NC Federal Court Holds That Higher Interest Rate and Origination Fee Are Injuries Sufficient to Confer RESPA Standing

The U.S. District Court for the Eastern District of North Carolina recently ruled that a mortgage lender and real estate agency’s alleged kickback scheme that caused a borrower to pay a higher interest rate and origination fee was sufficient to confer standing to bring RESPA and state consumer protection law claims.

According to the complaint, the real estate agency would refer homebuyers to the mortgage lender in exchange for alleged kickbacks masked as payments for legitimate marketing services.  The real estate agency referred the plaintiff to the mortgage lender, which purportedly charged the plaintiff a higher interest rate and origination fee for his mortgage than he would have paid at other lenders.

The borrower sued the real estate agency and the mortgage lender for violations of RESPA, the North Carolina Unfair and Deceptive Trade Practices Act (NCUDTPA), and civil conspiracy.  The defendants moved to dismiss the complaint for lack of standing and for failure to state a claim.  The court denied the motions to dismiss in full.

The court rejected the defendants’ argument that, to establish injury in fact sufficient to confer standing, the borrower needed to allege that the defendants prevented him from working with other mortgage lenders.  As the court explained, RESPA was enacted to prohibit cost increases that “tend” to result from alleged kickback agreements in the settlement services market.  The court concluded that the complaint adequately asserted an injury in fact based on the thousands of additional dollars the borrower would allegedly pay due to the higher interest rate and origination fee that he would not otherwise have been charged.

The court rejected a similar challenge to standing for the NCUDTPA claim based on the same reasoning.  Further, the court denied the motions to dismiss for failure to state a claim after determining that the complaint plausibly alleged claims under the relevant legal standards.