RESPA and TILA claim based on scheme by lender to direct inflated appraisals tossed because neither statute regulates the quality of the services provided

The U.S. District Court for the Southern District of New York in Cedeno v. IndyMac Bancorp, Inc., 06 Civ. 6438 (S.D.N.Y., August 26, 2008) was asked to decide if a lenders failure to disclose to the plaintiff class that it selected appraisers and appraisal companies who performed faulty and defective appraisal services which inflated the value of residential properties in order to allow the lender to complete more real estate transactions and obtain greater profits violated RESPA and TILA. The plaintiff argued that under RESPA’s anti-kickback provision, 12 U.S.C. § 2607(a), a person is prohibited from giving or accepting any fee, kickback, or thing of value as part of a real estate settlement service involving a federally related mortgage loan. The court held that, even assuming that the lender received a thing of value in the form of inflated appraisals, and that it promised and provided business in return, the plaintiff could not state a claim under RESPA. Under RESPA’s safe harbor provision the payment for goods or facilities _actually_ furnished or services _actually_ performed is not prohibited. See 12 U.S.C. § 2607(c)(2). There was no dispute that the appraiser received a fee for the appraisal so the safe harbor applied. The court rejected the plaintiffs’ attempt to avoid the safe harbor provision by arguing that the appraisal was faulty and inaccurate. The court said that RESPA does not apply because it is not a price control statute. The TILA claim was similarly disposed of on the grounds that TILA does not regulate the quality of the service but only requires that the cost of the service be set out.

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