Culpepper Ruling Reaffirms Propriety of YSPs

The 11th Circuit Court of Appeals has reaffirmed its position in a 12-year-old legal battle that lender-paid fees to mortgage brokers are proper unless consumers can prove the amount is excessive."In summary, the borrowers bear the burden of demonstrating, with specific evidence, that the total remuneration that their brokers received was unreasonable … in light of market standards and the subjective facts of their mortgage transactions," the circuit judges ruled in Culpepper v. Irwin Mortgage Corp. The appeals court stressed that the courts should use the Department of Housing and Urban Development's two-part test in evaluating yield-spread premiums, which are paid by the wholesale lender to the broker at closing. This test requires a case-by-case inquiry into each mortgage transaction, the appeals court said in affirming a lower court decision to decertify class action status in the Culpepper case. The 11th Circuit Court had upheld class certification in 2001, and the mortgage industry was afraid it would be engulfed in class action lawsuits. But the appeals court reversed itself after HUD issued a clarification of its YSP test.