Appeals Court Rules Builder Incentive did not violate RESPA

Dennis Norman

The United States Court of Appeals for the Eleventh Circuit recently consdered an appeal by the plaintiffs of a class action lawsuit again D.R. Horton, Inc. and DHI Mortgage, Co brought by John R. Yeatman and Eleanor E. Yeatman on behalf of themselves and all similarly situated individuals. 

The lawsuit stems from the Yeatman’s purchase of a home from DR Horton in 2006 in which the purchase agreement gave the Yeatmans the option of receiving a discount on their closing costs on the house, provided they used DHI Mortgage as their mortgage lender.  This was not a condition of the contract however.

The lawsuit alleged that the builders offer of a discount for using a related company was a violation of the Real Estate Settlement Procedures Act (RESPA) however the lower court dismissed the complaint, and the Yeatman’s appealled.

The appellant court upheld the decision of the lower court saying “the district court correctly determined that the mere offering of an option of a discount on closing costs does not violate the Real Estate Settlement Procedures Act (RESPA).  Neither does it violate the United States Department of Housing and Urban Development (HUD) regulation prohibiting arrangements where consumers are required to use a specified service in order to buy another service or product.”