Judge Allows RESPA Claims to Proceed in Veterans United Lawsuit

A federal judge has significantly narrowed a lawsuit against Veterans United Home Loans, dismissing several state consumer protection claims while permitting allegations under the Real Estate Settlement Procedures Act (RESPA) to proceed. The ruling, issued on March 14, 2024, by U.S. District Judge Richard J. Leon, allows plaintiffs to continue pursuing claims that Veterans United engaged in illegal kickback schemes and referral fees, which are prohibited under RESPA. The lawsuit, initially filed in the U.S. District Court for the District of Columbia, accused Veterans United of violating RESPA by allegedly receiving kickbacks from third-party service providers, including title companies and insurance providers, in exchange for directing business to them. Plaintiffs contend that these arrangements inflated costs for borrowers and stifled competition in the real estate settlement services market. Judge Leon's order specified that the RESPA claims could move forward because the plaintiffs had adequately pleaded the existence of an illegal referral fee arrangement. Specifically, the court found that the plaintiffs' allegations, if proven, could demonstrate that Veterans United received things of value for referring settlement service business, which is a direct violation of RESPA's anti-kickback provisions. The judge, however, dismissed claims brought under various state consumer protection statutes, including the District of Columbia's Consumer Protection Procedures Act. The reasoning behind the dismissal of these state claims was that the plaintiffs had not sufficiently articulated how Veterans United's actions violated those specific state laws, or that the federal RESPA claims preempted the state claims in this context. The court also dismissed claims related to unjust enrichment and breach of contract, finding them to be insufficiently pleaded or duplicative of other claims. Veterans United Home Loans, a company based in San Antonio, Texas, is one of the largest mortgage lenders for veterans in the United States. The company offers a range of home loan products and services specifically tailored to active-duty military members and veterans. The RESPA statute, enacted in 1974, aims to protect consumers from abusive and illegal practices in the real estate settlement process. It prohibits kickbacks and unearned fees in connection with mortgage loans. The surviving claims will now proceed to further discovery and potentially trial, focusing on the alleged RESPA violations. This ruling represents a partial victory for both the plaintiffs, who have had key allegations preserved, and Veterans United, which has seen a significant portion of the lawsuit dismissed. The case highlights the complex interplay between federal and state consumer protection laws in the mortgage industry and the stringent requirements for pleading violations of statutes like RESPA.