W.D. Wash. Discusses Split in Holding that Real Estate Settlement Procedures Act Does Not Create A Private Cause of Action

Per Birkholm v. Washington Mut. Bank, F.A., --- F. Supp. 2d ---, 2006 WL 2104296 (W.D. Wash. July 26, 2006):

Under 12 U.S.C. § 2609(c)(1)(A), a provision of the Real Estate Settlement Procedures Act (RESPA), a loan servicer that establishes an escrow account is required to provide the borrower with a statement outlining the estimated taxes, insurance premiums, and other charges expected to be paid during the first 12 months after an escrow account is established. Under 12 U.S.C. § 2609(c)(1)(B), the loan servicer must provide this statement at closing of the mortgage loan, or no later than 45 days after the loan servicer establishes the escrow account. The loan servicer is required to provide annual statements to the borrower thereafter. 12 U.S.C. § 2609(c)(2). If the loan servicer fails to comply with the requirements of 12 U.S.C. § 2609(c), 12 U.S.C. 2609(d) authorizes the Secretary of Housing and Urban Development, see 12 U.S.C. § 2602(6), to assess penalties.

12 U.S.C. § 2609 does not by its terms provide for a private right of action. The Circuits are split on whether Congress intended to vest borrowers with a private cause of action for violation of Section 2609. See State of La. v. Litton Mortgage Co. ., 50 F.3d 1298, 1301-02 (5th Cir.1995), and Allison v. Liberty Sav. & Loan Ass'n of Detroit, 695 F.2d 1086, 1091 (7th Cir.1982) (no implied private cause of action for violation of Section 2609); Vega v. First Federal Sav. & Loan Assoc., 622 F.2d 918, 925, n. 8 (6th Cir.1980)(Congress intended to create private cause of action for violation of Section 2609).

To determine whether a statute provides for an implied private right of action, the court looks to whether Congress intended to create the private remedy asserted. Suter v. Artist M., 503 U.S. 347, 364 (1992). The burden of demonstrating Congressional intent to create an implied right of action lies with the party asserting an implied right of action. Id. at 363-64. To determine whether Congress intended to create a private remedy, the Supreme Court, in Cort v. Ash, 422 U.S. 66 (1975), set forth a four-part test for determining whether an implied private right of action exists: (1) whether the plaintiff is a member of a class for whose especial benefit the statute was enacted; (2) whether there is any explicit or implicit indication of congressional intent to create or deny a private remedy; (3) whether a private remedy would be consistent with the underlying purposes of the legislative scheme; and (4) whether the cause of action is one traditionally relegated to state law. Id. at 78.

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A review of the statutory scheme shows that Congress did not intend to provide a private right of action for violation of 12 U.S.C. § 2609. The court should grant Washington Mutual's motion for judgment on the pleadings, and should dismiss the Birkholms' claim under 12 U.S.C. § 2609.