Schuetz v Banc One Mortgage

Within the case Schuetz v. Banc One Mortg. Corp.

Schuetz maintains that there was a violation. The presented factor stems from the fact that the direct fees that she fully compensated the Home Mortgage for the offered services and the payments made by Banc One for the yield spread premium, which was not related to any particular exchange fee, is ordinarily a referral fee. With an aim of clarifying the law, the HUD focused on outlining a position on what determined the legality of the payments offered by lenders to mortgage breakers as outlined under the Real Estate Settlement Procedures Act.

Under RESPA

The test for the YSP validity is determined by the valid consideration to the mortgage broker in exchange for loan origination and its sale to the lender. Apparently, the permissibility of a yield spread premium should have its basis on the analysis that the premiums constitute a reasonable payment solely or in combination with a direct fee paid by the borrower for already furnished facilities, goods or services.

Company Background Information

Background

Banc One Mortgage Corporation is a firm offering various services such as leasing, insurance, commercial and corporate banking services, and brokerage and investment services. The major focus of the presented case is on variance between illegal kickbacks and legal fees noted between the lender, mortgage borrower and broker. Schuetz thought it was unfair for her to make extra payments estimated at $516.00 to the mortgage broker for the YSP (“Schuetz v. Banc One Mortgage Corporation”, 2003). Apparently, she had already made direct fees payments which involved loan origination, loan discount and processing charges. Despite this, Bank One which was the mortgage lender also provided the Home Mortgage Financial Corporation with a YSP estimated at $516 which is paid to the Schuetz charged at a higher interest rate. Schuetz’s argument was that the YSP estimated at $516 was a kickback to the Home Mortgage Financial Corporation which was also considered as illegal since it violated the provisions of the Real Estate Settlement Procedures Act. However, the court ruled in favor of Banc One.

Case Analysis

The ruling provided by the courts took into consideration the HUD 1999 policy statement. According to the 1999-1 policy statement, in transactions where the mortgage brokers are provided with payments by the lenders, the HUD does not deliberate the payments in question as legal. Additionally, it does not consider the name offered to the payment as an important issue under RESPA. The HUD’s stand that the pay offered to the brokers by the lenders is not legal per se does not provide an implication that the YSPs are legal in various transaction classes. If they violate the provisions outlined under Section 8 of RESPA then the classes of transaction are considered as illegal (“Schuetz v. Banc One Mortgage Corporation”, 2003).

The test for validity of the YSP provided by the Department of Housing and Urban Development focuses on establishing if the compensable services are offered as well as if the total compensation is associated with the provided services in a reasonable manner. After including the test in the provided case, a finding was derived that the Schuetz was indeed provided with compensable goods, facilities and services.

Despite the fact that the YSP seem unfair

They play a significant role in benefiting the mortgage borrowers. Apparently, they guide the lenders to offer payment for the YSP for a prospective home owner with liquid cash at the moment of settlement. Therefore, the decision made by the judges not only legal but also the right one at the identified time.

References

Schuetz v. Banc One Mortgage Corporation 292 F. 3d 1004 (2003).