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Spears v. Washington Mutual, Inc.

2009 WL 605835 (2009)

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Spears v. Washington Mutual, Inc.

United States District Court for the Northern District of California

2009 WL 605835 (2009)

Facts

Washington Mutual Bank FA (the bank) (defendant) provided home mortgage loans to borrowers. The bank retained a security interest in each mortgaged home until the mortgage loan was repaid. The bank regularly referred its borrowers to First American eAppraiseIT and Lender’s Service, Inc. (collectively, the appraisers) (defendants) for home appraisals. The borrowers who received the loans had to pay the appraisal fees themselves. A class of borrowers with mortgage loans through the bank (the plaintiff class) (plaintiffs) filed a lawsuit in federal district court against the bank and the appraisers, alleging that they conspired to inflate the appraised value of homes so the bank could sell its security interests in the homes to financial institutions at inflated prices. The plaintiff class withdrew their claims against the bank and accused the appraisers of violating two sections of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. §§ 2607(a) and (b). Section 2607(a) forbade anyone from receiving a kickback—a thing of value—in exchange for the referral of business involving a mortgage loan. The plaintiff class reasoned the appraisers gave the bank kickbacks—overvalued appraisals that allowed the bank to increase the price of its security interests in the mortgaged homes—in return for the appraisal business. Section 2607(b) prohibited fee-sharing and provided that no person should receive a payment in relation to a transaction involving a mortgage loan except for services actually performed. The plaintiff class claimed that the appraisers received appraisal fees but performed no services because the overvalued appraisals were worthless. The appraisers moved to dismiss the plaintiff class’s claims, arguing that the overvalued appraisals were not things of value under § 2607(a) and that the appraisal fees they received were for services actually performed under § 2607(b).

Rule of Law

Issue

Holding and Reasoning (Whyte, J.)

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