NCUA Reiterates Appellate Court Rulings on Mark-Ups

ALEXANDRIA, Va. – NCUA reminded federally insured credit unions in the seven states that make up the Fourth Circuit and Seventh Circuit that because recent appellate court rulings decided that “mark-ups” – the practice of charging a consumer more for a third party’s settlement services than is actually paid to the third party – are not a violation of Section 8(b) of the Real Estate Settlement Procedures Act (RESPA), NCUA should not cite a violation for these CUs of section 8(b) under two circumstances. These include where a consumer is charged more for a settlement service provided by a third party than is actually paid to the third party; and the third party is not involved in the mark-up. The U.S. Department of Housing and Urban Development (HUD) prohibits the practice of mark-ups. The seven states affected by the court’s ruling are Illinois, Indiana, Maryland, North Carolina, South Carolina, Virginia, West Virginia, and Wisconsin. Section 8(b) prohibits any person from giving or accepting “any portion, split or percentage of any charge made or received.other than for services actually performed.” But because the courts found that “the third parties received no more than their regular fees, and did not give or arrange for the settlement service companies to receive the unearned portions.they did not engage in the third-party involvement necessary to create a violation of Section 8(b).” According to NCUA, HUD interprets this section as “prohibiting the acceptance of any portion or part of a charge other than for services actually performed, including a split fee that requires the participation of more than one provider.” Because of the decisions of the Fourth and Seventh Circuits, NCUA stated that “for loans subject to RESPA, NCUA examiners should not cite violations of Section 8(b) in situations where the facts are similar to those in Boulware or Echevarria, the names of the two cases. However, HUD’s interpretation of Section 8(b) will continue to be applied to transactions where the property is outside the Fourth and Seventh Circuits. -