Are YSP Class Actions Dead?

Class certification in yield spread premium cases may now be out of reach for plaintiff attorneys due to a long-awaited clarification by a U.S. Appeals Court in Atlanta.Plaintiff attorneys have filed scores of class action lawsuits against wholesaler lenders since January when the appeals court ruled in Culpepper vs. Inland Mortgage that the payment of a YSP in table-funded transaction violated the Real Estate Settlement Procedures Act. The class action lawsuits contend that YSPs are by definition illegal. But the clarification issued by circuit judges last week stresses that "our decision was highly dependent upon the facts in the current record about this table funded financial transaction." The judges also said that in "certain circumstances" YSP are legal. The clarification eliminates the class action attorneys' arguments that YSPs are per se illegal, said Inland's attorney, Robert Pratte of the Minneapolis law firm of Briggs and Morgan. He predicted that this will kill the class action cases. "I think the yield spread cases will be dead a year from now," Mr. Pratte said.