According to combined media reports, the U.S. Supreme Court has agreed to hear the case of Freeman v. Quicken Loans, in which a group of Louisiana borrowers have accused the Detroit-based lender with violating the Real Estate Settlement Procedures Act, which prevents financial services providers from charging an unearned fee unless the fee is divided between two or more parties. The plaintiffs stated that the lender charged as much as $1,100 in ‘loan discount fees’ but failed to offer interest-rate reductions usually associated with such fees.
The Obama administration has voiced its support of the plaintiffs. However, the Fifth U.S. Circuit Court of Appeals in New Orleans ruled in favor of Quicken Loans last year on a 2-1 vote.
The Supreme Court is expected to begin hearing oral arguments early next year and produce a ruling by the end of June.
Quicken Loans defended its practices in a statement sent directly to MortgageOrb.com.
‘The underlying premise of this case is factually wrong. Quicken Loans, like all lenders,Â has offered, and does offer, borrowers the option of 'buying down' their interest rate by paying additional discount points to do so,’ said Paula Silver, vice president of communications at Quicken Loans. ‘This practice is not unique to our company; it is universal across the lending industry. It is undisputed that the loan discount points collected in this case were earned and resulted in a lower interest rate for the borrowers. Any implication to the contrary is pure fantasy and has been manufactured by certain plaintiff law firms, attempting to twist and manipulate facts to serve their own financial interests.
‘The plaintiffs have no claim under the federal statute at issue because the discount points they were charged were earned and because the statute does not even apply to discount points paid to a lender,’ Silver continued. ‘Unfortunately, in the past, courts have been misled by certain plaintiff law firms who invent these kinds of claims. Quicken Loans already won this case in two lower courts, and is confident that the high court will reach the same conclusion – that the petitioners' claims are meritless.’