TJOFLAT, Circuit Judge:
Section 8(b) of the Real Estate Settlement Procedures Act ("RESPA") provides:
12 U.S.C. § 2607(b). The principal question this appeal presents is whether, in connection with a residential mortgage loan, charging a loan discount payment— otherwise known as "points" or "discount points"—to provide a specific, below-market interest rate constitutes the "rendering of a real estate settlement service" within the meaning of § 2607(b). The district court, dismissing the appellant borrowers' complaint for failure to state a violation of § 2607(b), held that the borrowers' payment of such points was not for the "rendering of a real estate settlement service." We agree, and therefore affirm the court's ruling.
This is a class action brought against Quicken Loans, Inc. ("Quicken") by two sets of borrowers: Keidrick C. Wooten and his wife Mitzi D. Wooten, and Billy R. Buckhaults and his wife Cheryl A. Buckhaults, his wife.
Before doing so, however, we should point out that plaintiffs' counsel, in drafting the complaint in this case, failed to attach to the complaint the notes and mortgages the Wootens and Buckhaults executed. Defense counsel attached the notes to Quicken's motion to dismiss the complaint, and the district court, over plaintiffs' objection, made the instruments part of the complaint,
On July 18, 2006, the Wootens entered into a residential mortgage transaction with Quicken. They executed an "Adjustable Rate Note" for $132,250, payable in 30 years, at an "initial fixed interest rate" of 5.875% per annum.
On July 3, 2006, the Buckhaults entered into a residential mortgage transaction with Quicken. The Buckhaults executed a "Note" for $140,000, payable in 15 years, at a fixed interest rate of 6.500% per annum.
The Wootens and Buckhaults instituted this class action on July 2, 2007. Their complaint contained two counts, both founded on the facts recited in parts I.A. and I.B. Count I, brought under § 8(b) of RESPA, 12 U.S.C. § 2607(b) and 24 C.F.R. § 3500.14(c), alleged that Quicken charged the Wootens and Buckhaults a "`Loan Discount' fee for which no interest rate discount was given or bargained for...." Id. ¶ 1. Specifically,
Id. ¶ 33. Stripped to its essentials, Count I alleges that the agreements the Wootens and Buckhaults made with Quicken did not call for a discounted interest rate and thus did not require the payment of a loan discount, or points. They nonetheless paid the points, receiving nothing in return.
Count II, claims for breach of contract,
Having laid out the facts surrounding the mortgage loan transactions as described in the complaint, we turn now, in part III, to the sufficiency of Count I to state a case for relief under § 8(b) of RESPA and Regulation X. In part IV, we consider whether Count II states a case for breach of contract.
The district court concluded that points are not a "settlement service," within the meaning of § 8(b) of RESPA, but a sum paid to provide an interest rate lower than the interest rate the market required.
For a mortgage lender's charging of points to violate § 8(b), the points must be charged or received "for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan." Accordingly, in reviewing the district court's dismissal of Count I, we begin with the question of whether points represent a charge for rendering a "settlement service." If they do not, we proceed to the question of whether the points Quicken charged constituted payment for settlement services rather than for providing the borrowers with below-market interest rates.
We begin our analysis with the text of RESPA, noting that we are necessarily limited in our interpretation of "settlement service" by the statutory definition and the regulations interpreting it. See, e.g., Schwarz v. City of Treasure Island, 544 F.3d 1201, 1214 (11th Cir.2008) (contemplating the meaning of "residence" in the context of defining "dwelling," beginning with the definitions provided by the applicable statute and HUD regulations and, finding nothing applicable, proceeding to the common or ordinary meaning of the term). RESPA defines a "settlement service" as "any service provided in connection with a real estate settlement." 12 U.S.C. § 2602(3). Examples of qualifying services include:
24 C.F.R. § 3500.2. In addition, both "the provision of title certificates" and "the handling of the processing, and closing or settlement" qualify. 12 U.S.C. § 2602(3).
"Settlement" is defined as "the process of executing legally binding documents regarding a lien on property that is subject to a federally related mortgage loan." 24 C.F.R. § 3500.2.
While the non-exhaustive, but illustrative, list of examples provides some guidance, neither the statutory text nor the regulations define what is meant by "service." Failing a statutory or regulatory definition, we must turn to its common and ordinary meaning. Schwarz, 544 F.3d at 1214 (citing Nat'l Coal Ass'n v. Chater, 81 F.3d 1077, 1081 (11th Cir.1996)).
Black's Law Dictionary defines "service" as "the act of doing something useful for a person or company, usu[ally] for a fee." Black's Law Dictionary 1491 (9th ed.2009). The definition in Webster's Third New International Dictionary is substantially the same: "action or use that furthers some end or purpose: conduct or performance that assists or benefits someone or something: deeds useful or instrumental toward some object." Webster's Third New Int'l Dictionary 2075 (1993); see also Webster's New World Dictionary 1226 (3d ed.1988) (defining "service" as "an act giving assistance or advantage to another," including "friendly help; also, professional aid or attention"). As these sources suggest, the service referred to by RESPA includes any act undertaken to bring about the execution of a mortgage and note. Cf. United States v. Graham Mortg. Corp., 740 F.2d 414, 418 (6th Cir. 1984) ("[T]he common thread running among the listed services is that each is an ancillary or peripheral service that ... is not directly related to the closing of a real estate sale covered by RESPA.").
We can find nothing in the legislative history surrounding Congress's 1992 amendments to RESPA, which were enacted specifically in response to Graham, to suggest a broader definition of "settlement service." Prior to the amendments, the definition of "settlement service" ended with the phrase "services rendered by a real estate agent or broker." Patton v. Triad Guar. Ins. Corp., 277 F.3d 1294, 1298-99 (11th Cir.2002). After Graham held that the making of mortgage loans was not a "settlement service," Congress responded by adding the phrase "the origination of federally related mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of loans)." Pub.L. No. 102-550, § 908, 106 Stat. 3672, 3873-74 (1992). House Report 102-760 explained the reason behind the change:
H.R.Rep. No. 102-760, at 158 (1992), reprinted in 1992 U.S.C.C.A.N. 3281, 3438. The amendments do not alter our analysis.
As a preliminary matter, we dispense with any comparison to Graham. That case involved a loan origination fee, "a fee charged by a lender to cover the administrative costs of making a loan." Black's Law Dictionary 690 (9th ed.2009) (emphasis added). This case, in contrast, involves the payment of loan discount points. See Graham, 740 F.2d at 415 n. 2 (defining "point" as a fee or charge collected at the inception of the loan, including both loan origination and discount payments, in addition to the long-term interest rate stated on the face of the loan).
Moreover, we must note, as the district court did, that RESPA is still limited to "services," a term the statute leaves undefined and that the court in Graham did not address. Id. at 418 ("Because of the illumination provided by the list of settlement services in § 3(3) of RESPA, we need not rely upon any purported common understanding of the term `service', assuming that such an understanding exists."). We cannot conceive of a circumstance in which the charging of loan discount points would qualify under our definition of "service." The points paid by the Wootens and Buckhaults were ostensibly in exchange for an interest rate below market, i.e., to "raise the yield on the loan to the market rate." VanDenBroeck v. CommonPoint Mortg. Co., 210 F.3d 696, 702 (6th Cir.2000) (citations
The Wootens and Buckhaults "do not disagree that the interest rate on the mortgage note is not, per se, a settlement service." Br. of Appellants at 40. Instead, as prima facie evidence that discount points qualify as a "settlement service," they rely on HUD's placement of the loan discount fee within the 800 number series dedicated to
The HUD-1 that Quicken provided the Wootens and Buckhaults discloses discount points on line 802. Line 801 concerns the "Loan Origination Fee," line 803 the "Appraisal Fee," line 804 the "Credit Report," line 805 the "Lender's Inspection Fee," line 806 the "Mortgage Insurance Application Fee," and line 807 the "Assumption Fee." Because every item in the 800-series, save line 802, represents a fee for a "settlement service," the Wootens and Buckhaults infer that discount points are also qualifying fees. We do not draw such inference. Points in this context are part of the loan agreement, not a service provided to borrowers; therefore, regardless of its location on the HUD-1, the line 802 charge could not be for a "settlement service."
More troubling, however, is their suggestion that we should defer to the accompanying booklet for our definition of settlement services. HUD regulations specifically state that the special information booklet is not a "rule, regulation, or interpretation" for purposes of RESPA, 24 C.F.R. § 3500.4, meaning that even if the statutory language were unclear, we would owe the booklet no deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). See Thorpe v. Housing Auth. of Durham, 393 U.S. 268, 275, 89 S.Ct. 518, 522, 21 L.Ed.2d 474 (1969) (comparing a regulation promulgated in a HUD manual to handbooks and booklets and concluding the latter are "mere `instructions,' `technical suggestions,' and `items of consideration'").
In sum, based on our understanding of the statutory text, we conclude that points are not a "settlement service." We now proceed to the question of whether, as the Wootens and Buckhaults contend, the points they paid were not for a below-market interest rate but, instead, were for services unrelated to interest.
In reviewing de novo the district court's
Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (internal quotation marks and citations omitted).
Count I does not satisfy this plausibility standard. Implicit in the allegations of the complaint is the fact that the Wootens and Buckhaults, on the one side, and Quicken, on the other, had different understandings of the interest the Wootens and Buckhaults would be paying on their mortgage loans. The Wootens and Buckhaults thought they would be paying the going rate of interest; they were not seeking a lower rate of interest for which they would have to pay points. Quicken thought the borrowers wanted to obtain a specific below-market rate and would pay points to obtain it. Quicken's understanding was evidenced in the notes the borrowers signed after reading the loan documents, including the HUD-1s and the entry on line 802, "Loan Discount ____%." Quicken's understanding was confirmed when the borrowers made no objection to paying the advance interest the points called for,
Except for its allegation that the Wootens and Buckhaults "did not negotiate for a buy-down of the interest rate nor did they receive a lower interest rate in return for paying points," Compl. ¶¶ 8-10, the complaint offers nothing to explain away the obvious fact that they willingly paid points in order to close the mortgage transactions in accordance with their terms.
Faced with these facts, the district court properly held that the loan discounts constituted appropriately agreed upon points for specific below-market interest rates and not a cover for unearned fees for services. We therefore affirm the court's dismissal of Count I of the complaint.
The district court dismissed Count II on the ground that the complaint's allegations failed to establish that Quicken breached its contracts with the Wootens and Buckhaults. We affirm the court's ruling. We do so for the reasons stated in part III.B; the complaint's allegations demonstrate that by the time the mortgage loans were closed, the parties reached a meeting of the minds and that the Wootens and Buckhaults received what they bargained for.
AFFIRMED.
24 C.F.R. § 3500.14(c). Note that the first sentence of § 3500.14(c) adopts verbatim the language of 28 U.S.C. § 2607(b), except that it omits the words "real estate" between "rendering" and "service."
A version of the booklet as described by the Wootens and Buckhaults may be found at U.S. Dep't of Hous. & Urban Dev.—Fed. Hous. Admin., Buying Your Home: Settlement Costs and Helpful Information, available at http://www.hud.gov/offices/hsg/ramh/res/ stcosts.pdf.