Pacific Plan v. Fox

[217]Opinion

TAYLOR, P. J. Pacific Plan of California (Pacific Plan) appeals from a judgment denying its petition for a writ of mandamus to set aside an order of the State Real Estate Commissioner directing Pacific Plan to refrain from charging or collecting escrow fees without taking into account the costs and expenses paid, incurred or reasonably earned for each individual loan transaction. Pacific Plan argues that: 1) the court erred in concluding that Business and Professions Code section 10242, subdivision (a), requires individualized cost accounting for each escrow operation; and 2) the trial court erred in finding that the commissioner had established that fees earned by Pacific Plan were not reasonably earned. For the reasons set forth below, we have concluded that the court below properly determined that Pacific Plan’s method of calculating escrow fees violated the statute.

The facts1 are not in dispute. Pacific Plan is a licensed mortgage loan broker, subject to the provisions of Business and Professions Code section 10131. Pacific Plan’s activities as a mortgage loan broker are regulated and controlled by Business and Professions Code section 10240 et seq.2 In the course of its mortgage loan business, Pacific Plan solicits borrowers and lenders for loans secured directly or collaterally by liens on real property and negotiates and arranges the making and collection of these loans. Pacific Plan routinely performs “escrow services,” for which the borrower is charged an “escrow fee” pursuant to section 10242. At the relevant time here, this statute provided, so far as pertinent: “The maximum amount of expenses, charges and interest to be paid by a borrower with respect to any loan subject to the provisions of this article shall be as follows: (a) The maximum amount of all costs and expenses referred to in subdivision (a) of Section 10241 shall not exceed four percent (4%) of the principal amount of the loan or one hundred sixty-five dollars ($165), whichever is greater but in no event to exceed two hundred ninety-five ($295), provided that in no event shall said maximum amount exceed actual costs and expenses paid, incurred or reasonably earned ”3 (Italics added.)

[218]Pacific Plan calculates its escrow fees by first determining the maximum amount permitted by the above statute for each loan. From this maximum, Pacific Plan then deducts the fixed expenses, such as the appraisal fee, title insurance fee, recording fee, reconveyance fee, and credit investigation fee.4 The remaining balance is then charged as the escrow fee.