintiffs who took out mortgages from Fifth Third in 2007. Similar lawsuits have been brought against other banks and mortgage lenders. Countrywide settled a similar RESPA reinsurance violation for $34 million after failing to convince an appeals court with the argument that customers did not pay anything more than what they would have paid if the reinsurance had been done by another company unrelated to Countrywide. The case against Fifth Third Bank, related companies and six insurance companies was filed by Jamie and Aimee Young of Carbon Cliff, IL and Christopher Manners of Latrobe, PA. Did you know? |