Related Document(s):
	2nd Circut - Cohen vs. JP Morgan Chase

The U.S. Court of the Appeals for the 2nd Circuit issued a ruling on Aug. 6 that permitted aborrower to sue a mortgage lender for charging an alleged unearned fee, even though the lender did not split the amount with another party. In the case, Cohen vs. JP Morgan Chase & Co., a borrower sued the bank alleging that a post-closing fee charged in connection with a refinancing of a mortgage violated the Real Estate Settlement Procedures Act and New York laws because the bank did not provide any service for the a $225 "post-closing fee". The district court had granted Chase's motion.

The Second Circuit reversed the lower court judgment, holding that (a) Kruse addressed mark-ups and situations where a lender provides a service but charges more than the reasonable value of the service, and Kruse concluded that applying section 8 to "overcharges" would ensnarl the courts in judicial rate regulation, but (b) this case presented a different issue than had not been presented in Kruse in that the plaintiff here was alleging that Chase had provided no services (rather than that it had overcharged for the services it did provide).

The 2nd Circuit did note that its opinion is in conflict with a ruling by the U.S. Court of Appeals for the 4th Circuit. The 4th Circuit pointed to the absence of any reference to undivided unearned fees in the statement of purpose for RESPA in concluding that the law only applies to divided fees.

Please select the Related Document to view the Second Circut Court Ruling.