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Hardy vs. Regions Mortgage, Inc.

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Can a borrower bring suit under RESPA when escrow account disclosures are inaccurate? The United States Court of Appeals for the Eleventh Circuit says no, ruling that §10 of RESPA (addressing escrow account disclosures) does not provide for a private right of action against a mortgage lender/servicer. Actions and penalties for violations must instead be assessed by the Secretary in the form of civil money penalties.

The background of the case is as follows: Mr. and Mrs. Hardy joined a retail shopping program through Regions which added $5 to each mortgage payment. The fee for the shopping program was not reflected on their annual escrow statements, and over time they had forgotten about the membership. After seven years, when they realized the fee had been omitted from the escrow statement, they attempted to bring suit against Regions and have it certified as a class action.

They filed the complaint under §10 or the Real Estate Settlement Procedures Act which requires annual escrow statements and specific content concerning monies paid in and distributed (§3500.17(o)). The United States District Court for the Northern District of Alabama held, and the U.S. Court of Appeals for the 11th Circuit affirmed, that §10 does not allow for the consumer to seek damages for errors in escrow statements. The Hardy's maintained that §6 of RESPA does, and they argued that escrow statements are related to that.

§6 addresses the servicing of mortgage loans and the administration of escrow accounts. The court held that Sections 6 and 10 of RESPA regulate two different aspects of mortgage lending. §6 requires disclosures relating to servicing transfer notices and timely payments of escrowed funds for taxes, insurance and other charges. That is not the basis for the complaint in this case. The complaint deals with the ongoing disclosure of the monthly payments and distribution of those funds. The regulations explicitly state that failure to comply with §3500.17 is a violation of RESPA §10, not a violation of RESPA §6, and §10 doesn't provide for a private right of action.

The Hardy's claim for damages was denied, which made the request for class action status moot. The court noted this decision does not address actions between the lender and their regulatory agency.
Hardy vs. Regions Mortgage, Inc.
Real Estate Settlement Procedures Act of 1974


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