John and Patricia Culpepper Shock the Home Lending Industry With Landmark Case

John and Patricia Culpepper initiated a legal action that has become a landmark case, shocking the home lending industry.

The gist of the case started when the Culpeppers obtained an FHA loan from Inland Mortgage in December 1995 through mortgage broker Premiere Mortgage. The couple paid Premiere an origination fee of $750.50 for its assistance in obtaining and closing the loan. Inland then paid Premiere a yield spread premium (YSP) of $1,263.21.

The Culpeppers challenged the legitimacy of Inland's payment and sought class action in the U.S. Court for the Northern District of Alabama. This became known as Culpepper I. The court also issued an opinion that many in the industry considered outside the boundaries of the original case. In June 1999, the court issued the clarification that came to be known as Culpepper II.

In Atlanta on Jan. 23, 2001, a three-judge panel for the U.S. Court of Appeals heard arguments between lender attorneys and class action attorneys on Culpepper and three other yield spread premium cases.

The parties waited over 12 months for this hearing, which was delayed because it was difficult for the appeals court to assemble a panel of judges who did not own stock in some of the lending banks - namely BankAmerica and First Union Corp. 

A decision is expected soon.

Excerpted from the 13 Dec 1999 issue of Real Estate Finance Today and the 23 Feb 2001 issue of Origination News.

Culpepper Ancestry. The ancestry of John Culpepper is currently unknown to Culpepper Connections. If you know it, please let us know.